JAH Nee S v. VH

CACV 279/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 279 OF 2012

(ON APPEAL FROM HCMC NO. 3 OF 2012)

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J U D G M E N T

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Hon Cheung JA :

I. The appeal

1. The petitioner wife obtained a decree nisi of divorce based on the unreasonable behaviour of the husband.  The respondent husband applied by summons under section 17(2) of the Matrimonial Causes Ordinance (‘MCO’) (Cap. 179) to make the decree absolute.  The wife opposed the application.  Poon J granted the decree absolute.  The wife now appeals.  By an order dated 27 November 2012, the Judge ordered that if an appeal is lodged the decree nisi will not be made absolute until the determination of such appeal.

II.   Background

2.1  The background of the case is succinctly summarised by the Judge which I will gratefully adopt with supplements.

2.2   The husband is an ethnic Cambodian and a French national.  He is now 72.  The wife is a Korean and now aged 58.  The husband and wife were married on 8 June 1987.  They have two adult children.  Most, if not all, of the family assets are in Cambodia.

2.3  On 16 November 2009, the wife commenced divorce proceedings in the Family Court in Hong Kong.  On 16 April 2010, the husband issued a petition for divorce in the same Court.  By order dated 23 June 2010, the two petitions were consolidated with the wife’s standing as the petition and the husband’s standing as the cross-petition in the consolidated cause.  On 16 July 2010, leave was given to the husband by consent to withdraw the cross-petition.  On 25 August 2010, a decree nisi was pronounced in favour of the wife in respect of her amended petition which was based on a milder form of unreasonable behaviour on the part of the husband.

2.4  The parties then entered into mediation with a view to resolving financial provisions.  The mediation was successful, which resulted in a mediation agreement dated 22 December 2010 (‘the Mediation Agreement’) whereby the parties reached an overall settlement over their finances on a ‘clean break’ basis.  The parties agreed to make cross-transfers of various properties and shares in different companies.

2.5  The parties next obtained a consent order dated 13 January 2011 (‘the Consent Order’) from the Family Court.  The Consent Order contained various undertakings by the parties to effect the settlement contained in the Mediation Agreement within 12 months from the date of the Mediation Agreement.  Upon compliance of the undertakings, the parties’ respective claims for ancillary relief do stand dismissed.

2.6  On 1 February 2011, the husband took out an ex parte application under rule 65 of the Matrimonial Causes Rules (‘MCR’) (Cap. 179A) for the decree nisi to be made absolute.  The procedure was wrong as such an application can only be made by a petitioner.  However, the Family Registry erroneously granted a decree absolute in the husband’s favour on 9 February 2011.  The wife then swiftly applied to set aside the decree absolute, which was allowed by Judge Melloy on 19 April 2011.

2.7  Complaints about the non-compliance of the undertakings in the Consent Order soon arose.  In December 2011, the wife took out a summons seeking directions for the implementation of a timetable in relation to the undertakings in dispute.  The matter came before Judge Melloy on 31 January 2012.  After hearing the parties, she adjourned the matter for 12 weeks to assess the progress and for report to be made to the Court.

2.8   On 3 February 2012, the husband filed a criminal complaint against the wife in Cambodia for breach of trust arising from her failure to hand over the signed transfer documents in relation to one of the properties to him, as she was supposed to do under her undertakings in the Consent Order.  The criminal complaint was based erroneously on the allegation that the wife was his ex-wife.  After the children’s intervention, the husband withdrew the complaint on 16 March 2012.  The Deputy Prosecutor responsible for the complaint took the view that it was non-performance of contract and not a criminal offence.  The case was then ‘filed without proceeding’ on 23 March 2012.  The husband had since taken no further step in the criminal complaint.

