XCHRX YIP KU v. KWAN KUK LIN

HCMC 5 of 1997

IN THE HIGH COURT OF HONG KONG SAR

COURT OF FIRST INSTANCE

MATRIMONIAL JURISDICTION

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J U D G M E N T

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1. This is an interlocutory application by the Petitioner Husband against the Respondent Wife for an interim lump sum payment of $6 million to enable him to continue with the trial of his Ancillary Relief Application and Setting Aside Dispositions Application ("Trial") which started before me on the 23rd of November 1998.

2. The Husband and Wife (now in their sixties) were married in China in 1958 and came to Hong Kong in the early sixties. From a modest background in electroplating, the family moved upward to property ownership and property development so that by the early ninety nineties the family was wealthy in terms of many hundreds of million dollars. The marriage broke down in the early ninety nineties. Divorce proceedings started in May 1996 and Decree Nisi was granted on 26th November 1997 followed in the usual way by Decree Absolute in early 1998. There was a long, bitter and expensive history of litigation extending from the District Court in the matrimonial proceedings to a large number of High Court Actions concerning ownership of property companies and with remedies sought from the courts ranging from a contested maintenance pending suit to three Anton Pillar Orders.

3. The Petitioner Husband said that the Respondent Wife notwithstanding the recent property downturn still has a very large (reduced probably from huge in the sense of more than a billion dollars) asset pie of hundreds of million dollars whereas because of the protracted expensive litigation, he has been reduced to a poor man, owing large debts to pay for the litigation and that he cannot further afford his legal (solicitor, leading and junior counsel) and professional (accountants and valuers) teams unless the Court makes an interim lump sum order in his favour for initially some $6 million to finance his continued litigation. The Respondent Wife on the other hand said that because of the Trusts she set up and the dramatic downturn in the property market, she is in fact not even worth one million dollars and that she as well as the companies controlled by her and the Trusts both owe large sums to banks and other creditors.

4. The Trial which started before me was in the nature of two side by side applications, one by the Petitioner and by the Respondent respectively against each other for ancillary relief and the other application by the Petitioner to set aside a large number of dispositions of interests made by the Respondent and by him in respect of their interests in many property companies in favour of two Discretionary Trusts set up by the Wife in 1993. The Trial which was originally set down for 8 weeks has now a time estimate varying from 4 months to 6 months. The case is no doubt complex as it involves complicated issues of both fact and law and requires the investigation of conduct of the parties and their relationship with large number of companies and properties. Over 30 factual witnesses as well as a number of expert witnesses will be giving evidence during the Trial. The costs estimate given to the Court earlier was that the total costs up to the end of the 8 week Trial was to be $19 million for the Respondent and $13 million for the Petitioner. However on the 8th day of the Trial, before Mr. Rodway for the Petitioner had finished his very long opening, he informed the Court that the Petitioner could not continue with further professional representation and would have to act in person (as he was said to be not qualified for Legal Aid) unless the Court grants him the application of interim payment of some $6 million. I directed that a proper application be issued and this was done with 4 Affidavits filed on behalf of the Petitioner in support of the Summons and 2 Affidavits filed in opposition by the Respondent.

5. At the start of the Petitioner's Summons for Interim Lump Sum, with the agreement of the parties, I directed that the legal issue of the jurisdiction of the Court to grant such application should be heard first, deferring the other three complex issues to a later time should such necessity arise. The legal issue involves principally a consideration of the various provisions of the Matrimonial Proceedings and Property Ordinance ("MPPO") and raises in particular the construction of section 4 of MPPO, Rule 78 of Matrimonial Causes Rules and the Rule making power of the Matrimonial Causes Ordinance.

