SHW v. SCKR also known as CKR

FCMC 611/2014

[2020]HKFC262

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 611 OF 2014

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J U D G M E N T

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1.  This is a Summons take out by the Respondent Wife on 17 January 2020 for the following:

(1)     The Clearwater Bay Golf and Country Club membership (“the Membership”) as described in paragraph (A) of the Order of Deputy District Judge G Own (as he then was) dated 30 May 2014 (and the debenture issued thereunder) be surrendered and reissued;

(2)     All payment receivable under the surrender and re-issue of the Membership (and the debenture issued thereunder) be paid out and released to the Respondent solely.

Background

2.  The parties married in 1979 in Korea.  There are two children of the family, one son and one daughter.

3.  The Petitioner issued the petition for divorce on 16 January 2014. At the time of the petition, both children were already adults, respectively the son was 33 and the daughter 24 years of age.

4.  On 25 April 2014, both parties being legally represented, entered a Consent Summons which was made an Order of Court by DDJ G Own (as he then was) on 30 May 2014 (“2014 Order”).

5.  Decree Absolute was granted 25 July 2014.

6.  In the 2014 Order, the parties’ agreement on the Clearwater Bay Golf and Country Club (“CBC”) membership was dealt with by an undertaking and read as follows:

“AND UPON the Petitioner agreeing and undertaking to the Respondent and to the Court that:-

(A)  He will take immediate steps to transfer all his ownership, rights and interests of and in two club memberships, namely Clearwater Bay Golf and Country Club and Pacific Club, to the Respondent unconditionally and absolutely PROVIDED THAT if such transfers cannot be effected immediately under the relevant policies of the clubs, he will effect such transfers as soon as possible and will continue to allow the Respondent to use and enjoy all rights and benefits of these clubs pending such transfer.”

7.  On enquiry by the Respondent’s solicitors, it was discovered that there was no transfer mechanism for the membership, but the membership and the debenture issued thereunder (the “Debenture”) can be surrendered and released in accordance with the Articles of Association of CBC.

8.  Following communication with CBC, the Petitioner had in or around 2 August 2014 signed a document which read as “Notice of Surrender” of Membership Debenture to CBC which gave notice of his wish to surrender his Debenture, the Respondent were informed by CBC that the Petitioner’s CBC membership had since that date been put on the surrendering member waiting list.  The parties were informed that they would be notified when the Petitioner be able to surrender his Debenture.

9.  After waiting for a number of years, and eventually on 3 July 2019, the Petitioner and the Respondent received a notification email from CBC that they would look for a potential buyer for the Debenture, and that the amount to be received would be HK$2,530,000 (the “Debenture Proceeds”).

10.  CBC was then informed by the Respondent’s solicitors on 16 July 2019 that the Debenture Proceeds should be paid into the Respondent’s sole account pursuant to the 2014 Order.  CBC so informed the Petitioner.

11.  On 20 August 2019, the Petitioner informed CBC that he could only accept that the Debenture Proceeds be placed into the parties joint account for their son, and that he intended to apply for another Court Order.  On 27 September 2019, by his newly appointed solicitors, CBC was asked to withhold the transfer of the Debenture Proceeds pending variation of the 2014 Order.

12.  It also transpired that the Petitioner had filed a notice to act in person on 8 January 2020, and thereafter also filed an “appeal” to the 2014 Order, which proposed to “amend” the said Order to read:

“Clearwater Bay Golf and Country Club” “…. will continue to allow the Respondent to use and enjoy all rights and benefits of these clubs pending such transfer and amount of sold membership should use for Son (ASKM) which deposit to Son’s fund bank account in Join name of CKR and SHW…”. 

13.  On the same day, the Petitioner also filed draft grounds of appeal, a short affidavit with exhibits, and an affidavit of service where the Petitioner stated that he had posted the documents to Hastings (“January 2020 papers”).

14.  Shortly after the Petitioner has filed the January 2020 papers, the present proceedings were initiated by the Respondent, to which the Petitioner then responded.

15.  The Respondent’s solicitors said in Court that the first time they were aware of the January 2020 papers was at a direction hearing on 10 July 2020 (where the Petitioner was absent), and that these papers were never received by them. At a subsequent direction hearing on 27 July 2020 when this matter was set down for trial in the presence of the Petitioner, only the Respondent’s present Summons was dealt with.

16.  The Petitioner was asked in Court whether he had followed up further on the January 2020 papers, and he indicated in the negative.  Therefore in effect, he never pursued his “appeal”.

