RAYMOND KIN SANG HUNG v. MIMI KAR KEE WONG HUNG (also known as MIMI KAR GEE WONG HUNG)

Press Summary (English)

Press Summary (Chinese)

FACV Nos. 10 & 11 of 2014

FACV No.10 of 2014

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO.10 OF 2014 (CIVIL)

(ON APPEAL FROM CACV NO. 197 OF 2012)

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FACV No.11 of 2014

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 11 OF 2014 (CIVIL)

(ON APPEAL FROM CACV NO. 197 OF 2012)

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REASONS FOR JUDGMENT
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Chief Justice Ma:

1. In applications for ancillary relief in matrimonial proceedings, the court is given wide powers to make orders for financial provision.  The jurisdiction is contained in ss 4, 6, 6A and 7 of the Matrimonial Proceedings and Property Ordinance (“the MPPO”),[1] where the court is able to make orders for financial provision (by way of periodic payments and lump sums etc) and for property adjustment.  These orders can take effect immediately or, sometimes, they may take effect only in the future.  We were in the present appeal concerned with a type of order that takes effect in the future in which the Court has ordered that upon the occurrence of a contingency, there will accrue to one of the parties to a dissolved marriage a stated or perceived benefit.

2. The particular order with which this appeal was concerned was in the following terms:-

“Contingent upon the commencement of the redevelopment of Severn Villa by ADHL within the lifetime of the wife, the husband do pay the wife a further sum representing one half of the notional increase in the value of the 418,945,640 ADHL shares attributable to the redevelopment (less HK$230 million and all costs and expenses [of] or relating to the redevelopment), such value to be agreed, failing which the same to be assessed by an independent court expert to be appointed by the Court and such payment to be paid within one month of the final determination of such valuation.”

3. This type of order has been called a clawback order.[2]  The nature of such an order and the type of factors that ought to be considered by a court before such orders are made, fell to be considered in the context of the present case.  Three questions, which I shall presently set out, were identified by the Appeal Committee[3] as being questions of great general or public importance,  and leave to appeal was accordingly given to the Respondent Appellant, Mr Raymond Kin Sang Hung (“H”).  The Appeal Committee also granted leave to appeal to the Petitioner Respondent in this appeal, Ms Mimi Kar Kee Wong Hung (“W”) in relation to the form of the clawback provision.  I shall also elaborate on this presently.

4. After hearing counsel,[4]  we allowed H’s appeal (FACV 10 of 2014) and dismissed W’s appeal (FACV 11 of 2014).  The clawback order referred to earlier was ordered to be set aside.

5. Before going into the reasons for the Court’s decision, I should first set out the relevant background.

A  BACKGROUND

A.1  Facts

6. H and W married in 1973.  They had two daughters and a son.  The parties separated in 1999 and W petitioned for divorce on 25 February 1999 citing unreasonable behaviour.  The decree absolute was not granted until 18 March 2010.  Neither the reasons for this nor the history of the divorce proceedings are relevant to the present appeal and it is therefore unnecessary to say more about this aspect.

7. The context of the present appeal was W’s application for ancillary relief following the couple’s divorce.  At stake were combined assets in excess of HK$1 billion, comprising a collection of antique furniture worth about $749 million,[5] some jewellery worth about $1.3 million, paintings and artefacts of the value of over $42 million and shares in the company, Applied Development Holdings Limited (“ADHL”) valued at over $330 million.  In the lower courts, issues arose in relation to all these assets, but in this appeal we were concerned only with the ADHL shares.

8. In 1975, the parties formed a company manufacturing electronic products, Applied Electronic Limited (“AEL”).  The majority shareholders were initially W’s uncle and aunt, who had provided most of the company’s startup capital.  Their shareholding was later transferred to H and W.  In 1986, AEL went public and was listed on the Hong Kong Stock Exchange as ADHL.  The parties retained 50% of the shareholding.