6. MPPO was enacted in Hong Kong in 1972 when it introduced a number of new statutory rights. MPPO replaced the financial provisions previously in Matrimonial Causes Ordinance ("MCO") and introduced for the first time financial provisions, such as lump sum payment, not previously enacted in statute. The main features of MPPO relevant to the present Judgment are the following sections:-

7. At the hearing, it is accepted by all parties that the matrimonial jurisdiction of the Court is a creature of the statute. It is also agreed by the parties that the statute has created the right of the Court to make the following matrimonial orders in favour of one applicant spouse against the other respondent spouse:-

(1) maintenance pending suit which can be made at any time from the issue of the Petition and be effective until the order of the decree absolute (section 3 of MPPO);

(2) periodical payment order which can be made to take effect at any time from decree absolute (section 4(1)(a) of MPPO);

(3) secured periodical payment order which can be made to take effect at any time from decree absolute (section 4(1)(b) of MPPO);

(4) lump sum payment order which can be made to take effect at any time from decree absolute (section 4(1)(c) of MPPO);

(5) secured lump sum payment by instalments order can made to take effect at any time from decree absolute (section 4(2)(b) of MPPO).

What divides the parties is whether there is any statutory power of the Court to grant an interim lump sum as opposed to a final lump sum under section 4(1)(c) of MPPO. In support of the existence of such statutory power, Mr. Rodway relied on Rule 78 of the Matrimonial Causes Rules ("MCR") which provides that:-

"Upon an application for ancillary relief, the court may make an interim order upon such terms as it thinks just."

In opposing the existence of this unheard of new power of the Court, Miss Leong for the Respondent referred me to the detailed provisions of Section 4(1), 4(2), 5, 6, 7, 11 and 32 of MPPO, to MCO and its Rule making provisions, to Rule 78 of MCR and to the authorities. I propose to consider the legal question of jurisdiction by reference to:-

1. the construction of the statute;

2. the authorities; and

3. the nature of the application.

 

STATUTORY CONSTRUCTION

8. Section 4 of MPPO reads as follows:-

"(1) On granting a decree of divorce .... or at any time thereafter (whether, in the case of a decree of divorce .... , before or after the decree is made absolute), the court may, subject to the provisions of section 25(1), make any one or more of the following orders, that is to say-

(a) an order that either party to the marriage shall make to the other such periodical payments and for such term as may be specified in the order;

(b) an order that either party to the marriage shall secure to the other to the satisfaction of the court, such periodical payments and for such term as may be so specified;

(c) an order that either party to the marriage shall pay to the other such lump sum or sums as may be so specified.

(2) Without prejudice to the generality of subsection (1)(c), an order under this section that a party to a marriage shall pay a lump sum to the other party-

(a) may be made for the purpose of enabling that other party to meet any liabilities or expenses reasonably incurred by him or her in maintaining himself or herself or any child of the family before making an application for an order under this section;

(b) may provide for the payment of that sum by instalments of such amount as may be specified in the order and may require the payment of the instalments to be secured to the satisfaction of the court.."

9. Section 5 relates to periodical payment, secured periodical payment or lump sum for children and has a similar arrangement as that in Section 4 for spouse. Section 6 is in respect of transfer and settlement of property etc. Section 7 of MPPO which is important, reads as follows:-

"(1) It shall be the duty of the court in deciding whether to exercise its powers under section 4, 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say-

(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) the standard of living enjoyed by the family before the breakdown of the marriage;

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;

(g) in the case of proceeding for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring."

The statutory scheme of MPPO is that as soon as a Petition is issued, a spouse can apply under Section 3 for maintenance pending suit which is not fettered by Section 7 consideration. The next stage of the financial arrangement is for a clean cut final order under Section 4 for spouse and under Section 5 for children, such as lump sum payment. When there is property involved, application should also be made under Section 6 for transfer or settlement of property or variation of settlement or for sale of property. It is important to note that applications under Sections 4 and 6 all require the Court to exercise its duty to take into account the matters set out in Section 7. The interlinking of Section 4, 5 and 6 is made clear when one looks at Section 11 of MPPO which provides as to what orders which are capable of being varied. It is to be noted that lump sum order under Section 4(1)(c), 4(2)(a), 5(2)(c) or 5(3) are not capable of being varied because each one of these is a final order made to achieve the purpose of clean break as made clear by such leading authority as de Lasala v de Lasala [1980] A.C. 546. Section 17 gives the right to seek avoidance of disposition made with the intention to defeat the rights which otherwise would arise under the MPPO. It is therefore the complete code in MPPO which is important and defines the rights and liabilities of the parties to a marriage. The Rules made under the statutes are generally speaking only of procedural and minor relevance.