The Respondent’s case

17.  The Respondent was represented by Hastings, her case was straight forward.  What she was seeking, was to give effect to the undertaking given by the Petitioner under the 2014 Order.

18.  She argued that the Petitioner had never appealed the 2014 Order nor applied for it to be set aside over the course of more than 5 years, therefore the Order remains valid.

19.  It was her case that, the Respondent had followed through his undertaking given under the 2014 Order for “transferring” the membership to the Respondent; that he was fully aware of the process which, instead of a transfer, should be a “surrender and release”. He had also conformed to the CBC Articles of Association and signed a Notice of Surrender, and was informed he had been placed on a waitlist.

20.  When CBC informed the parties that they were ready to find a buyer to take over the Debenture, and the issue of where the Debenture Proceeds were to be sent, the Petitioner had changed his mind, and reneged from the abovementioned undertaking.

21.  Hastings continued to argue that when the Petitioner agreed to transfer “all his ownership, rights and interest of and in” the CBC membership to the Respondent, the “interest of and in” include the Debenture and the proceeds therefrom.  They also submitted that “Property” within the meaning of Sections 6, 6A and 11 of the Matrimonial Proceedings and Property Ordinance is wide enough to include the CBC membership and the Debenture, and hence the court has power to grant an order in terms of the present Summons.

22.  Hastings had also informed CBC of the Summons, CBC’s solicitors had no objection saved that the Order should make reference to CBC in the following manner:

a.     The words “in accordance with the Articles of Association of The Clearwater Bay Golf and Country Club (“the Club”)” be added to the end of paragraph 1 of the Summons; and

b.     The words “subject to the retention by the Club of part of the premium of the debenture in accordance with the Articles of Association of the Club” be added at the end of paragraph 2 of the Summons.

Hastings’ Submission asked for an order to be in terms of the Summons with the proposed amendments from CBC.

The Petitioner’s case

23.  The Petitioner acted in person.

24.  He did file an affirmation in opposition in which he raised the following arguments:

a.     That Hastings was conflicted in acting for the Respondent during their divorce as it had previously acted for both parties on a prior occasion.  And that Hastings recommended his solicitor acting for his divorce, he felt that the 2014 Order made was “one sided”, and that his interest was not looked after.

b.     He remained a guarantor to the Respondent’s mortgage, which adversely affected his credit position.

c.     The parties’ son has a mental condition which has deteriorated over the years, he felt that the money that was set aside by agreement with the Respondent during the divorce is now inadequate to look after him going forward.  He therefore argued that the money from the Debenture Proceeds should be used for the son.

25.  He also filed a submission in Court where he sought to add new information.  He was informed in Court that he should not have used the submission for raising new evidence and therefore that part of his submission containing new evidence would not be taken into consideration for the purpose of the Hearing.

26.  At the Hearing, the Petitioner only made the following point with regard to the Respondent’s Summons, that he is not seeking not to surrender the CBC membership, but instead, the Debenture Proceeds of HK$2,530,000 should be paid to the parties’ joint account at Shanghai Commercial Bank, to be used for the care of the parties’ son.  He also indicated that he did not mind if the Respondent manages the money after.

27.  The Petitioner filed a supplemental submission following Hasting’s submission on “undertaking” hereinafter mentioned.  In his submission, the Petitioner did not limit himself to addressing Hasting’s submission.  It was mentioned that there were two applications before the Court, this was wrong; it was clear that the Petitioner had not follow through on his appeal based on the January 2020 papers.  It was also submitted that a consent order can be set aside based on change of circumstances: “A consent order on ancillary relief may also be set aside on any one of the following grounds, namely, fraud, mistake, non-disclosure or misrepresentation of material facts at the time of the order was made; and new event have occurred since the order was made which have invalidated the basis upon which the order was made.”  Petitioner argued that the son’s situation is the new event and to use the Debenture proceeds to support him “must be made in order to do justice”.  As to how the new event have “invalidated the basis upon which the order was made”, no arguments were ever presented at the Hearing, or elaborated in this supplemental submission.

The Issues

28.  The Issues before the Court are as follows:

a.     Whether the Petitioner should be permitted to change his mind as to who is to receive the Debenture Proceeds; and

b.     If he is not, whether the directions sought by the Respondent be granted.