9. Notwithstanding their separation in 1999, the parties continued to work within the company and its related and subsidiary companies.  W was up until 2010 an executive director of the company and at some stage also its executive chairman.  In March 2010, after the divorce proceedings became active again, W was removed as executive director of ADHL.[6]  Her entitlement hitherto to housing also ceased.  This housing consisted of an apartment at Severn Villa, located in Severn Road on The Peak.

10. Severn Villa is a four storey residential building comprising six units.  Four of these were owned by Severn Villa Limited (“SVL”), a wholly owned subsidiary of ADHL.  It is in relation these four units (“the Severn Villa Property”) with which the present appeal was concerned.  The remaining two units in Severn Villa were owned by other persons.

11. Apart from the Severn Villa Property, ADHL also owned two properties located in the British Virgin Islands and Panama, held with a view to the development of hotel resorts.  ADHL was essentially a property investment company.

12. At this point, it is important to recognise that neither H nor W at any stage owned the Severn Villa Property themselves: they were merely shareholders in a company (ADHL) which had a wholly held subsidiary company (SVL), and it was this subsidiary company which held the property. ADHL was not even some sort of corporate vehicle which held the property for them; the company was a public company, had other shareholders and also had business interests other than the Severn Villa Property.  As recorded by the judge who tried the matter at first instance,[7] at one stage W claimed that the Severn Villa Property belonged beneficially to her and that SVL held the property on trust for her, since she had provided the purchase money through the sale of some properties in the United States.  Following her removal as a director of ADHL, W instituted proceedings[8] making the claim that SVL held the legal title to the Severn Villa Property as a matter of “corporate convenience”.  This claim came on for trial in April 2011 and on the first day of trial, W accepted she had no sustainable claim.  The action was dismissed and she paid costs on an indemnity basis.

A.2  The proceedings below

13. The application for ancillary relief was tried in the Court of First Instance before Deputy High Court Judge Carlson in a hearing lasting 14 days.  At the beginning of his judgment, the learned judge had this to say:-

“2. It is very easy to be wise after the event, but I am bound to say that with more than enough assets to go round between them and with a modicum of common sense and good judgment this is a dispute that could have been settled quickly and, for a case of this size, relatively cheaply.

3. I am afraid that this has become an object lesson in how matrimonial litigation should not be conducted. I have not been able to add up the total precisely, but the parties joint costs for this and the related action which I had consolidated with these matrimonial proceedings must exceed $50 million.  The parties have fought each other before me for over two years.  I have lost count of, and I don’t care to count, how many written rulings and judgments I have had to deliver or hand down.  They have gone to the Court of Appeal twice before trial and before the Companies’ Judge on one occasion.  The proceedings have seen me into retirement from the bench and I have returned as a retired judge to try this matter and its related action.”

14. These remarks have some relevance to a point which I shall develop below regarding the need to consider the desirability of finality, particularly in matrimonial litigation, when a court makes orders taking effect in the future in the form of the clawback order in the present case.

15. In the Court of First Instance, W did not seek a clawback order at all.  Following the approach laid down by this Court in LKW v DD[9], the parties and the judge proceeded to look into and assess the value of the matrimonial assets I have identified earlier.[10] The evidential focus of the trial was not so much on the value of the assets (as to which there was much agreement between the parties) but mainly over an issue which was no longer a live one in the appeal before us, namely, an allegation by H that W had taken away 27 items (worth over $78 million) in the Hung Collection.[11]  Much of the learned judge’s judgment dealt with this issue.  There were also a number of legal issues, one of which was the appropriate proportion to be applied in the division of assets: W sought a 60/40 division in her favour, H submitted that an equal division was appropriate.

16. As regards the value of ADHL’s shares, this was agreed between the parties’ experts.[12] There was a minor difference regarding the shell value of the company, but this was resolved in H’s favour.[13]  Despite the difference in shareholding in their names, it was also held that H and W had an equal interest in the shares held between them.[14]  At trial, H sought an order that the total shares held by them be divided equally, but this was resisted by W on the basis that this would take away much of the value of the shares.  According to her, it was more valuable for the shares to be held by one person.[15]  W sought an order that the whole of shareholding in H’s name be transferred to her and for his part as an alternative, he sought an order that W’s shareholding be transferred to him.  The judge ordered that W transfer her shares to H and that H had to pay W $161,120,620.09 for her half share in the shares held between them.