Section 32 of MPPO reads as follows:-

"The Chief Justice may make rules of court for the better carrying out of the purposes and provisions of this Ordinance."

No Rules had been made by the Chief Justice pursuant to Section 32 of MPPO. Rule 78 which was the foundation of the present application for interim lump sum payment was a Rule made pursuant to Section 54 (under the heading PART VIII Miscellaneous) of the Matrimonial Causes Ordinance and it reads:-

"(1) The Chief Justice may make rules of court for the better carrying out of the purposes and provisions of this Ordinance and in particular, but without prejudiced to the generality of the foregoing, may make rules-

(a) as to all matters of procedure under this Ordinance;

(b) prescribing the forms to be used under this Ordinance;

(c) with regard to any matter as to which rules may be made under this Ordinance;

(d) providing for the enforcement in the Supreme Court of orders made under this Ordinance in the District Court..."

Although Rule 78 is the foundation and real basis of the present application of the Petitioner for interim lump sum payment, it was not so stated in the Summons dated 4th December 1998 which bears on the margin "Section 4(1)(c) of MPPO and inherent jurisdiction of the High Court". At the hearing Mr. Rodway abandoned any reliance on the inherent jurisdiction of the High Court as the source of the jurisdiction and he also disclaimed any reliance on the High Court Ordinance and the Rules of the High Court as the source of the jurisdiction for his application. Although he argued the jurisdiction of his interim lump sum application being based on Section 4(1)(c) of the MPPO, he was in fact not making his claim under Section 4(1)(c) but under Rule 78. This was made plain by the fact that he asserted that his application for interim lump sum was not restricted by Section 7 of MPPO considerations as would be the case of a lump sum application under Section 4(1)(c). Whatever might be his formulation, the real question is whether there is any statutory basis for the Court to grant an interim lump sum payment pending the completed hearing of the Trial for ancillary relief.

10. There can be no doubt that each and every one of the financial provisions in sections 3, 4, 5 and 6 of the MPPO gives rise to substantive rights to one party and correspondingly imposes substantial obligations on the other party. That is what the legislation is supposed to do and it has done it in very clear terms. An example of this clear legislative intention is that in respect of application for lump sum payment under section 4(1)(c), the statute has made it clear that no such payment can be ordered by the court unless the court has given consideration to the factors set out in Section 7(1) of MPPO (hereinafter referred to as "Section 7 Matters"). Thus the statute made clear the creation of this financial right of one spouse asking another spouse to make a lump sum payment and defined clearly the extent that such right could be exercised. Is there such clear legislative intent shown for the existence and exercise of the right of interim lump sum payment and if so where exactly in the statute can it be found.

11. Interim lump sum is not stated anywhere in section 4(1)(c) or for that matter anywhere in either MPPO or MCO or MCR. It is, if I may say so, a desperate creation of the Petitioner's legal team. The logical place in MPPO to find the appearance of such a substantial right of interim lump sum payment would be in section 4 of the MPPO. But it is not there. The case of the Petitioner is that the legislation has sanctioned or created this right by way of Rule 78 of MCR. Is that contention correct?

12. It is first to be noted that notwithstanding the power to make Rules given by Section 32 of the MPPO (which is of course the statute dealing with financial provisions as opposed to MCO which is the statute dealing with matrimonial proceedings generally) no Rules had been made under MPPO. Rule 78 of MCR was created pursuant to the Rules making power under Section 54 of MCO. MCO is not a statute (since 1972 when MPPO was enacted and repealed the ancillary provisions in MCO) dealing with financial provisions or the creation of financial rights. A glance at the contents pages of MCO confirms this view. It is therefore to say the least highly unlikely that a statute not dealing with financial rights would (or could) provide by way of its Rules making power, the authority for the Rules to create financial rights. One therefore turns to Section 54 of MCO. Section 54 gives the Chief Justice the power to make rules for the "better carrying out of the purposes and provisions of this Ordinance". The purposes and provisions of the MCO are not financial rights or the creation of financial rights in matrimonial proceedings. It seems to me that the Petitioner falls down on the first hurdle of establishing that there was a statutory foundation for Rule 78 to create the disputed right of interim lump sum. Section 54 also provides that the Chief Justice may make rules as to all matters of procedure under the Ordinance, namely the MCO (not MPPO). The creation of interim lump sum payment right is not a matter of procedure and again the Petitioner fails to show that Section 54 of MCO has the statutory power to enable Rule 78 to create the disputed right.