2.9,   On 30 April 2012, the wife issued a summons seeking an order restraining the husband from pursuing proceedings in Cambodia against her or any of her assets and other interim orders of protection to preserve the assets subject to the agreed division so that a division could in fact be carried out.  On 3 May 2012, Judge Melloy granted an interim anti-suit injunction and other interim preservation orders against the husband pending the determination of the summons.  But later on 24 May 2012, she discharged the interim anti‑suit injunction and ordered the case to be transferred to the High Court for a full hearing to be fixed on an expedited basis.

2.10   By summons dated 3 July 2012, the husband applied for a decree absolute, which was opposed by the wife.

2.11   Both the wife’s and husband’s summonses came before the Judge on 20 July 2012.  After hearing the parties, the Judge dismissed the wife’s application for an anti-suit injunction in its amended form (the amendment was allowed by the Judge on 6 July 2012).  But he allowed her application for the preservation orders, which, in short, prohibited the husband from disposing of the assets concerned without court’s leave or the wife’s consent (‘the Preservation Orders’).  He adjourned the husband’s application with consequential directions.  Subsequently, the husband’s application was fully argued before the Judge on 16 November 2012 and allowed.

III.  Decree Nisi and Decree Absolute

3. Section 15(5) of the MCO provides that every decree of divorce shall in the first instance be a decree nisi and shall not be made absolute before the expiration of three months from its grant, unless the Chief Judge by general order, or the Court in any particular case, fixes a shorter period.  By the Matrimonial Causes (Decree Absolute) General Order (Cap. 179 Sub-Leg C), the period is reduced to six weeks.

IV.  Application to make decree absolute

4.1  Where a decree nisi of divorce has been granted on a divorce petition either of the parties to the decree may apply to have it made absolute with a right being given to the other party to be heard.

1)   Under statute

(1)  By the spouse who obtained the decree in his/her favour

4.2  Rule 65(1) of the MCR enables the spouse to make absolute a decree nisi pronounced in his/her favour by lodging with the registrar a notice in Form 5.  The notice of application is not required to be served on the other party.

4.3  Where a rule 65(1) application is made, rule 65(2) provides that the registrar is to search the court minutes and ‘shall make the decree absolute’ if he is satisfied that :

(a)  no appeal against the decree and no application for re-hearing of the cause or for rescission of the decree is pending;

(b)  no order has been made by the Court of Appeal extending the time for appealing against the decree or by a judge extending the time for making an application for re-hearing of the cause or, if any such order has been made, that the time so extended has expired;

(c)  no application for such an order as is mentioned in sub-paragraph (b) is pending;

(d)  no intervention under rule 61 or 62 is pending;

(e)  the Judge has made an order under section 18(1) of the Matrimonial Proceedings and Property Ordinance (Cap 192) [i.e. restrictions on making decree absolute on matters affecting children]; and

(g)   the provisions of section 17A of the MCOdo not apply or have been complied with.

4.4  The reference to section 17A deals with the application by the respondent to a divorce based on one-year separation with consent (section 11A(2)(c) of MCO) or two-year separation (section 11A(2)(d)) for the Court to consider his/her financial position after the divorce.  Under such an application the Court is required to consider under section 17A(2) :

(a)  all the circumstances, including the age, health, conduct, earning capacity, financial resources and financial obligations of each of the parties; and

(b)  the financial position of the respondent as, having regard to the divorce, it is likely to be after the death of the petitioner should the petitioner die first.

4.5  Under section 17A(3) the Court shall not, subject to sub-section (4), grant a decree absolute unless it is satisfied that :

(a)  the petitioner should not be required to make any financial provision for the respondent; or

(b)  the financial provision made by the petitioner for the respondent is reasonable and fair or the best that can be made in the circumstances.

4.6  Nonetheless, under section 17A(4) the Court may proceed without observing the requirements of subsections (2) and (3) if—

(a)   it appears that there are circumstances making it desirable that the decree should be made absolute without delay; and

(b)   the Court has obtained a satisfactory undertaking from the petitioner that he will make such financial provision for the respondent as the Court may approve.

4.7  My understanding is that in the Family Court if the registrar received notice of opposition from the other party to the rule 65 application, he will refer the matter to the Judge.