17. At trial, the extent of the differences between the parties regarding the shares in ADHL was as stated in the previous paragraph. No issue was raised by either party regarding the value of any redevelopment of the Severn Villa Property and certainly, no order remotely resembling the clawback order was sought by W.  Before us, Mr Fung SC submitted that the issue of the redevelopment of the Severn Villa Property was raised before the trial judge.  He was correct only to the extent that W did as part of the evidence before the court produce an expert report placing a redevelopment value on the Severn Villa Property at $665 million[16] and that in his Opening, Leading Counsel for W[17] did vaguely mention the aspect of redevelopment.  However, as Mr Yu SC submitted in the written Case for H, it was at no stage pressed by W that the value of the ADHL shares ought to take into account the redevelopment potential of Severn Villa, there was no cross examination by W’s counsel of the expert valuer produced by H at trial on this aspect and in the closing submissions of counsel, no mention was made of it either.  It is important also to remember that the value of the shares in ADHL was actually agreed between the parties at trial without any consideration of redevelopment, nor was this facet somehow left open.  It was perhaps not surprising that W did not insist that the redevelopment potential of Severn Villa ought to be taken into account in valuing ADHL shares: at the trial stage, she was submitting that the shares in H’s name ought to be transferred to her and obviously she would not have wanted to pay more than was necessary for those shares.  Neither the maker of the report on redevelopment potential nor her own expert on the valuation of the shares was called at trial.

18. W appealed.  Again, it is not necessary to go into any of the grounds of appeal except in relation to the question of redevelopment.  Though not raised at first instance, W sought to obtain an uplift in relation to the ADHL shares on the basis that the judge’s valuation did not reflect the redevelopment potential of the Severn Villa (being, as indicated earlier, $665 million).[18] Notwithstanding the fact that W had not sought an order below taking into account the redevelopment value, the Court of Appeal was of the view that a clawback order should be made, essentially for the following reasons:-[19]

(1) Even where the parties had not raised a point in the court below, the courts generally had a quasi-inquisitorial role in matrimonial litigation.  Reference was made to a passage in Parra v Parra[20] at para 22.  I shall deal with this passage later in this judgment.

(2) Reference was made to H’s evidence in which H expressed a hope that Severn Villa might be redeveloped in order to help ADHL out of its financial difficulties, to develop existing projects and look into future investment opportunities.  H did, however, also go into the difficulties of this, given in particular the fact that the owner of one of the units in Severn Villa was holding out.

(3) The clawback order was a type of order that had “withstood the test of time” and was one based on principle (specific reference was made to ss 7(1)(a) and (b) of the MPPO[21]). The value of the redevelopment of the Severn Villa to ADHL was regarded as something which H was “likely to have in the foreseeable future”.  The redevelopment of the Severn Villa was seen as “not an unlikely eventuality”. Even if the prospect of redevelopment was remote, this was not a bar to a clawback order being made.  In his judgment,[22] Cheung JA said this:-

“4) The suggestion that the chance of redevelopment is remote must be considered in the proper perspective. The property is located on the Peak which is the choicest real estate in Hong Kong. Further, even in Parra, notwithstanding that the chance of redevelopment was remote, a claw back was nonetheless imposed, no doubt because of the Court’s wish to achieve fairness between the [parties].”

(4) While the clawback order was inconsistent with a clean break,[23] the facts of the case justified such an order.