13. When one turns to Rule 78 of MCR, it is to be noted that it is part of some 16 Rules under the heading Ancillary Relief in the MCR. These Rules are concerned with procedure and practice relating to financial relief proceedings. Rule 78 is in general and wide terms and permits the Court to "make an interim order upon such terms as it thinks just" but in the context of the MCO, section 54 of MCO and the ancillary relief Rules in MCR, Rule 78 is restricted to matters of procedure and practice and is not intended or can be seen to create new legal rights and remedies. The Petitioner's argument if correct, would mean that the Court by the back door of Rule 78 has been given wide interim power to grant not only interim lump sum but every kind of interim order of ancillary relief set out in Rule 2 of the MCR defining ancillary relief, such as interim order for maintenance pending suit, an interim periodical payment order, an interim transfer of property order, an interim settlement of property order, an interim variation of settlement order and possibly even an interim avoidance of disposition order. The point has only to be stated for its absurdity to be plainly seen. In any event, if Rule 78 on its construction has such extensive effect, then on the basis of what I perceive to be the limited ambit of Section 54 of MCO, Rule 78 would be ultra vires. But of course it is not ultra vires, because on the true construction of Rule 78 of MCR, Section 54 of MCO and Section 4(1)(c) of MPPO, there is simply no power of interim lump sum given to the Court under Rule 78.

14. Finally it seems to me also relevant to point out that the creation of a substantive right as controversial and difficult as interim lump sum payment in matrimonial ancillary relief proceedings can only be done by way of new and clear legislation. Examples of this statutory necessity can be seen in Section 56 of the High Court Ordinance (interim payment in High Court proceedings), Section 7 of the Inheritance (Provisions for Family and Dependents) Ordinance (interim payment) and section 22A of Schedule 2 of the Family Law Act, 1996 of the United Kingdom [paragraph 3637 of Rayden and Jackson on Divorce and Family Matters, 17th ed. Vol. 2] (interim periodical payment and interim lump sum). It will be seen from these provisions that substantial financial rights which are interim in nature cannot come about by uncertain implication but can only be created by express, definite and clear statutory provisions. It was argued by Mr. Rodway forcefully that for years the practitioners have been obtaining from the courts interim orders of one kind or another and they cannot always be acting illegally. But as I pointed out to Mr. Rodway at the hearing, practice cannot make any difference to the existence of jurisdiction. Ultimately, when there is a contest, it is a matter of studying the statute to ascertain what the true position is.

AUTHORITIES

15. The research of Counsel indicated that in England and in Hong Kong from the time in early seventies that lump sum payment first became available as a statutory remedy until 1992, there was no record of any judgment where there was a successful attempt to seek interim lump sum. In Bolsom v Bolsom (1983) 4 FLR21, the English Court of Appeal held that there was no jurisdiction for the court to make what was in effect an interim lump sum order as a lump sum order was a once-and-for all order.

16. Barry v Barry [1992] 2 Fam.140 was the first case where a Court ordered in advance of the ancillary relief hearing, the payment of interim lump sum by way of transfer of a part of the money held in an account in the joint names of solicitors of both parties to the wife to enable a house to be purchased for the wife. To do immediate justice to the case, Waite, J. admitted to making an order of an "unusual and perhaps unprecedented kind." The Judge acknowledged that the power "to order a lump sum of capital to be raised and paid by one spouse to the other can be exercised once only, and cannot be exercised piecemeal-first on an interim and, then upon a final, basis". The interim lump sum application was disguised as a purely administrative direction approving a change of investment from cash to house, which would still be subject to the dispositive powers of the court. On the basis there was no jurisdiction objection by the husband to the course proposed, the Court granted the application. This case therefore is no authority in support of the existence of jurisdiction and by its own admission the decision supports the Respondent's contention of the lack of jurisdiction. In any event, as will be seen later, in Wicks v Wicks the English Court of Appeal disapproved Barry v Barry.

