YU v. SO

[English Translation – 英譯本]

FCDJ3947/1987

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 3947 OF 1987

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JUDGMENT

(Charging Order)

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Introduction

1.  On the strength of the order made by Hartmann J. on 3 January 1995, the petitioner (husband) applied to the court for a charging order for the first time on 22 December 2010, and obtained a charging order absolute on 14 April 2011. Subsequently, he made applications for an order for possession and an order for sale of the properties. Eventually, the orders sought were made on 4 December 2012, but the respondent (wife) was absent from all the proceedings the whole time.  On 4 March 2013, the wife applied to set aside the order for possession and the order for sale of the properties, and obtained an order for stay on 12 March 2013.  Now the wife applies to discharge the charging order and any incumbrance in relation to the 2 properties registered with the Lands Registry. The husband opposes the application.

2.  Both parties filed affidavits in relation to the wife’s application, and confirmed their choice of not giving evidence and making oral submissions.  The wife’s application was dealt with by way of affidavits and written submissions.  The crux of this application hinges on whether the interpretation of the term “action” in sections 2 and 4(4) of the Limitation Ordinance, Cap 347, Laws of Hong Kong includes an oral agreement made for the delayed execution of a judgment.

Background

3.  The husband and the wife are 77 and 67 respectively.  They married in Hong Kong on 17 June 1972.  They have 3 children of the marriage:

1) The eldest son was born in May 1973 and is currently 41;

2) The eldest daughter was born in February 1976 and is currently 38;

3) The youngest son was born in September 1978 and is currently 36.

4.  Without any notice to the wife, the husband petitioned for divorce (the petition in this case) on 12 September 1987 on the ground of 2-year separation, and applied for a decree nisi with a Form 4 stating that it was an undefended petition and bearing the forged signature of the wife.  Later the Court ordered the decree nisi and the decree absolute on 20 July 1988 and 18 October 1988 respectively.

5.  The wife was totally in the dark about the divorce in 1988.  On 9 November 1992, the wife issued a petition for divorce (FCDJ 6923/1992) on the ground of unreasonable behaviour.  The husband opposed the petition, and stated that he would contest the custody of those children of the family who had not yet reached the age of majority.  The court had obtained a social welfare report and made a decree nisi in respect of this petition.  On 2 August 1993 when the decree nisi was granted, the court also ordered that the custody of the children of the family be granted to the wife, whereas the husband would have reasonable access and be required to pay a nominal maintenance to the wife, and that other applications concerning ancillary relief be adjourned to another date for hearing.  During the preparation of the application for ancillary relief, the then legal representative of the wife discovered that the husband had obtained a decree absolute on the marriage on as early as 18 October 1988.

6.  In respect of the wife’s discovery, on 10 March 1994, Judge Surman, after hearing submissions from both sides (who were then legally represented, with the husband even represented by counsel), ordered that the decree nisi granted in FCDJ 6923/1992 was null and void, granted leave to the wife to terminate the petition for divorce, and ordered the husband to pay costs to the wife, particularly with those of the divorce petition hearing and the application for the termination of the divorce petition be taxed on the indemnity basis.  Both parties were granted leave to apply for ancillary relief, and those applications were transferred to the present case.  The order for costs made on 10 March 1994 was taxed at HK$211,916.10 on 3 January 1995.

7.  The inter-partes application for ancillary relief during that period was handled by Judge Hartmann (as he then was).  After trial, Judge Hartmann ordered on 3 January 1995 that the husband had to deliver vacant possession of the property on Lai Chi Kok Road, which was in the wife’s name, to her on 31 March 1995, but the husband could receive and retain the rental income from that property until 31 March 1995, and that the wife had to pay the husband a lump sum of HK$280,000 by 1 May 1995.

8.  The wife alleged that the husband did not pay the costs of HK$211,916.10 taxed on 3 January 1995 pursuant to the order made on 10 March 1994, deliver vacant possession of the property on Lai Chi Kok Road to her pursuant to the order made on 31 March 1995 and is still occupying the rooftop of the property. However, she agrees that she has not paid the husband the sum of HK$280,000 pursuant to the order made on 31 March 1995.