(5) A clawback order did not mean that W would only get the upside of any redevelopment but no downside: “She is only asking for an uplift in the event of redevelopment of this property only and not for other purposes.” [24]

19. The terms of the clawback order made by the Court of Appeal differed from the order that had been suggested by W at the appeal.  The main difference between the order as made and that prepared by W was that the stated contingency in the former was the “commencement of the redevelopment of Severn Villa by ADHL” (my emphasis). W’s proposed order merely referred to a redevelopment of the property without any restriction as to who would redevelop.  This formed the subject matter of W’s appeal before us.

20. Further, the Court of Appeal gave liberty to apply to H to discharge the clawback order in the event of a sale of his shares in ADHL or if the company was delisted, provided that the sale was bona fide or that there were legitimate reasons to delist.

21. Apart from making the clawback order in relation to the ADHL shares, the Court of Appeal increased the amount that H had to pay to W for the transfer of the shares in her name to him to $167,159,310, this taking into account the shell value of the company which the Court of Appeal assessed at $258 million.

B  THIS APPEAL

B.1  Leave to appeal

22. Both parties sought leave to appeal to this Court.  The Appeal Committee granted leave to H on the following questions said to be of great general or public importance (all related to the clawback order):-

“(1) Whether it is wrong in principle to grant the “clawback” order in a case where the property in question is not owned by the parties but by a company which is a subsidiary of a publicly listed company in which the parties are majority shareholders, especially in circumstances where the company would require further injection of capital;

(2) Whether it is open to the Court of Appeal to impose a clawback provision when the same was not sought at the trial and where the parties agreed the valuation of the matrimonial asset in question;

(3) Whether a clawback provision is contrary to the clean break principle and/or the principle of fairness which is fundamental in ancillary relief, and, if so, what are the circumstances and/or conditions in which it should be invoked and applied.”

23. As indicated earlier, leave was also granted to W on one issue regarding the clawback order, namely, in relation to the insertion of the words “redevelopment by ADHL”.[25]  W had submitted at the hearing for leave that the addition of these words made the order nugatory in practical terms.  In her written Case, however, W submitted a revised clawback order in the following terms:-

“Proposed Claw Back Provision

1. Contingent upon the occurrence within W’s lifetime of a Specified Event defined in (2) below, H do pay W a sum representing one half of the increase in the market value of H’s ADHL shares attributable to the Specified Event, such value to be agreed by the parties, failing which the same to be assessed by an independent expert to be appointed by the Court and such payment to be paid within one month of the final determination of such valuation.

2. A Specified Event means any one of the following events:

(1) A sale by ADHL of its shareholding in SVL at a price which takes into account the redevelopment value of Severn Villa, or the passing of a resolution by ADHL’s board of directors authorizing such sale;

(2) A sale by SVL of its interest in Severn Villa at a price which takes into account the redevelopment value of Severn Villa, or the passing of a resolution by SVL’s board of directors authorizing such sale;

(3) The passing of a resolution by ADHL’s board of directors or SVL’s board of directors to participate in the redevelopment of Severn Villa.

3. Liberty to either party to apply.”

This proposed order was completely new; there had at no previous stage been any discussion about it at all.

B.2  The issues to be resolved

24. Within the context of the type of order with which this Court was concerned in the present appeal,[26] the following issues fell to be determined within the three questions identified above:-

(1) The general approach.

(2) Fairness.

(3) Finality and clean break.

(4) The quasi-inquisitorial function of the courts and Flywin.[27]

25. These issues can conveniently be dealt with in turn.

C  THE GENERAL APPROACH

26. I have already made reference to the ancillary relief jurisdiction of the court contained in ss 4, 6, 6A and 7 of the MPPO.  The opening words to s 7(1) of the Ordinance are important because the seven particular matters to which specific reference is made, are merely examples of “all the circumstances of the case”.  In other words, while in most cases, the court will largely focus on one or more of the seven facets, it should not be restricted to them.  This is of some relevance in the present case where the clawback order was made notwithstanding the remoteness of the possibility of the redevelopment of Severn Villa.

