CWG v. MH AND OTHERS

CACV 80/2013
CACV 81/2013
CACV 82/2013
CACV 83/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 80 OF 2013

CIVIL APPEAL NO. 81 OF 2013

CIVIL APPEAL NO. 82 OF 2013

CIVIL APPEAL NO. 83 OF 2013

(ON APPEAL FROM HCMP NO. 643 OF 2012)

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REASONS FOR JUDGMENT
&
JUDGMENT ON COSTS

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Hon Yuen JA:

1.  On 19 May 2014, we acceded to an application that the appellant in CACV83/2013 (who was also a respondent in CACV80/2013, CACV81/2013 and CACV82/2013) should not be heard on those appeals by reason of her failure to comply fully with an order of the court.  We indicated that written reasons would be given in due course. My reasons appear below.  

Background

2.  In HCMP643/2012, the applicant (“the Wife”) applied for relief under Part IIA Matrimonial Proceedings and Property Ordinance Cap. 192 against the respondent (“the Husband”).  The Wife alleged that the Husband owned, or had interests in assets owned by, various companies.  The Husband denied this and alleged that the companies were owned solely by his mother (“the Mother”). The Mother was subsequently joined as a party.                          

The Discovery Order

3.1   On 10 August 2012 Jeremy Poon J made an order requiring the Mother to disclose various documents regarding companies which she claimed to own (“the Discovery Order”). These were companies which the Wife alleged were owned or controlled by the Husband. 

3.2   The Mother did not appeal the Discovery Order.  However she failed to comply with it. 

The hearing of the Part IIA application

4.  At the hearing of the application under Part IIA in October 2012, the Mother did not attend to testify in person or via video link.  She was not permitted to adduce affidavit evidence.

5.  In a judgment handed down on 26 March 2013 (“the Main Judgment”), B. Chu Dep J remarked on the absence of evidence regarding the companies and their assets.

6.  The learned judge ordered (amongst other things) that the Husband should pay a lump sum of $120m to the Wife.

The 2.8.2013 Hadkinson order

7.1   Subsequently the Husband sought a stay of the judgment.  The Mother sought to “support” the Husband’s application.  On 2 August 2013 the judge made an order to the effect that the Mother would not be heard on her application until she fully complied with the Discovery Order (“the 2.8.2013 Hadkinson order”).         

7.2   The Mother applied for leave to appeal that decision but her application was refused on paper by this court (Kwan and Macrae JJA) on 9 January 2014.

The appeals against the Main Judgment

8.  Both the Husband and the Mother lodged appeals against the Main Judgment (CACV80/2013 and CACV83/2013 respectively).  The Wife lodged a cross-appeal (CACV81/2013). Moon Valley Foundation Ltd, the recipient of certain shares from the Mother, also lodged an appeal (CACV82/2013).    

The Wife’s application for a further Hadkinson order

9.1   On 6 February 2014 in a summons filed in the Mother’s appeal, the Wife applied for a Hadkinson order to the effect that the Mother should not be heard on the appeal until she fully complied with the Discovery Order.

9.2   Shortly before the hearing before this court of the Wife’s application on 4 March 2014, the Mother caused to be filed three affirmations purporting to comply with the Discovery Order.  The Wife argued that nevertheless the Mother had still failed to comply fully with the Order. 

9.3   In a judgment handed down on 13 March 2014, we directed that the issue of compliance be remitted to the judge.  Some further affirmations were filed before the hearing before the judge.

The judge’s decision on the issue of compliance

10.  On 15 May 2014 the judge heard the parties on this issue and decided that the Mother had still failed to comply fully with the Discovery Order.  Reasons for the decision were handed down the following day.                                                                 

Restoration of the Wife’s Hadkinson application

11.  The Wife’s Hadkinson application was duly restored for hearing on the first day of these appeals on 19 May 2014.  After hearing argument on behalf of the Wife and the Mother, we acceded to the Wife’s application.

Principles

12.  The questions a court should ask itself in Hadkinson applications have been conveniently set out in Mubarak v Mubarik (No.1) [2004] 2 FLR 932, 946, para. 59.  Applied to the situation in our case, they are:

(1) Is the Mother in contempt?    

(2) Is there an impediment to the course of justice?

(3) Is there any other effective means of securing compliance with the court’s orders?

(4) Should the court exercise its discretion to impose conditions having regard to the question?

(5) Is the contempt wilful (is it contumacious and continuing)?

(6) If so, what conditions would be proportionate?

