MCYP v. CWYW

FCMC 11432/2018

[2022] HKFC 262

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER FCMC 11432 OF 2018

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JUDGMENT

(Discharge of Undertaking)

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Introduction

1.  This is an application taken out by the petitioner (“the husband”) by way of a summons filed on 23 November 2021 for discharge of an undertaking made by consent and to replace it by a different one. The respondent (“the wife”) opposed and asked for the original undertaking to remain in place.

The application

2.  The subject undertaking was ordered in Recital J of the consent order made by DDJ Rita So dated 30 November 2018 (“the Consent Order”), the exact undertaking was reproduced as follows:

“(J) Credit card spending for the Respondent

AND UPON the Petitioner undertaking confirming and acknowledging to the Court and to the Respondent that further to the Order made herein and the Undertaking (D) and (K) herein, the Petitioner do continue to provide the Respondent with the usage of the following credit cards:-

(i) Citi Bank credit card No.4028 XXXX XXXX XX04;

(ii) Citi Bank credit card No. 4028 XXXX XXXX XX26;

(iii) HSBC credit card No. 5431 XXXX XXXX XX28; and

(iv) Hang Seng Bank MasterCard (The Hong Kong Jockey Club) No. 5520 XXXX XXXX XX21.

and/or credit cards upon expiry or cancellation of either one or all of the cards (“Other Credit Cards”) for the Respondent’s own purchases and expenditure up to a maximum limit of HK$300,000 per month (1^st day of each month until the end of the month”) and to settle such expenses incurred under the above credit cards or Other Credit Cards referred to herein in full directly and promptly by the due date of each month to ensure the credit limit of HK$300,000 is not affected.”

(“the Undertaking”)

3.  The husband now seeks an order to discharge it with a replacement as follows:

  “Upon Petitioner’s undertaking, confirming and acknowledging to the Court and to the Respondent that the Petitioner do continue to provide the Respondent with the usage of the following credit cards:

(i) HSBC Red credit card no. 5289 XXXX XXXX XX97;

(ii) Hang Seng Bank Mastercard (The Hong Kong Jockey Club) No. 5520 XXXX XXXX XX21

And/or other credit cards upon the expiry or cancellation of either one of all of the cards (“Other Credit Cards”) for the Respondent’s own purchases and expenditure up to a maximum limit of HK$100,000 (1^st day of each month until the end of the month) and to settle such expenses incurred under the above credit cards or Other Credit Cards referred to herein in full directly and promptly by the due date of each month to ensure the credit limit of HK$100,000 is not affected.”

(“The New Undertaking”)

4.  The wife did not take issue on the situation that the number of credit cards from 4 to 2, the dispute here is that the wife is resisting, the husband to reduce the monthly spending limit from HK$300,000 to HK$100,000.

5.  This concerned her because the husband had already failed to pay the amount ordered by DDJ R. Chow in his judgment dated 17 January 2022 regarding an upwards elevation of maintenance pending suit from HK$120,000 to HK$180,000 coupled with a backdated amount of HK$1.173 million. As at the date of the wife’s affirmation filed on 21 April 2022, the husband has only paid up HK$351,900 to the wife.

Legal principles

6.  Prior looking into the parties’ background and the reasons of application, I shall visit the law on discharging or varying undertakings. HHJ Melloy summarized the principle in FHP v. YPY (formally known as YSL) FCMC 15966 of 2010 / [2019] HKFC 296 at paragraphs 15 – 16:

“The law

Discharge of undertakings

15. In so far as the undertaking is concerned, it is not disputed that the court cannot impose an undertaking on a party nor can it vary an undertaking of its own motion. The court may accept an undertaking; it may discharge an undertaking and it may, in some circumstances refuse either to accept an undertaking or to discharge it.

16. This issue was recently reviewed by the UK’s Supreme Court in the case of Birch v Birch [2017] WLR 2959. Lord Wilson, who gave the lead judgment, essentially reiterated what has been said in the above paragraph, namely that the court has no power to vary an undertaking. It may however release a party from an undertaking upon the offer of a new one, which may look like a variation – but it is not. At paragraph 5 he said as follows:

“A court has no power to impose any variation of the terms of a voluntary promise. A litigant who wishes to cease to be bound by her (or his) undertaking should apply for “release” from it (or “discharge” of it); and often she will accompany her application for release with an offer of a further undertaking in different terms. The court may decide to accept the further undertaking and, in the light of it, to grant the application for release. Equally the court may indicate that it will grant the application for release only on condition that she is willing to give a further undertaking or one in terms different from those of a further undertaking or one in terms different from those of a further undertaking currently on offer. In either event the court’s power is only to grant or refuse the application for release; and, although exercise of its power may result in something which looks like a variation of an undertaking, it is the product of a different process of reasoning.”