27. Authoritative guidance on the court’s approach in ancillary relief proceedings is contained in the decision of this court in LKW, to which reference has already been made.[28] It is obvious of course that the overall objective in ancillary relief proceedings is to achieve a fair outcome between the parties.[29]  No two cases ever being the same, the application of the yardstick of fairness, although underlying the exercise of powers in ancillary relief applications, is a matter of judgment[30]  and is primarily, if not mainly, a matter for the fact determining tribunal.  The use of case law as precedents when what is relied on are not so much legal principles but essentially the application of principles to facts, is to be avoided, particularly in applications for ancillary relief where the primary yardstick is fairness.  Apart from fairness, in exercising its powers regarding ancillary relief, the court ought also to bear firmly in mind the question of finality and the clean break principle.  So how do these principles apply in the present case, in the context of clawback orders?

D  FAIRNESS

28. In the present case, the Court was concerned with an equal division of the assets and this ought to have been a relatively straightforward exercise.  The particular asset to be considered were the shares in a company (ADHL).  The trial judge was entirely correct in his approach, urged on him by the parties at the time, of valuing the shares in ADHL and then dividing the interest of each party in the shares (50% each).  In most cases, after the appropriate division of the asset in question is ascertained (50/50 in the present instance), in the case of shares, the court will then determine the best way of dividing the asset between the parties.  Sometimes, the simplest method will be to split the shares equally between the parties; in other situations, the court may order that one party should transfer his or her shareholding to the other party in exchange for a payment or equivalent, as happened in the present case.

29. The Court of Appeal, however, instead of leaving intact the order made by the trial judge, made an additional order in terms of the clawback order set out above.[31] The fundamental question to be asked in relation to this type of order was the same as in relation to any other order: is it fair to make it?  The Court of Appeal recognised that this was the critical question.[32]

30. In answering this question, a court must evaluate those elements which are relevant to the exercise of discretion and in identifying factors which indicate fairness towards one party, the court should of course also look at any elements of unfairness, being the reverse side of fairness.  In considering what is fair, a court must adopt a holistic approach, meaning that it must look at things in the round and not just focus on isolated aspects or on the point of view of only one party.  In the present appeal, I believe this is where the Court of Appeal has erred in its approach: it looked at the position of W and the factors favouring her without taking adequately into account the factors going the other way.

31. From W’s point of view, the possibility of the redevelopment of Severn Villa and that this may result in an increase in the value of ADHL shares, could be said to be a relevant factor to be evaluated. The order as made by the judge did not reflect this possibility although he could not be faulted since neither party raised this point as we have seen. That W might not benefit following a possible redevelopment of Severn Villa heavily influenced the Court of Appeal to make the clawback order.  Reliance was placed on Parra v Parra[33] where a similar order was made by the court.  In that case, a clawback order was made relating to the possibility that planning permission for residential development might be given to the site in question (a brownfield site[34] in Checkendon).  Notwithstanding that such an order was not consistent with a clean break and that the terms of the order dealing with its operation were potentially difficult and might result in further litigation,[35]  the Court of Appeal in England upheld the making of the order on the basis that on the facts of that case, there would be a “terrible unfairness” if such an order was not made.[36]  Particular emphasis was placed on the fact that the scale of any potential windfall, if the land were to be redeveloped, would be great (it would more than treble in value) and on the husband’s evidence at trial that it would indeed be unfair on the wife if she did not share the fruits of any future redevelopment.[37]

32. The fairness of the order on the facts in Parra did not of course make it a fair or appropriate one to be made in the present case.  Cheung JA, in his judgment,[38] emphasised the fact that Parra v Parra had “withstood the test of time” and he also made reference to another English case in which a clawback order had been made.[39]  With respect, I think that Cheung JA, who has considerable experience in matrimonial matters, has on this occasion rather overestimated the impact of Parra.  That case was one in which, on the facts, it was appropriate to make a clawback order and the facts were, as I see them, quite exceptional.[40]

33. The facts of the present case were not exceptional by comparison, would not result in anywhere near a “terrible unfairness” and indeed militated against the making of a clawback order:-