4.8  Where there are circumstances which ought to be drawn to the notice of the Court the application to make the decree absolute has to be made to a judge (rule 65(3)).  The notice of application (if the divorce is in the District Court) or summons (if the divorce is in the High Court) has to be served on the other party.  An order granting an application under rule 65(3) shall not take effect until the registrar has searched the court minutes and is satisfied as to the matters mentioned in rule 65(2).  

(2) By the spouse against whom the decree was granted

5.1  Under section 17(2) of MCO,where a decree nisi has been granted and no application for it to be made absolute is made, then, at any time after the expiration of three months from the earliest date on which such an application may be made (i.e. after the passage of six seeks), the spouse against whom the decree was granted may apply for the making of the decree absolute.  Where a section 17(2) application is made, the Court may exercise the power provided for under section 17(1), namely

(a)  make the decree absolute; or

(b)  rescind the decree nisi; or

(c)  require further inquiry; or

(d)  otherwise deal with the case as it thinks fit.

5.2  Rules 65(4) and (5) provide for the procedure and requirement to be adopted in such an application.  The application is by way of summons to a judge or registrar and service of the summons on the other spouse is required.  The same requirement is imposed for the registrar to search the court minutes and be satisfied with the matters contained in rule 65(2). 

5.3  As observed by Smith v Smith [1990] 1 FLR 438 in view of the provisions of section 9(2) of the English Matrimonial Causes Act (‘MCA’) 1973 (the equivalent of our section 17(2)), the registrar still has a discretion to refuse the decree absolute even if he is satisfied as to the matters listed in rule 65(2) of the Matrimonial Causes Act 1977 (i.e. the equivalent of our rule 65(2) with slight differences).  

5.4  The party who obtained the decree nisi may oppose the application by the other party to make it absolute.  Rayden and Jackson Divorce and Family Matters (Butterworths, 18^th edn, 2005), para 11.17, commenting on the powers under section 9(2) of the MCA 1973 (the equivalent of section 17(2) of MCO) stated that :

‘ The most common reason for refusing to grant the application is if the petitioner would be financially prejudiced by, for example, loss of a pension, but the court is not bound to refuse the application in these circumstances.’

5.5  In Wickler v Wickler [1998] 2 FLR 326, the wife obtained a decree nisi against the husband in September 1996 and began ancillary proceedings.  Both parties were Dutch, the wife living in England, the husband in Holland and Israel.  The husband’s involvement in the ancillary proceedings was marked by a lack of openness and a devious approach to disclosure.  There was evidence that he was concealing his real address, and that his sudden drop in income was apparent rather than real.  Some of his considerable assets were held within the jurisdiction, including the former matrimonial home, but the majority were not, and it was not clear to what extent they were encumbered (as the husband claimed) by debt.  In September 1997 the husband, who was anxious to marry another woman, was granted leave to apply for decree absolute (under section 9(2) of MCA 1973), upon undertakings which related to the wife’s financial situation.  The wife appealed, arguing that her interests would be materially prejudiced if the decree absolute were granted, as the husband would no longer have any incentive to participate in any way in the ancillary proceedings.  Between the appeal hearing and delivery of judgment the husband flew to New York to go through a religious ceremony of marriage which was not legally recognised anywhere.

5.6  The questions posed by the wife for the consideration of the Court were :

1)   Is there a real risk of prejudice to the wife if the husband is allowed to apply for a decree absolute?

2)   If there is, does it outweigh prejudice, if any, to the husband in declining to grant leave to make the decree absolute?

5.7  Bracewell J allowed the wife’s appeal.  She considered the same commentary in Rayden and Jacksonwhich I have referred to and set out in para. 15.16 of the 17^th Edition.  She held at page 330 that :

‘ Having considered with care all the disclosed material, I conclude that there is a very real risk that if this husband is granted a decree absolute and permitted to undergo a lawful remarriage he will wash his hands of any further involvement in the ancillary relief proceedings, so that the wife will not be able to establish her true entitlement and receive her appropriate share. The only aspect which is keeping the husband’s participation in the legal process is his need for a decree absolute.’