17. F v F [1995] 2 FLR 45 is another case where the interim lump sum was sought to pay for a house for the wife and in advance of the ancillary relief hearing. There the husband contested the jurisdiction of the Court and Thorpe, J. at page 56F seemed to have side stepped that question and relied on inherent jurisdiction (page 57F) to ensure fair play. From the report, it would seem that the Judge acknowledged the lack of statutory authority (page 57F) and if he did eventually decide in favour of the wife on the application, it seemed to me that the decision turned on its own special circumstances and provides scant authority that the court has statutory jurisdiction to grant interim lump sum. It will be seen later, that Wicks v Wicks also disapproved of this decision.

18. Wicks v Wicks [1998] 1 FLR 470 is another case where the interim lump sum payment was required to be used to purchase a house for the wife and the children. The lower court made the order sought and on appeal the English Court of Appeal consisting of Lord Justices Peter Gibson, Ward and Sir John Vinelott allowed the appeal and held that the Court has no jurisdiction to order any interim lump sum payment. Ward, L.J. (as the LJ with the matrimonial expertise) gave the leading judgment. At page 477D, he felt compelled to hold that Barry v Barry not good law, as there was no power in the Court to re-allocate property rights between the parties. In respect of F v F and the inherent jurisdiction basis relied on by Thorpe, J. in F. v F., Ward, L.J. rejected the contention of inherent jurisdiction as conferring sufficient jurisdiction on the Court. At page 478F, he said:-

".. . the power the applicant wives were inviting the court to assume was not a procedural power to control the court's process but a substantive power affecting the right of the applicant to the relief she was seeking."

Then at page 479F he said that:-

"where the substantive law laid down by the Matrimonial Causes Act 1973 does not permit that to happen, the court has no inherent jurisdiction to do what Parliament has not granted it power to do."

Then at page 485C-D, after referring to the equivalent to Rule 78 as an alternative basis for an argument that the Court has jurisdiction, Ward, L.J. said:-

"Both Waite, J and Thorpe, J were discouraging of any venture down this path, though no judgment blocks it-yet. If, for the reasons already set out, the Act excludes the power to make an interim order, then the rule cannot create the jurisdiction and the rule would be ultra vires. So that journey seem to go only up a garden path."

What was characterised as the garden path point is the argument of the Petitioner in this case, namely that Rule 78 gives the Court the jurisdiction to grant interim lump sum order. I had earlier held that point to be bad and I am comforted that Ward, L.J. expressed the same view. Both Sir John Vinelott and Peter Gibson, L.J. gave judgment holding that the Court has no jurisdiction and it is to be noted that both referred to the fact that it was due to the lack of power of the Court that the Family Law Act 1996 had to be enacted to establish a jurisdiction basis for the exercise of such interim power conferring substantial rights.

19. From the above account of the authorities (all from the United Kingdom) it is clear that there is no jurisdiction for the Court to grant any interim lump sum order and although Wicks v Wicks was strictly speaking dealing with the inherent jurisdiction as basis for the court's jurisdiction, the analysis and general consideration of the statutory position in the judgment provide, it seems to me, very persuasive authority against the contention of Mr. Rodway.

20. Before passing on to consider the Hong Kong authority on the subject, I should also mention that the two leading English textbooks on the subject confirm the lack of jurisdiction of the Court to grant interim lump sum order. (See Rayden & Jackson, 17th edition, Vol. 1, para. 21.101 and Jackson on Matrimonial Finance and Taxation, 6th ed. Para. 5.9).

21. In Y v Y [1997] 3 HKC 43, the application was like in this case for an interim lump sum to be paid to finance the litigation (albeit in the somewhat modest sum of HK$100,000). There the argument in favour of jurisdiction was put on two basis, firstly that the Basic Law of Hong Kong encompassed the common law in South Africa which confer certain right to seek costs contribution in matrimonial matters and secondly on the ground of inherent jurisdiction. The learned Judge rejected both submissions. As Mr. Rodway is not relying on inherent jurisdiction and as the application was dismissed also on other grounds, it is not necessary to go into the details of this judgment. It is however to be noted that Deputy Judge Hartmann (as he then was) decided the case against jurisdiction even though he did not have the benefit of Wicks v Wicks. It is sufficient to say that the general tenor of the decision is that there was no jurisdiction of the Court to make interim lump sum order specially when it is by way of payment to finance the very same matrimonial litigation. Y v Y is therefore no authority in support of the Petitioner's case and if anything gives general confirmation of the Respondent's contention that there is no jurisdiction.