7.  In an unreported case HMSE v JJS [2019] HKFC 55, FCMP 70 of 2008 where my sister judge, DDJ Rita So summarized the same issue and said as follows, without limiting the situation identified below, the court may always accept an undertaking or discharge it, if it is just and reasonable to do so.

“93. The legal principles on discharge of an undertaking can be summarized as follows :-

(a) An undertaking can be discharged, but not varied.

(b) The Court has jurisdiction to discharge an undertaking given to the Court at any stage, even if it was given in an order made by consent.

(c) A party who has given an undertaking to the Court may seek an uplift or release himself/herself from an undertaking in any of the following situations:-

(i) When there has been a material change of circumstances since the undertaking was given which is not foreseeable at the time and which make compliance not feasible;

(ii) When the subject matter to which the undertaking relates no longer exists which renders compliance impossible;

(iii) The party to whom the undertaking was given releases the undertaker from complying with the undertaking;

(iv) When the undertaking was obtained though fraud, misrepresentation or mistake.

(d) Whether an undertaking given to the Court should be discharged is a matter of judicial discretion to be exercised if it is “just” to do so, in order to achieve a “fair” result.

94. It is trite law that undertakings should not be given lightly.”

8.  In addition, HHJ Melloy stated in paragraph 22 in D, M v. D, R (also known as R, R) (FCMC 1968 of 2009; [2021] HKFC 48) which concluded the whole idea of the above principles:

“22. That remains my view now. It seems to me that the court has a very wide discretion when considering whether or not to discharge an undertaking or to accept a different undertaking in its stead. As with an application to vary under s. 11 (7) of the Matrimonial Proceedings and Property Ordinance, Cap 192, the overall intention is to achieve a fair outcome, by reference inter alia to all of the relevant circumstances of the case, including the basis upon which the parties originally entered into the consent order and whether or not there has been any material change of circumstance. Overall, I am charged with considering whether the husband’s request is just and reasonable. To that end, and by analogy, reference may also be made to the often-quoted section from the Hong Kong Court of Appeal decision, AEM v VFM [2008] HKFLR 106, where the Hon Cheung JA made the following point when referring in particular to agreements reached by consent, as here:

8. At the same time the basis and intended effect of the original order are relevant factors to which the Court on variation should pay regard and there should not be a radical departure from the approach taken by the parties themselves when they had entered into an agreement embodied in a consent order: Boylan v. Boylan [1988] FLR 282.”

Overview

9.  This is a highly conflicted case, the husband petitioned for a divorce after 23 years of marriage. The husband’s family has been running a business in the financial industry which also involved substantive land developments. The founder of the family business, i.e. the father of the husband, passed away in the 1980s, the family wealth was inherited by the husband and his siblings. It is beyond question that the husband and wife have enjoyed a very high standard of living, both during marriage and after separation, and that has been exclusively provided for by the husband or his family. The wife had become a housewife after marriage. They have 3 children, namely 2 sons and 1 daughter and all are now above 18 year of age.

The husband’s reasons to vary

Delay in fixing an FDR

10.  The husband says this application was instigated by the wife’s excessive expenditures, particularly on jewelries since the Consent Order, he has to put a halt to the wife’s lavish spending pattern. The Consent Order was sought after a successful mediation and the husband sees the content therein was concluded on an interim basis with very generous maintenance (which has exceeded the living standard) to the wife. With a view to settle the ancillary relief expeditiously, the husband anticipated a financial dispute resolution (“FDR”) will be fixed soon after the Consent Order. However, it turned out to have been delayed by the wife’s two interlocutory applications. The husband put an effort to oppose the said two applications and as at the date of handing down this judgment, the said two interlocutory applications are still on foot.

11.  The wife argued by saying firstly, the Consent Order did not conclude lightly, both the husband and herself had gone through various sessions of mediation. Not to mention both parties were represented, it took almost one month to settle on an interim basis.

12.  On this point, it is irrelevant here to consider how the Consent Order was granted, be it as it is undesirable that the petition as not yet reach FDR stage, I should say it is expected such interim order shall be continued until further order.