9.  Based on the order on costs, the wife obtained a charging order nisi and a charging order absolute on the husband’s property on 24 February 1995 and 3 May 1995 respectively. Afterwards, the charging orders obtained by the wife were discharged by way of a consent summons.  Both parties have different versions concerning the background on the discharge of the charging orders and whether the husband has paid the costs taxed on 3 January 1995.

10.  In relation to FCDJ 6923/1992, the husband submitted a “Notice of Application for Ancillary Relief” on 19 March 2010, requesting a re-distribution of property.  The husband’s application was handled by Judge C. K. Chan.  After hearing the husband and in the absence of the wife, Judge Chan dismissed the husband’s application on 23 June 2010.  On 4 October 2010, the husband’s application on 27 August 2010 for leave to appeal out-of-time was dismissed.  Later, the husband appealed to the Court of Appeal, and his application was eventually refused on 29 November 2010.

11.  After the appeal had been dismissed, on 22 December 2010, the husband for the first time commenced legal proceedings to apply for a charging order on the property in the wife’s name for the enforcement of lump sum payment of HK$280,000 of 3 January 1995.  After the husband had obtained an order of possession and an order for sale, the wife appeared and raised objections.  Both parties have different versions regarding whether the husband was in full compliance with the requirements of service.  However, the wife admitted that the legal document(s) in question was/were delivered to her home, she turned a blind eye to it/them only because she was afraid of her husband.

The wife’s argument

12.  Section 4(4) of the Limitation Ordinance provides that the husband shall not bring any application for a charging order regarding the order of the lump sum payment 12 years from 3 January 1995, the date on which the order became enforceable. Moreover, the interest allowed in the charging order absolute involved in this case has far exceeded that allowed in the Limitation Ordinance. Furthermore, the husband has still not paid the wife the costs taxed on 3 January 1995, and this was even concealed in the application for the charging order, which has violated the principle of “full and frank” disclosure.   In addition, the husband did not serve the “Charging order: notice to show cause” dated 22 January 2011 and the supporting affidavit on the wife in accordance with the Rules of the District Court.

The husband’s argument

13.  The charging order in question is a continuation of the enforcement of the agreement on delayed repayment.  It is not subject to the 12-year limitation, nor has it exceeded the interest allowed in the Limitation Ordinance.  The wife discharged the charging order obtained by reason of the “costs order” because she received consideration, and when she applied for the charging order, she did not disclose the “lump sum payment order” either.  The husband had repeatedly served papers on vacant possession on the wife in accordance with Order 10. The wife’s application has violated the principle of ne bis in idem, which is an abuse of the court’s process.

The law

14.  Order 50, Rule 7 of the Rules of the District Court provides that the Court may on the application of the judgment debtor or any other person interested in the subject-matter of the charge, at any time, whether before or after the order is made absolute, discharge or vary the order, and apply such terms as to costs or otherwise as it thinks just.

15.  Parts II and III of Limitation Ordinance have stipulated the periods of limitation for different classes of action and on how to extend or exclude them.  Section 4(4) of the Ordinance concerns the limitation on actions upon judgments, the relevant provision of which is as follows:

“4(4) An action shall not be brought uponany judgment after the expiration of 12 yearsfrom the date on which the judgment became enforceable, and no arrears ofinterest in respect of any judgment debtshall be recovered after the expiration of 6 years from the date on which the interestbecame due.”

According to the interpretation in section 2, "action" includes any proceeding in a court of law.

16.  Section 28AA(2) of the Matrimonial Proceedings and Property Ordinance provides that, if full and punctual payment is not made in compliance with the maintenance order, the judgment creditor is entitled to interest in respect of arrears of maintenance which accrue on or after the commencement date, and the judgment debtor is liable to pay the interest. According to the definition in section 2 of the Ordinance, a “maintenance order” includes an order for the payment of a lump sum.  Section 28AA(3) provides that the arrears in respect of the payment of a lump sum under a maintenance order shall be treated as a judgment debt for the purposes of section 50 of the District Court Ordinance, Cap 336 and shall carry interest.

17.  Part III of Limitation Ordinance stipulates the extension or exclusion of the limitation periods in certain cases.  Section 23(3) of the Ordinance provides that:

“Where any right of action has accrued to recoverany debt or other liquidated pecuniary claim,or any claim to the personal estate of adeceased person or to any share or interest therein,and the person liable or accountable thereforeacknowledges the claim or makes any paymentin respect thereof, the right shall be deemedto have accrued on and not before the dateof the acknowledgment or the last payment.”