22. The above survey of the authorities indicate that no court has held that there is a statutory basis for the alleged power to grant interim lump sum. In fact quite opposite is the case. Even in decisions such as Barry v Barry and F v F, the Courts there recognised the lack of statutory jurisdiction for such relief. In Bolsom v Bolsom, the Court of Appeal clearly held that there was no jurisdiction and in Wicks v Wicks, the English Court of Appeal affirmed in the most positive terms their judgment that the Court has no jurisdiction. Lord Justice Ward expressed the clear view that the equivalent to Rule 78 could not provide the statutory justification for jurisdiction. Based on authority, I therefore also reject the submission of the Petitioner that this Court has the necessary jurisdiction to make the interim payment order sought by the Summons.

NATURE OF THE APPLICATION

23. The nature of the Petitioner's application is a pure and simple one for interim lump sum in advance of the judgment on the ancillary relief application. I do not think it is an exaggeration to describe the Trial as being bitterly contested on every point and that as can be seen from the Revised List of Issues of the Petitioner and of the Respondent, there is not even consensus as what are the family assets (whether it be his or hers) let alone as to the valuation of the various assets. If the Respondent is right, then she simply has no substantial assets of any kind with which to pay him any ancillary relief order let alone the present $6 million interim lump sum sought. This brings me to the question of the fundamental difficulty faced by the Petitioner, namely the nature of the interim lump sum application which is outside section 4(1)(c) of MPPO and which is not controlled in any way by Section 7 Matters. The submission of Mr. Rodway is that because the application is based on Rule 78 and is interim in nature and not based on Section 4(1)(c) which is final in nature, the Court notwithstanding the controversies surrounding all Section 7 Matters, can ignore them in considering this interim lump sum application. He has to say this because if the Court is to take them into consideration before making any order as it is required to do under a Section 4(1)(c) application, then these will provide serious impediments to the Court granting the requested order. What is therefore suggested by Mr. Rodway is that the Court should act on the interim lump sum application on a basis totally different from the final lump sum application and in contravention of the express statutory control embodied in Section 7. This dichotomy of treatment can of course be legitimate, done by way of clear words in a clear statute as to the different concept which will apply in relation to an interim lump sum payment. But it is not legitimate when the very foundation of the interim lump sum is not by express intention in statute but by way of implication through three layers (Rule 78, Section 54 of MCO and Section 4(1)(c) of MPPO). What is sought to be done is by way of third-hand implications to contradict what is in the express words of Section 7. This I do not think is permissible. No matter how much sympathy the Court has for the applicant or how much the justice of the particular situation calls for a means to assist the applicant victim, there is simply no room for this approach or for a substantial right which cannot be properly and clearly established. In an area charged as much with emotion and hard cases as matrimonial financial proceedings, it is I believe even more important than in other proceedings to have the certainty of the law as the strong steady ballast in a stormy sea. Interim lump sum might be desirable but it also brings in its wake other difficulties and ultimately it must follow the step by step approach adopted by legislature to introduce such provisions as deemed to be appropriate at the time. Britain has taken a long time to travel from a position from last century when the weaker spouse has few protection to a position in early seventies where lump sum can be ordered to the recent position when Parliament enacted the Family Law Act of 1996 to confer on the Court for the first time the jurisdiction and the guidelines for the exercise of the power of interim lump sum. In Hong Kong, although we have moved fast, we are always on solid ground. Brave souls can of course push for a faster introduction of legislation based on Family Law Act of 1996. The Court however must act according to the law.

24. I conclude therefore for reasons given above, that the Summons must fail because there is no jurisdiction for the Court to grant interim lump sum. The Summons of the Petitioner is therefore dismissed. The Respondent is to be awarded the costs of the Summons in any event with Certificate for two Counsel.