5.8  The case may be contrasted with Re G (Decree Absolute: Prejudice) [2003] 1 FLR 870 where the petitioner wife after obtaining a decree nisi did not apply to make it absolute.  The respondent husband then applied for a decree absolute which was opposed by the wife.  Bennett J granted the decree absolute after considering Smith and Wickler.  He held at page 874 that :

‘ [15] In the instant case there are several incontrovertible facts. The husband has made his life in this country. He was educated here. He has lived and worked here. His son is living here with the wife. He is employed in GD in this country. He has also attended all the hearings which he was obliged to attend. He has complied with all the court directions. He says he has no intention of living abroad. There are, therefore, obvious distinctions between the facts in this case and the facts in Wickler v Wickler.’

5.9  He concluded at page 878 that :

‘ [29] Thus， I conclude that the wife has failed to make out her case that she will or might be prejudiced by the grant of the decree absolute. As I have already said, I fail to detect anything in the husband’s affidavits or in Mr Warshaw’s submissions that the husband would suffer any real prejudice if the decree absolute was held up. Although he is in a relationship with another lady, he has no present intention of marrying or cohabiting with her. Therefore, there is no question of the decree being made absolute so that he can remarry.

[30] In such a situation one is tempted to leave things as they are ‘just in case’. But, in my judgment, that would be a faulty exercise of my discretion. The wife is entitled to apply for decree absolute and if she had done so it would undoubtedly have been granted. There are no technical objections to its grant. If the wife can establish no grounds why the decree absolute should not be granted then in the normal course of things it ought to be granted. I do not consider that the mere fact that there are ancillary relief proceedings yet to be heard and adjudicated upon is a sufficient reason to hold up the grant of the decree absolute. Accordingly, the application will be granted.’

2)  Inherent jurisdiction

6.1  Parallel to the statutory scheme, the party against whom the decree nisi has been granted, may,without waiting for the petitioner to apply for the decree absolute, apply by summons to delay or stay an application to make a decree absolute.  In Miller-Smith v Miller-Smith (No 2) [2010] 2 FLR 351, the petitioner husband succeeded in obtaining a decree nisi after a contested hearing.  The respondent wife applied for an order that the decree nisi should not be made absolute until the conclusion of the ancillary relief issues between the parties.  Baker J dismissed the wife’s application.  At page 359, he held that :

‘ [23]...., I conclude nevertheless on the authority of two Court of Appeal decisions that there is a discretionary power under the inherent jurisdiction to delay or stay an application to make a decree absolute, but this jurisdiction can only be exercised if the respondent is able to establish special or exceptional circumstances.’

6.2  The two English authorities that Baker J referred to, were, first, England v. England (1979) 10 Fam Law 86 where Brandon LJ stated :

‘ It was contended for the wife on this appeal that there were no circumstances in which the court had power to delay the making absolute of a decree nisi. I do not accept that contention. It is, in my view, clear beyond doubt that the court has the power to do that in the exercise of its inherent jurisdiction where there are special circumstances which make it just that it should be done.’

6.3  In England the petitioner wife obtained a decree nisi but the Judge ordered the decree absolute was not to be made absolute until a maintenance order had been made in favour of the children.  The wife appealed contending that the last provision ought never to have been included and should accordingly be deleted from the order. The appeal was allowed.

6.4  The other case was Dart v Dart (unreported) judgment dated 27 October 1995 where Butler-Sloss LJ (as she then was) stated,

‘ Consequently, one starts from the proposition that the husband has the right to a decree absolute after the appropriate period from decree nisi, and that period has now elapsed. In the normal course of events he would be able to make the decree absolute unless the wife is able to show special circumstances to defer it. At the end of the day it is an exercise of the discretion of the trial judge, but that exercise of discretion weights the granting of the decree absolute against the special circumstances very heavily in favour of the grant. It is not a balancing exercise in the ordinary sense. Why should this husband, who has a decree nisi, not make it absolute? The wife has sought to say that she would be at a disadvantage by loss of rights and loss of opportunity to enforce.’