18.  Section 24 of Limitation Ordinance, however, contains formal provisions as to “acknowledgments”:

“24. Formal provisions as to acknowledgments and part payments:

(1) Every such acknowledgment as aforesaid shall be in writing and signed by the person making the acknowledgment.

(2) Any such acknowledgment or payment as aforesaid may be made by the agent of the person by whom it is required to be made under section 23, and shall be made to the person, or to an agent of the person, whose title or claim is being acknowledged or, as the case may be, in respect of whose claimthe payment is being made.”

Cases

19.  In relation to the interpretation of section 4(4) of the Limitation Ordinance, the respondent has cited a number of cases, and they are respectively: Re: Man Po International Holdings Limited HCCW 14/2012, Re: Lau Wan HCB 4136/2012, Re: Li Man Hoo CACV 83/2012.  Re: Li Man Hoo is a Court of Appeal case, in which Hon Barma JA did not only analyse and consider the historical background of the UK law on limitation and the English cases, but also considered cases from Australia.  Eventually, the interpretations by Harris J and Anthony Chan J in Re: Man Po International Holdings Limited and Re: Lau Wan were accepted.  It was found that:

“I would therefore hold (as did Harris J and Anthony Chan J) that for the purposes of section 4(4) of the Limitation Ordinance, “action” has the very wide meaning attributed to it by section 2 of the Ordinance, and that such meaningis apt to include legal proceedings by way of bankruptcy or winding up petitions.”

According to the finding by Hon Barma J on the interpretation of “action”, the interpretation of “action” in section 2 of the Limitation Ordinance has a very wide meaning and is consistent with its ordinary meaning, that is, the effect of the provision in section 4(4) of the Limitation Ordinance strictly prohibits any proceedings be brought upon a judgment after the expiration of 12 years, including proceedings for the enforcement of the judgment.

20.  Hon Barma JA went on to conduct an analysis on interest in Re: Li Man Hoo regarding section 4(4) of the Limitation Ordinance, and finds that:

“The effect of the second part of section 4(4) of the Ordinance is to bar the recovery of interest on a judgment debt more than six years after it becomes due. … Where, however, enforcement (or bankruptcy or winding-up) proceedings are brought more than six (but less than 12) years after the judgment, the principal judgment debt may be recovered (or relied upon), along with the most recent six years’ of interest, but not interest accruing earlier than six years previously. Where enforcement (or bankruptcy or winding-up) proceedings are brought after the lapse of 12 years, they will be barred absolutely. In my view, once all forms of enforcement or proceeding on a judgment are barred, this must extend also to any attempt to recover interest on the judgment debt, which arises out of the judgment.”

According to the finding by Hon Barma JA, if the legal proceedings for the enforcement of the judgment are brought more than 6 years after the judgment became enforceable but within a period of 12 years, only the interest for the recent 6 years is recoverable.  If the proceedings are brought after the expiration of the limitation of 12 years, any claim on interest is also strictly prohibited.

Discussion

21.  The order for lump sum payment in question was made on 3 January 1995, requiring the wife to pay the husband a lump sum of HK$280,000 by 1 May 1995.  Until now, the wife has not paid any sum or interest in accordance with the Order.  The husband has pointed out in the first affirmation in support of his application for a charging order (dated 22 December 2010) that:

“(The wife) has breached the court order and refusedto make repayment. I request that an encumbrance be imposed on her property. Since the court had ordered that (the wife) had to repay the charges for the purchase of the flat to (the husband), the children were still small at that time and needed (to be) raised, raised, raised [sic], if I chased her up for repayment, the victims would be the children. Therefore both parties came to an agreement that not only no repayment shall be made, financial assistance was often given (to the wife), and the repayment with interest in full would be made after the children have finished education. Now that the children have become independent, although I have kept urging (the wife) for repayment, (she) refused. It is now necessary to impose encumbrance on her property.”

In another affirmation by the husband (dated 5 January 2011), again he pointed out that the effort to chase up for the above HK$280,000 for years had been unsuccessful.  Eventually, the husband prayed for the $280,000 in the judgment and the interest on judgment rate from 1 May 1995 and a charging order with costs incurred from the application for the order.