The husband’s difficult financial position

13.  The husband put forward his change of circumstance since the Consent Order by saying his financial position has been deteriorated. To name it, the husband’s overdraft facilities have increased from –HK$1,878,926.17 as at 28 September 2018 to –HK$5.65 million as at the date of filing this summons, i.e. 23 November 2021; debts owed to his family company have also increased from HK$963,000 in early 2019 to over HK$11,343,000 now. To meet the wife’s maintenance pending suit payments, he sold a property in Kennedy Town. Albeit the husband’s total assets amounted to HK$370.5 million, he said it is nevertheless a minority interest in the family company and of which he is unable to liquidate most of it.

14.  On the other hand, the wife sees there is no material change of circumstance on the part of the husband. The wife rebutted by saying firstly, the family company was the husband’s financial resources, his overdraft facility with the family company has not been exhausted. Secondly, when the husband has incurred a monthly expenses as high as HK$1.182 million, the family company has been paying the husband HK$413,166 plus HK$50,000 director’s fee monthly to the husband. The husband’s financial means was grossly underestimated because the so-called loan from the family company was not genuine liability.

15.  I should say in the outset I accept the wife’s argument that the husband was nowhere in financial difficulty. The husband came from a wealthy family and that the family company / business will finance his expenses by advancing loan(s) to him. The wife has rightly pointed out that the indebtedness or borrowings only show his financial ability to attain continuous flow of financial support from his family. Although the husband may not be able to liquidate his share in the family company at this stage, it has no bearing on his financial ability to settle credit card bills at interim stage.

16.  I find the husband has ability to pay, be it the loans advanced by his family company / business might have been elevated, it does not affect his true financial position.

The wife’s spending on jewelries and lavish items

17.  The husband complained the credit card bills have reflected the wife has spent mostly on jewelries, in particular, in an attempt to use the Hang Seng Bank credit to purchase a Cartier diamond bangle in February 2019; Citibank Premier Miles credit card to purchase a diamond bracelet in March 2019 and 2 purchases in sum of HK$40,000 and HK$30,000 on 19 March 2019. Moreover, the husband was frustrated to learn the wife’s spending habits which were beyond her needs but mostly and disproportionately on lavish items. The husband recalled there were occasional purchases on high end items from auction house but he did not recall regular purchase of jewelries does not form part of the lifestyle during marriage. He was particularly dissatisfied to learn the wife had purchased 5 Rolex Daytona for the children in sum of HK$204,000 between March 2020 to July 2020.

18.  The wife has once complained the transaction of the credit cards cannot be put through, the husband says it was the wife herself who has breached the Undertaking by spending over HK$300,000 per month and that rendered her subsequent transactions been rejected. To ease the wife’s complaint, the husband gave her a new HSBC Red credit card with a limit of HK$360,000, having done so, the wife had continued to complain her difficulty in using them.

19.  The husband believes the wife’s spending on credit cards during marriage was mostly below HK$200,000 or sometimes as low as HK$10,000. The husband sees the wife’s conduct in light of using the credit card was done purposefully to maximize her needs in this suit. From this, the husband seriously reconsidered the wife’s needs and had come to a figure of HK$71,000 per month on her needs (excluding accommodation, jewelry and Chinese herbal medicine), jewelry items should be excluded to be part of the wife’s needs.

20.  The wife denied the husband’s allegation and had explained her use of credit cards was to replace direct or indirect payment by the husband during marriage. To name a few, dinner out and expenses on vacations were mostly paid by the husband. She mentioned it was a usual practice that the husband will supply cash to her mostly around HK$50,000 upon demand. Apart from this, the wife was allowed to have access to the safe at home for cash. The wife’s spending, including extinguished art pieces, were paid or arranged by the husband’s secretary, the husband will arrange reimbursement according to her request.

21.  The wife had a chance to analyze her credit card spending from January 2013 – November 2018 (prior to the petition) was HK$278,246 per month excluding children’s clothing, entertainment and grooming. When the above payment arrangements by the husband are no longer available to her after separation. She can only spend with the credit cards provided by the husband. After the petition, she had been deprived with sponsorship of luxury clothing, jewelry and evening gowns from luxury brands such as Dior, YSL, Gucci and Louis Vuitton for maintaining a positive image as a celebrity wife. She lost such benefits after separation with the husband and has to pay for the items herself, for instance, an evening gown from Dior costs more than HK$100,000.