6.5  In Dart, the respondent wife sought to stay the petitioner husband’s application to make absolute a decree nisi.  It was refused in the first instance.  The Court of Appeal refused to grant leave to appeal to the wife.

V.  Grounds of appeal

7.1  In essence, the wife’s appeal in the present case is based on two grounds :

1)   the Judge had adopted the wrong tests in granting the decree absolute; and

2)   the Judge had failed to take into account a relevant consideration, specifically, in respect of the disparity in the non-compliance by the parties of their undertakings.

VI.  What is the test?

7.2  The Judge held that the proper test is that ‘the opposing spouse must establish special or exceptional circumstances to satisfy the Court that it is just to refuse the grant of a decree absolute.’  He then held that ‘when the opposing spouse raises financial prejudice before determination of the ancillary relief as a special or exceptional circumstance, he/she must prove that the prejudice as alleged is real, failing which the mere fact that the ancillary relief is yet to be determined is not sufficient’.

7.3  I have no doubt that when the respondent spouse against whom the decree nisi was made invoked the inherent jurisdiction of the Court, as in Dart, to delay or stay the making of a decree absolute, special or exceptional circumstances must be established.  After all, the petitioner spouse for whom the decree nisi was made in his or her favour is entitled to have it made absolute as of right.

7.4  What then is the position when it is the petitioner spouse for whom the decree nisi is made in his or her favour wishes to delay the making of the decree absolute? The reality is as Thorpe LJ observed in Manchanda v Manchanda [1995] 2 FLR 590 at page 596 that :

‘ .... Many petitioners have applications for ancillary relief that are not finally determined until long after the decree nisi. For many reasons they are generally loath to lose their marriage status until financial claims have been settled. If they are to lose that protection it should only be in the exercise of a judicial discretion after they have had a proper opportunity to present their opposition.’

7.5  As against this, there is the public policy consideration discussed in Blunt v Blunt [1943] AC 517 which is relied upon by Mr Pilbrow SC, counsel for the husband, that the interest of the community at large, judged by maintaining a true balance between respect for the binding sanctity of marriage and the social considerations which make it contrary to public policy to insist on the maintenance of a union which has utterly broken down.

7.6  In my view the public policy of ensuring a marriage that has been irretrievably broken down be put to an end without further ado must be subject to an equally important public policy of ensuring the spouse who opposes the making of a nisi absolute, must not be prejudiced in terms of financial provisions by way of ancillary relief.  It is not necessary for me to come to a view whether the ‘special or exceptional circumstances’ test is to apply to a case like the present one where it is the petitioner spouse who opposes the making of a decree absolute.  It is sufficient for me to say that, based on the authorities, the Court may refuse to make the decree absolute, if the opposing spouse can truly establish financial prejudice.  This is the test that the Judge had actually applied in the present case.

VII.  The present case

8.1  This is, of course, an appeal from a discretionary remedy with the attendant well established restraints imposed on us in interfering with the exercise of a judicial discretion.  The discretion to be exercised is entirely dependent on the circumstances of the case.  As discussed in Wickler, the opposing spouse cannot resist the application to make the decree absolute in order to provide her with any additional benefit over and above her entitlement.  Nor should there be a delay for the purpose of securing a financial advantage.  In the present case the Judge relied on two features which he considered to be ‘very important’ in rejecting the wife’s argument that she will suffer a real financial prejudice.  First, the undertakings in the Consent Order are cross‑undertakings.  The wife is required to effect certain transfers to the husband as well and the husband is complaining that there has been substantial non-compliance on her part.  The Judge thinks the husband has every incentive to carry on with the on-going negotiations with the wife as to how to effect the undertakings and, if necessary, to participate in any proceedings, to ensure that he will receive his proper share under the Consent Order.  Second, the Preservation Orders will remain in force, preventing the husband from disposing of his assets to be transferred to the wife without leave of the Court or her consent.  The wife’s interest in those properties is adequately protected until the parties’ disputes over the implementation of the Consent Order are resolved.