22.  An application to the court for a charging order is clearly legal proceedings for the enforcement of a judgment.  In 2010, the husband made an application for a charging order for the lump sum payment and interest by the judgment in 1995. The application was obviously made outside the 12-year limitation period, and was strictly prohibited by section 4(4) of the Limitation Ordinance, be it for the lump sum payment or the interest so incurred.

23.  The husband does not dispute that his application for the charging order has exceeded 12 years from the date of enforcement of the lump sum payment order made in 1995. His argument is that both parties had an “agreement”.  In his affirmation or affidavit, the husband has mentioned the agreement with the wife, and a more detailed account is in the description given in his “supplemental affirmation” dated 15 November 2012:

“1. In the matrimonial cause 3947/1987, on 3 May 1995, HH Judge Hartmann ordered that the respondent shall repay $280,000 being the charges for the purchase of the flat to (the husband). The judge suggested that the respondent mortgaged the property and the amount obtained be repaid (to the husband).

2. The 3 children were still young and at school then, and (the wife) did not have any financial means. If the property had been mortgaged, the children would have been unable to go to school and therefore their future affected; another way out would be to sell it, but (the husband) was of the opinion that as America was printing money like crazy, which would definitely lead to global inflation, and real estate would be the first to be affected. Selling properties would incur losses, definitely unwise.

3. (The husband and the wife) reached an agreement: (1) (The husband) will not pursue the debt for the time being, and will even support (the wife) financially until the children have come of age and had economic means, then repayment with interest shall be made to (the husband); (2) This is a long-term debt, which will surely last beyond 6 years. However, the both parties have agreed that a 6-year extension will be given automatically after each 6 years until the outstanding debt has been paid off; (3) (The wife) undertakes not to mortgage the property under her name without the petitioner’s consent, otherwise the principal with interest plus a penalty shall be paid (to the husband) in a lump sum; (4) Taking into account the problem of inflation, it was undertaken that for the sake of fairness, the final sum to be repaid should be able to purchase a medium- to low-priced property.

4. Whenever the end of a 6-year period approaches, (the husband) shall urge (the wife) for repayment, but (the wife) shall pay (the husband) $1,000-2,000 as an incentive for an extension of a further 6 years, and shall ensure that there will be an even better return.”

24.  Although the husband has alleged that there was an “agreement”, on 19 March 2010 he requested a re-allocation of the family’s assets without mentioning the alleged “agreement” in his supporting affidavit, but from which one can see that he is still occupying the tin yat (sic) of the wife’s property.  In accordance with the order for ancillary relief in 1995, the husband was supposed to return the property and its rooftop to the wife then.  By 1995, the 3 children were 22, 19 and 17 respectively and were living with the mother.  During that time, the children finished their studies respectively and entered the workforce.  The wife asserted that there was no “agreement” as alleged by the husband.  She said that because the husband did not return the whole of the property to her in accordance with the order, and that in 1997 she agreed to the discharge of the charging order obtained by way of a costs order, therefore she believed at that time that all the disputes between her and her husband had been fully resolved.

25.  With regard to this application, I am of the view that the crux of the matter is not whether the agreement alleged by the husband existed or not.  There is no written record of the agreement as alleged by the husband, which does not comply with the requirement of “acknowledgements” in  section 24 of the Limitation Ordinance, and the $1,000-2,000 allegedly given to him by the wife was said to have been an incentive to a 6-year extension instead of being payment for any judgment sum or interest.  Therefore, even if the “agreement” alleged by the husband exists, still he cannot rely on section 23(3) of the Limitation Ordinance to extend the limitation period.

26.  According to the facts of the husband’s case, he neither made a written record of the agreement nor invited the wife to sign in acknowledgement.  However, because of the mutual “agreement”, he did not bring legal proceedings for enforcement at an earlier time.  No mention of section 23(3) of the Limitation Ordinance has been made in the arguments raised in the husband’s submissions. Instead he contended that the 2 charging orders were a continuation of the enforcement of the agreement on delayed repayment.  From the start of the conclusion of the agreement on delayed repayment, the legal proceedings on the enforcement of the judgment had already commenced because the mutual agreement on delayed repayment was an affirmation, not bound by the 12-year limitation period.  The husband submitted that the mutual agreement on delayed repayment concluded by the parties was a procedure for the enforcement of the judgment and that it was a valid agreement out of the common intention of the parties which required no intervention from the court.  However, the agreement alleged by the husband did not involve any legal proceedings.