(1) The prospect of the redevelopment of Severn Villa was by no means a likely event.  In his judgment, Cheung JA made reference to ss 7(1)(a) and (b) of the MPPO but there was no evidence that a redevelopment was “likely” at all.  No evidence existed that it was and Mr Fung SC pointed to none, although he asserted the contrary; in fact the evidence pointed the other way. If there had been any credible evidence of the likelihood of redevelopment, it was inconceivable that the redevelopment value of Severn Villa would not have been factored into the valuation of the shares of ADHL.  In fact, as we have seen, the NAV of the shares was agreed and no account was taken of the potential redevelopment of Severn Villa.

(2) More important, there was nothing to suggest that the making of the clawback order, focusing on the potential redevelopment of Severn Villa, was right or fair in the first place.  In Parra, the brownfield site was a property which had a special significance to the husband and wife: they had jointly bought it and it had been intended to be a part of their pension.[41]  In the present case, the Severn Villa Property was owned by SVL, a wholly-owned subsidiary of a public company (ADHL) in which the parties held shares. Mr Fung SC submitted that the Severn Villa Property was purchased by W using the proceeds from the sale of properties in the US, but this submission was factually incorrect: see para 12 above.

(3) The fact that the Severn Villa Property was held by a wholly-owned subsidiary of a public company was an important consideration of the court to take into account.  ADHL was not merely a company which had as its only asset and business the Severn Villa Property.  I have already referred to the other properties in the BVI and Panama.[42] In addition, the company had at least 12 other subsidiary companies apart from SVL.[43]  Although Mr Fung described the company as “stagnant”, it simply could not be said that the company had no business prospects.  There was evidence before the court by the time the appeal was heard of the fact that in May 2013, H had invested $31.08 million in convertible bonds issued by ADHL in order to protect his majority shareholding in the company.  There was also evidence of a rights issue of between $100 million to $150 million needed by the company to further its business.  All this suggested (and this was not disputed) that ADHL had an on-going business or at least might have future business prospects.  It is difficult to see why it was fair to the parties to concentrate only on the Severn Villa Property and ignore the rest of the company’s business.  As far as W was concerned, it was probable that the Severn Villa Property represented the best asset of the company but no reason was given as to why this asset should be isolated for consideration without any account being taken of the company’s other businesses.  It seemed that the effect of the clawback order in the present case was that W would get the benefit of what was likely to be the company’s best asset without taking the burden of the further investment necessitated by the company’s financial condition and attendant risks.  I would reiterate here that the relevant matrimonial asset with which we were concerned, were the parties’ shares in ADHL.  As Mostyn J asked rhetorically in FZ v SZ[44] (referring to his own judgment in GW v RW (Financial Provision: Departure from Equality),[45] “why should one party receive most of the plums leaving the other with most of the duff?”

(4) On this theme, it may further be pointed out that as ordered by the Court of Appeal, the relevant event was the redevelopment by ADHL of Severn Villa. If ADHL were to redevelop the property, there would be substantial expenses involved, without any certainty that there would be a profit to the company.  W was not going to contribute to the expenses or share in any of the risks. Moreover, whatever might otherwise be the state of the company, as long as there was a “notional” increase in the value of ADHL shares attributable to any redevelopment (less $230 million[46] and expenses), W would stand to gain.

(5) The points made above apply with even greater force to the orders advanced by W in this appeal.  If the words “by ADHL” were deleted, then even if ADHL did not itself redevelop, H would still be liable to W under the terms of the clawback order.  On the new form of the clawback order proposed by W in this appeal,[47] quite apart from the practical workability of it,[48] it is abundantly clear that W stood to gain even if ADHL did not; she would certainly not share in any losses, expenses or any of the risks.  It will be observed that the new draft proposed by W did not make any allowance for either the $230 million or the costs and expenses of any redevelopment .