8.2  In my view this is where the Judge had erred in the exercise of his discretion.  First, although I accept the existence of mutual undertaking is a relevant factor, at the same time the extent of the breach by the parties of their undertakings must be properly evaluated.  In other words, what is equally relevant behind this facade of non-compliance is the value of the respective undertakings and the disparity of the outstanding obligations by each of the parties.  The wife claimed in her evidence that the husband’s outstanding obligation in respect of his undertaking is about US$20 million.  This has not been contradicted by the husband. Mr Scott provided a schedule of the husband’s outstanding obligations :

1)   Transfer of the husband’s 45% shareholding in UTC, which is a tobacco company in Cambodia, to the wife - the shares are held in the husband’s name.

2)   Transfer of the three sites of UTC land to the wife - two sites of which are held under the husband’s own name and does not require 3^rd party’s cooperation.

3)   Appointment of an international firm of auditors as auditors to UTC.

4)   Transfer of FISB building to the wife.

5)   Transfer of one outstanding site of the Reverside Property to the wife.

6)   Transfer of Hospital Land to the wife.

7)   Transfer of all existing customers, loans and assets of Capital Holding Company Ltd to FISB.

8.3  The wife claimed that she had signed all the transfer documents in escrow and they are now with her solicitors.  Mr Pilbrow informed the Court that the documents need to be signed again in view of the delay in submitting them for stamping purpose in Cambodia.  Even taking this factor into account, one can see the contrast between the wife’s outstanding obligations in respect of her undertaking and that of the husband.  The wife’s outstanding obligation are :

1)   Transfer of the husband’s 24% in Embassy Properties Ltd (‘Embassy Properties’) which holds the Embassy Place property to the husband; and

2)   Transfer of shares of Most City Development Company Limited (‘Most City’).

8.4  The valuation of Embassy Properties is about US$26.76 million.  The wife’s 24% will be US$6.4 million.  There is no evidence on the valuation of Most City but the husband’s complaint so far is on the Embassy Properties only.  One can see immediately the huge disparity between the parties’ respective obligations.

8.5  The husband complained about the problem encountered by him with third parties in effecting the transfer.  But he has not carried out the transfer even with the items owned by him personally.  He has also not applied to vary the terms of the Consent Order if he has difficulties in getting the co-operation of third party interests.  Bearing in mind the husband’s properties are located outside Hong Kong and he is now living in Cambodia, there is every incentive, upon obtaining the decree absolute, to wash his hands of the ancillary relief application by simply giving up on those properties which the wife is required to transfer to him. It is not difficult to see that the wife will encounter real difficulties in enforcing the terms of the Consent Order. 

8.6  As to the Preservation Orders, the same problems I have identified will also apply.  In my view the wife has established real financial prejudice to her by the granting of the decree absolute.  The case of the wife is not simply based on securing any additional benefit over and above her entitlement nor is she trying to gain any financial advantage in the same vein.  What she is complaining and which has been established by her is that there will be a real risk that she will be deprived of her financial entitlement if the decree absolute is now granted because the husband, at the expense of giving up a small part of his entitlement, will no longer have any incentive to comply with his obligations.

VIII.  Conclusion

9. Accordingly the appeal is to be allowed and the decree absolute set aside.  Instead the decree absolute should only be granted upon the parties complying with the terms of the Consent Order or any variation thereof.

IX.  Costs

10. There will be a provisional costs order for the wife in respect of the appeal and below including costs reserved by the Judge.  There will be certificate for one counsel.

Hon Barma JA :

11. I agree with the judgment of Cheung JA and with the orders that he has proposed.

Hon Au J :

12. I agree.