27.  Firstly, as in the finding by Hon Barma JA in Re: Li Man Hoo, the definition in section 2 of the Ordinance provided that “action” includes any proceeding in a court of law, which is consistent with the ordinary meaning.  In accordance with the interpretation by Hon Barma JA on “action”, although the expression has a wide coverage, the scope of it does not extend to cover private oral agreements on debts by the parties.  If oral agreements could also be considered as “actions”, section 24 of the Ordinance would become meaningless.

28.  Both parties have stated different views in respect of the dispute over whether the “costs order” and “lump sum order” obtained individually and separately should or can be set off against each other and whether they have violated the principle of “full and frank disclosure”.  However, their respective arguments are based on the facts that each of them had alleged separately.  For this reason, I am of the view that it is not necessary to consider the issue of set off in this application.

29.  Regarding the wife’s allegation that the husband did not serve “Charging order: notice to show cause” together with a copy of the supporting affidavit in accordance with Order 50 of the Rules of the District Court, the husband did not give any direct response, but he said that he had served the document(s) on vacant possession on the wife repeatedly in accordance with Order 10.  Even if, as the wife had said, the “Charging order: notice to show cause” had been served on her, she had been informed of the time to appear in court; if there was anything unclear she could make enquiries with the court or request that the case be adjourned for the purpose of obtaining a copy of the relevant supporting affidavit before continuing with the case.  Nevertheless, the wife chose to turn a blind eye to it/them. This does not constitute a valid ground for discharging the charge.

Conclusion

30.  Having considered the relevant evidence, testimony and law, I am of the view that even if the husband’s claim that the existence of the alleged “agreement” is accepted, such an “agreement” does not constitute an “action” within the meaning of section 2 of the Limitation Ordinance.  The earliest time that the husband took action in relation to the 1995 “lump sum payment order” was his application for a charging order on 22 December 2010, when it had obviously exceeded the 12-year limitation period.  According to section 4(4) of the Limitation Ordinance, this is strictly prohibited.  It is found that the husband was not entitled to bring any legal proceedings to enforce the 1995 “lump sum payment order” on 22 December 2010, including the application for the charging order.

31.  Judge Wong made an order for an absolute charging order in the absence of the wife, and did not make any findings in relation to the issues in dispute.  In accordance with Order 50 Rule 7 of the Rules of the District Court, I could discharge the charging order in question upon the application of the wife at anytime, even after the charging order has become absolute.  I do not consider this application a violation of the principle of ne bis in idem, nor is it an abuse of the court’s power.

32.  Based on the above reasons, I grant the wife’s application, discharge the “Charging order: notice to show cause” dated 22 January 2011 and the absolute charging order dated 14 April 2011, and discharge the registration with the Lands Registry of a total of 4 charging orders on the wife’s 2 properties.

Costs

33.  The general principle on costs is that costs follow the event.  This matter arose, however, because the wife did not give a direct reply to the legal document(s) served on her, otherwise the matter would not have dragged on until now.  An appropriate way of handling this is to make no order as to costs with the wife’s own costs to be taxed in accordance with the Legal Aid Regulations.  This is an order nisi, which becomes utter after 14 days.

Order

1.  The beneficial interest imposed on the respondent in the property in question and the “Charging order: notice to show cause” dated 22 January 2011 and the absolute charging order dated 14 April 2011 ordered by Judge Wong be set aside.

2.  The 2 charging orders with memorial numbers 11020100050019 and 11050300050010 registered with the Lands Registry on the property in Hang Fa Chuen are set aside.

3.  The 2 charging orders with memorial numbers 11020100050019 and 11050300050010 registered with the Lands Registry on the property on Lai Chi Kok Road are set aside.

4.  No order as to costs regarding this application and the respondent’s own costs be taxed in accordance with the Legal Aid Regulations.  This is an order nisi, which becomes utter after 14 days.

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. P. Y. Lo, Barrister-at-law.