(6) On the point that W was only taking the upside without the downside, the Court of Appeal accepted W’s submission[49] (maintained in this Court by Mr Fung SC) that there was no unfairness since she was only asking for an uplift in the event of redevelopment and not an uplift on other grounds.  With respect, this provides no answer at all to the point.

34. On the aspect of fairness alone, it was inappropriate to make a clawback order.  However, there is more.  It was inappropriate to make the order when one came to consider the desirability of adhering to the clean break principle and the Court of Appeal ought not in any event to have embarked on considering the making of a clawback order in the first place.  I now consider these two aspects.

E  FINALITY AND CLEAN BREAK

35. The desirability of finality in litigation has a somewhat special application in matrimonial matters in that while it is desirable to have a clean break between parties, the law recognises that this may not always be possible in the interests of fairness.  Thus, for example, particularly where children are concerned, orders are frequently made for periodic payments which look to the future.[50]  Various orders which a court can make under ss 4, 6 or 6A of the Ordinance also look to the future.[51]

36. Nevertheless, in accepting the above, one must as far as possible try to achieve a clean break between parties who, following the dissolution of a marriage, can often be severely at odds with one another.  The desirability of a clean break should be at the top of a judge’s mind when considering issues of ancillary relief.  While there is no statutory backing for this approach,[52] it is a common law principle of long standing.  In LKW, reference was made to the clean break principle.[53] In Miller v Miller,[54] to which reference was made in LKW, the desirability of a clean break was emphasised in a number of passages.[55]  In one, Lord Nicholls of Birkenhead referred to a familiar passage in the speech of Lord Scarman in Minton v Minton[56]: “An object of the modern law is to encourage [the parties] to put the past behind them and to begin a new life which is not overshadowed by the relationship which has broken down.”  I would also echo the sentiments of Stock JA in L v C[57]:-

“…That policy consideration is one that itself recognizes the considerable trauma that attends prolonged and costly matrimonial disputes, and the obvious advantage in settlement rather than in the litigious cauldron that stirs bitterness, prolongs uncertainty, and is the enemy of the clean break that enures to the advantage of husband, wife and children.”

37. As stated earlier, it may on occasion be desirable or fair to make orders which do have the effect of looking to the future, but not so as far as the clawback order was concerned in the present case.  The terms of the clawback order made by the Court of Appeal were fraught with difficulties and would inevitably have given rise to substantial disputes between the parties in the future.  I need only refer to a few of these difficulties:-

(1) The term “commencement of the redevelopment” itself causes difficulties.  It is evident that this term could possibly cover a number of scenarios. It cannot, as counsel submitted, be restricted only to “breaking ground” on the relevant site.

(2) Further, a question will also arise as to the correct time (whether a point in time or a period) to ascertain the “notional increase” in the value of 418,945,640 ADHL shares attributable to the redevelopment.  The fact that this notional value was to be net of $230 million, and the costs and expenses relating to the redevelopment, would seem to indicate that one should look at the position after the redevelopment has been completed.  This, however, is by no means free from difficulties either.

(3) Although an independent court expert is to be utilized, no doubt the parties would have much to put to this expert regarding any valuation.

38. These difficulties would remain if the words “by ADHL” are omitted from the draft.

39. On the new draft proposed by W on her appeal, quite apart from aspects giving to the fairness of such an order,[58] it was also full of potential difficulties; again I highlight just some of them:-

(1) Instead of a notional increase in the value of the ADHL shares attributable to a redevelopment, reference is now made to the “market value” of the shares attributable to any of the Specified Events.  At its lowest, this is an extremely difficult exercise, requiring the expertise not just of accountants, but perhaps also stockbrokers and market analysts.  In these areas, it is likely that there would be differing opinions.  Valuations are often a matter of opinion on which experts will differ.[59]

(2) Two of the Specified Events refer to sales (either by ADHL of its shareholding in SVL or by SVL of its interest in the Severn Villa Property) which take “into account the redevelopment value of Severn Villa”.  This, again, is an extremely controversial, not to mention difficult, exercise.