The standard of proof is the civil standard: Mubarak v Mubarik (No.2) [2007] 1 WLR 271, 286, para. 72.

Discussion

13.1   In relation to questions (1) and (5), it is clear from the judge’s decision that the Mother was in contempt in failing to comply fully with the Discovery Order even after her late attempts to provide some materials.  For instance, Item 6 of the Order related to five Security Agreements entered into by ACOHL.  None was provided, and the Mother had made no attempt to obtain them from the other parties to the agreements in the 21 months since the date of the Order.  Item 8 related to documents regarding 31 cars.  Again, none was provided, and again there had been no attempt to obtain them from other parties such as dealers, purchasers and insurers.  There were also unexplained gaps in the audited accounts provided under Item 12.

13.2   Mr CY Li SC, leading counsel for the Mother, did not seek to challenge the judge’s decision on non-compliance.  As I understand it, his submission was that the court should take into account the Mother’s age which affected her ability to search for the required materials.  With respect, I find it difficult to accept this submission in the circumstances of this case.  The Mother’s non-compliance cannot be other than contumacious and continuing when one considers the resources at her disposal and the length of time that has elapsed since the date of the Order.   She has been served by a large team of lawyers, as well as persons (such as Mr Seeger and Miss Anita Lo) who have assisted her in the administration of her affairs for many years and who could be reasonably expected to know which persons or entities to contact to enable compliance, if they had been so instructed.

14.  The Mother’s age is however relevant to question (3).  In view of her advanced years, other means of securing compliance with the Order (eg by means of committal) would not be appropriate, and indeed Mr Li did not suggest any other effective means of securing compliance.

15.1   In relation to question (2), Mr Li accepts fairly in his skeleton submission (para. 8) that the non-disclosure has a substantial connection with the findings from which the parties have appealed.

15.2   The Mother’s non-compliance has certainly made the performance of the judge’s functions more difficult.  For instance, by reason of the absence of the documents in Item 8, the judge was hampered in performing a valuation of the cars (see para. 454 of the Main Judgment).  Similarly, by reason of the absence of documents in Item 9, the judge was unable to value the 9 watches which had not been sold through Christies (see para. 479 of the Main Judgment).

15.3   As Mostyn J put it in NG v SG [2012] 1 FLR 1211,

“Without full disclosure the court cannot render a true certain and just verdict. ... It is thrown back on inference and guess-work within an exercise which inevitably costs a fortune and which may well result in an unjust result to one or other party”.

It is clear from the Main Judgment that the Mother’s non-compliance has been an impediment to the course of justice in the Part IIA application.    

16.1   Of course, the crucial issue is whether in the exercise of its discretion, the court should bar the Mother from participating in the appeals by reason of her non-compliance, but first, it is necessary to say a word about the ambit of the Hadkinson application. 

16.2   A summons was taken out only in CACV83/2013 (ie the Mother’s appeal) and not in the other appeals where she is a respondent.  By way of explanation (or perhaps excuse), Ms Eu SC, leading counsel for the Wife, has referred us to some cases where the reports show that a Hadkinson point had been taken without a summons having been issued. 

16.3   For my part, I would have thought that bearing in mind the principles of the Civil Justice Reform, an application of such significance as a Hadkinson application should not be made without the other party being duly forewarned by way of summons, with enough time for affidavit evidence to be adduced for and against the making of the order.  That has not been done in relation to the appeals in which the Mother is a respondent. 

16.4   However in the present case there is no suggestion that the Mother’s legal team has been misled or taken by surprise by the application being extended to the appeals in which she is a respondent.  What has been pressed on us by Mr Li by way of submission, which I accept, is the principle that a Hadkinson application “needs even more serious consideration where the party in respect of which it is submitted should not be heard is the respondent to the application”: M v M [2011] 1 FLR 1773, 1779, para. 26; or, in our case, a respondent to the appeals.

17.  However, even after having given more serious consideration to the issue as a result of that feature, it is clear that in the exercise of the court’s discretion, the non-compliance in the present case was such that the Mother should be debarred from participating in the appeals.

18.1   First I accept the reality of the additional feature in the present case that the Husband’s legal team remained available, as it were, to fight the Mother’s corner: cf X Ltd v Morgan-Grampian Ltd [1991] 1 AC 1, 51.  However that is only one factor to be taken into account.  A party cannot get away with non-compliance of the court’s orders simply by taking advantage of the fact that there is another party with allied interests.