22.  A step forward, the wife rebutted the spending on jewelry for both herself and the husband was regular and recurring during marriage. The husband did not dispute on this point by agreeing, by February 2017, he has spent on jewelry for the wife as high as HK$69,067,395. The luxury items / personal valuables disclosed for the purpose of this divorce suit is more than 90 items, half of them were valued more than HK$300,000 per piece. The wife emphasized these items are not exceptional pieces but purchased on a regular basis which reflects their lifestyle and standard of living.

23.  The wife further compared her “interest” in purchasing jewelries to the husband’s purchase of expensive cars and Patek Phillip watches. She emphasized on the lifestyle prior to separation by referring to “a basket of car keys” at the matrimonial home, mostly Porsche GTS, Astor Martin, where the husband could choose any car to drive for the day the same way as the wife could choose to anything to wear from her wardrobe.

24.  The wife also recalled she has taken part in jewelry design courses towards a gemologist. She was not aware of the husband’s objection in doing so, when he had been supporting her financially during marriage with free rein spending.

25.  For now, when the wife is only allowed to have a credit limit of HK$300,000 per month, she has to purchase jewelry cautiously from various shops. She could not get extinguish pieces from Christie’s or Sotheby’s as before. The wife explained the purchases of Rolex watches was meant to be graduation gifts for the elder son.

26.  The wife complained the husband is making her difficult and embarrassing in using the credit cards. She denied overspending with the credit cards because she had kept a good record of expenditures because she was required to submit the receipts to the husband’s solicitors from time to time. There are occasional slight overspendings but she has tackled it by reducing the excess amount in following months.

27.  The wife concluded by saying the husband has formally become the chairman of the board of directors of an established charitable organization. He is expected to make handsome donations which is likely more than HK$1 million. The wife believes the husband has no financial difficulty in continuing the 2018 Consent Order, in particular, providing her with a credit limit of HK$300,000 per month.

28.  On this point, I am with the wife that the spending pattern has not changed but the mode of spending has been altered after the petition. I pay special attention to the parties’ lifestyle and the background of the husband’s family business, it certainly stands out from family that are difficult with necessities, the wife is entitled to be maintained at a very high standard of living. I agree with wife that purchase of luxuries are part of her lifestyle prior to separation, they are regular and recurring expenditures. The above is in line with HJFG v. KCY which thereby decided in big money cases, the maintenance is to enable a spouse to be maintained in highest standards and in addition to funds for other forms of expenditures which may not properly classified as “maintenance”. In this respect, as compared to the wealth of the husband, HK$370 million stated in Form E, some purchase of jewelries or capital spending are within their norm.

Outcome

29.  In the premises, I am not satisfied the husband has demonstrated a material change justified a discharge of the Undertaking. With no change of financial ability on his part, it is fair for the husband to maintain the same credit card limit of HK$300,000 as agreed in the Consent Order.

30.  The Undertaking shall be discharged and replaced by the following:

“Upon Petitioner’s undertaking, confirming and acknowledging to the Court and to the Respondent that the Petitioner do continue to provide the Respondent with the usage of the following credit cards:

(i) HSBC Red credit card no. 5289 XXXX XXXX XX97;

(ii) Hang Seng Bank Mastercard (The Hong Kong Jockey Club) No. 5520 XXXX XXXX XX21

And/or other credit cards upon the expiry or cancellation of either one of all of the cards (“Other Credit Cards”) for the Respondent’s own purchases and expenditure up to a maximum limit of HK$300,000 (1^st day of each month until the end of the month) and to settle such expenses incurred under the above credit cards or Other Credit Cards referred to herein in full directly and promptly by the due date of each month to ensure the credit limit of HK$300,000 is not affected.”

Costs

31.  Costs should follow the event, I make an order on costs on a nisi on costs that the husband to pay the wife’s costs of his summons, with certificate of counsel, to be taxed if not agreed. This costs order nisi be made absolute within 28 days from the date of this judgment in absence of party to vary by summons.

Orders

32.  With reasons of the foregoing, I make the following orders:

(i)  The petitioner’s (the husband’s) summons filed on 23 November 2021 be dismissed.

(ii)  There be an order of costs on a nisi basis that the husband to pay the wife’s costs of his summons, with certificate of counsel, to be taxed if not agreed. Such costs order nisi shall be made absolute within 14 days from the date of this judgment in absence of party to vary by summons.