(3) The third Specified Event refers to the passing of a resolution by ADHL’s board of directors “to participate in the redevelopment of Severn Villa”.  This is vague: the word “participation” covers a number of different situations ranging from a redevelopment on its own to merely joining in some aspect of it.

40. I have earlier referred to the trial judge’s assessment of the conduct of the parties in the litigation.[60]  It reflects the worst characteristics of matrimonial litigation.  But the court should not make orders which will have the potential of prolonging the bitterness that may exist between former spouses, unless this is an inevitable consequence of what is seen to be fair and just.  There was simply no necessity or justification to make an order having this effect in the present case.

F  THE QUASI-INQUISITOIRAL FUTURE OF THE COURT AND FLYWIN

41. I have already made the point that, at trial, the aspect of the redevelopment of Severn Villa, although vaguely raised, was never pursued by W and that W certainly made no submissions regarding a clawback order.[61] The matter was only raised at the appeal stage in spite of H’s objections.

42. In his judgment, Cheung JA was of the view that where the parties had not raised an issue, this did not prevent the court from doing so of its own motion.  Reliance was placed[62] on the decision of the English Court of Appeal in Parra v Parra where Thorpe LJ mentioned the quasi-inquisitorial role of the court in ancillary relief litigation.[63]

43. As H pointed out in his written Case, there are limits as to how far this point can be stretched, particularly in the present case.  What it does not mean is that matrimonial litigation is some form of “free for all” where procedural rules and practice, coupled with their rationale,[64] have no application.  In matrimonial litigation, I daresay that the court would exercise its quasi-inquisitorial role most acutely where children are concerned, or if one or the other party or both parties suffered from some disadvantage.  Where, however, both parties are properly represented (as in the present case where at every stage, H and W have been represented by leading counsel), the court can in almost every case, unless some exceptional circumstances exist, rely on the parties to look after their own interests.  It would be quite wrong in such circumstances for the court to second-guess, much less override, the parties’ approach to the litigation, much of it being driven by tactical considerations.

44. There was no justification in the present case for the Court of Appeal to entertain new submissions based on the redevelopment of Severn Villa at the appeal stage.  The parties had not raised this issue at the trial stage and probably had their reasons not to do so (as we have seen, they were certainly aware of the possibility of redevelopment).[65] 

45. There was also a compelling reason for the Court of Appeal not to entertain any arguments relating to a clawback order.  If the question of a clawback order had been properly raised at trial, the evidence adduced by both parties would have addressed this issue in full.  I have dealt extensively with aspects of fairness and the foreseeable problems that a clawback order would have caused.[66] There is no doubt that the evidence of the parties, particularly that of H, would have dealt with at least some of these aspects.

46. In Flywin, this Court laid down a salutary rule that where a new point is taken on appeal by a party, that party will be barred from doing so “unless there is no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial.”[67]  As Mr Justice Bokhary PJ stated,[68] this rule is based on fairness.  In the present appeal, this ought to have been a decisive consideration.  There is no doubt that at least on H’s part, he would have wished to adduce additional evidence had the clawback order been a live issue then.  Apart from anything else, he might not have been quite so willing to agree the NAV of the ADHL shares.

G  CONCLUSION

47. For these reasons, H’s appeal was allowed and W’s appeal dismissed.

48. As to costs, the parties wished to have sight of the reasons for our decision before making their submissions.  The parties should within 14 days of the handing down of this judgment serve on each other and lodge with the Registrar of the Court any written submissions, with liberty on the parties to serve and lodge written submissions in reply within 14 days thereafter.

Mr Justice Ribeiro PJ:

49. I agree with the judgment of the Chief Justice.

Mr Justice Chan NPJ:

50. I agree with the judgment of the Chief Justice.

Mr Justice Stock NPJ:

51. I agree with the judgment of the Chief Justice.

Lord Walker of Gestingthorpe NPJ:

52. I agree with the judgment of the Chief Justice.

Chief Justice Ma:

53. On costs, the Court makes the order set out in para 48 above.