18.2   Importantly, there was no appeal from the Discovery Order and it has not been argued that the order was an unreasonable one.  In those circumstances it cannot be said that there is any infringement of the maxim “audi alteram partem”: X Ltd v Morgan-Grampian Ltd, p.50or related constitutional rights.      

18.3   Although the Order was made in August 2012, no attempt was made at compliance, even after a Hadkinson order was made by the judge in August 2013 and was confirmed by another division of this court four months ago. 

18.4   It took yet another Hadkinson application in respect of these appeals before the Mother took any action, and even then the judge found what was provided was too little, too late. 

18.5   In these circumstances, to permit the Mother to participate in the appeals would be tantamount to condoning a deliberate flouting of the court’s orders.  

19.  For the reasons set out above, I acceded to the Hadkinson application.  It follows that CACV83/2013 is dismissed.  The Mother is to pay the Wife the costs of the summons and to pay the respondents to CACV83/2013 the costs of that appeal.  I agree with the judgment of Barma JA regarding costs.

Hon Barma JA:

20.  I agree with the Reasons for Judgment of Yuen JA in respect of the making of a Hadkinson order against the Mother, so as to bar her from being heard both in respect of her own appeal (CACV 83/2013) and those in which she was a respondent (CACV 80, 81 and 82/2013).

Costs

21.1   So far as costs are concerned, Ms Eu SC for the Wife sought an order that the costs of the Hadkinson application, and of the Mother’s appeal (CACV 83/2013), which must be dismissed in consequence of the Mother not being permitted to be heard on it, should be paid by the Mother to the Wife, on the indemnity basis.  For the Mother, Mr C Y Li SC accepted that the Wife should have her costs of both the Hadkinson application and the Mother’s appeal, but submitted that these should be taxed on the party and party basis rather than the indemnity basis.

21.2   At the hearing, we indicated that we would make costs orders in favour of the Wife in respect of both matters, but would reserve our decision in relation to the basis of taxation.

22.1   Ms Eu submitted that having regard to the Mother’s contumacious failure to comply with the Discovery Order, it was entirely appropriate for these costs to be taxed on the indemnity basis. 

22.2   Mr Li, however, submitted that this was inappropriate, given that the Mother was not a party to the marriage, but was a third party, and having regard to the fact that efforts had been made by the Mother to comply with the Discovery Order.

23.1   Although the Mother was not a party to the marriage, she was very much a party to the proceedings.  Her involvement in the proceedings arose as a result of the claim that she was the true beneficial owner of most of what might otherwise be thought to be assets owned by the Husband.

23.2   As Yuen JA has pointed out, the Mother was subject to the Discovery Order, against which she never appealed (paragraph 18.2 above), and the documents that she was ordered to provide were needed for the purposes of the proceedings, their absence making the task of the court below more difficult (paragraphs 15.1 to 15.3 above).

23.3   Further, such attempts as were made to comply with the Discovery Order came very late in the day – despite the fact that an earlier Hadkinson order had been made (and confirmed by another division of this court when dismissing an application for leave to appeal against it) in relation to her participation in an application by the Husband for a stay of the orders made on the Part IIA application, no attempt at compliance was made until after the present Hadkinson application was brought, and even then, the attempt fell short of what was required (see paragraphs 18.3 and 18.4 above).

23.4   The Mother’s appeal having been brought, and continued, against this background, and taking the matters referred to above into consideration, I am satisfied that the Wife’s costs, both of the Hadkinson application and of the Mother’s appeal, should be taxed on the indemnity basis.

24.  The Husband’s legal representatives were present during the hearing of the Hadkinson application, but did not take part in it, and did not seek any orders for costs arising from it or from the Mother’s appeal, and I would therefore make no order as to costs in respect of him.

25.1   So far as the 4^th, 5^th and 6^th Respondents are concerned, they were absent during, and took no part in, the Hadkinson application.  Further, that application did not, in my view, concern them, and accordingly, I would make an order nisi that there should be no order as to costs as between them and the Mother in respect of that application.

25.2   However, so far as the costs of the Mother’s appeal (CACV 83/2013) are concerned, they were parties to the appeal, having been served with the Notice of Appeal, and by the appeal, the Mother sought (among other things) to have the costs order made in their favour, jointly and severally against her and the Husband, set aside. They therefore were concerned in the Mother’s appeal and affected by it.  That appeal having been dismissed, I would make an order nisi that their costs of the appeal should be paid by the Mother, to be taxed on the party and party basis if not agreed.

Hon McWalters JA:

26.  I agree with the Reasons for Judgment of Yuen JA and the Judgment on Costs of Barma JA.