The Legal Principles with regard to Variation of a Consent order

29.  Hastings has put forward authority with regard to Consent Order quoting de Lasala v de Lasala [1980] AC 546:

“financial arrangements that are agreed upon between the parties for the purpose of receiving the approval and being made the subject of a consent order by the court, once they have been made the subject of the court order no long depend upon the agreement of the parties as the source from which their legal effect is derived. Their legal effect is derived from the court order.” (at page 560 G-H)

30.  Hastings’ submission also made the point that “A consent order may be set aside on grounds of fraud, mistake and/ or non-disclosure or misrepresentation of material facts”; and quoted further from de Lasala (supra):

“Where a party to an action who seeks to challenge, on the ground that it was obtained by fraud or mistake, a judgment or order that finally disposes of the issues raised between the parties, the only ways of doing it that are open to him are by appeal from the judgement or order to a higher court or by bringing a fresh action to set it aside. (at page 561 C-D)”

31.  These principles are not in dispute. 

32.  Reference is also made to Practice Direction SL10.3 (Guidance on Setting Aside a Consent Order on Ancillary Relief) which sets out the practice and procedure with which the Family Court deals with setting aside a consent order on ancillary relief.

The Legal Principles with regard to Undertaking

33.  It is trite that this Court retains the jurisdiction to deal with the issue of undertaking and that it is possible for the court to accept a new 000000undertaking from the parties (GM-SA also known as DG, M-S and DDPJ[2018] HKFC 164 per HHJ Melloy at paragraph 19).

34.  I have sought further assistance from Hastings as to the status of a “change” sought of an undertaking versus a Court Order, the supplemental submission was dated 18 November 2020.

35.  Hastings submitted therein, that the undertakings contained in the Order should form part of the Order, and “that the same threshold for setting aside a Consent Order (e.g. fraud / mistake / misrepresentation) should apply to the setting aside an undertaking which forms part of the Order”.

36.  Hastings referred to the HHJ Melloy’s case of MAR (nee ARM) v MM [2020] HKFC 49 which, inter alia, stated the principles behind discharge of undertaking at paragraph 21 therein.

37.  On this case, I would first turn first to paragraph 20 of this Judgement:

“20. In so far as undertakings are concerned, I think it is worth reiterating and as discussed during the hearing that the court cannot simply impose an undertaking on a party nor can it vary an undertaking of its own motion or on the request of only one or other of the parties. The court can accept an undertaking; it can discharge an undertaking and it can, in some circumstances and depending on the wording of the undertaking, refuse to accept or to discharge an undertaking. It can also accept a new undertaking in lieu of an old one. As has been said in other cases, this may look like a variation, but in truth it is not.”

38.  In the following paragraph of this MAR v MM case (and referenced by Hastings’ supplemental submission), HHJ Melloy referred to a judgement from DDJ R So:

“21. Counsel for the wife has referred to the unreported case of HMSE v JJS [2019] HKFC 55, FCMP 70 of 2008 where my sister judge, Deputy Judge Rita So discussed the issue of undertakings and said as follows:

“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.”

I would add that the court is not limited to the situations identified by the Deputy Judge in paragraph 93 (c) above and that a court may always accept an undertaking or discharge it, if it is just and reasonable to do so.”

39.  With these principles in mind, I turn to the Issues before the Court.

Discussion

40.  It was the Respondent’s submission that she was not seeking to vary the agreement / undertaking but to give effect to it, since “the subject matter of the undertaking i.e. the Membership and the Debenture …, cannot now be transferred but can be surrendered and re-issued in return for a sum of money”, i.e. the Debenture Proceeds.  It was further submitted that none of the arguments put forward in the Petitioner’s affirmation constituted valid grounds to oppose the Respondent’s Summons, and that the grounds did not amount to arguing that the Consent Order was obtained as a result of fraud, mistake or misrepresentation.

41.  I construe the essence of the Petitioner’s response is in effect seeking to be discharged from his original undertaking given in the 2014 Order, and offering a different one in its place.  He is seeking for the Debenture Proceeds to be used for his son, and not to be paid to the Respondent for her own use. 

42.  There is clearly a change of mind on the Petitioner’s part; but referring to the principles above mentioned, an undertaking cannot be varied; and while I have jurisdiction to accept a discharge the Petitioner from his undertaking, it rests with the Court’s discretion as to whether the Petitioner could do so.

43.  Even if the Petitioner had followed the proper procedures in seeking for a discharge of his undertaking, I find that he would have failed for the following reasons:

a.     Referring to paragraph 93(c) of DDJ R So’s judgement, none of the basis for discharge of undertaking would apply to the Petitioner’s case.  While the Petitioner had argued to some extent that there had been a change of circumstances with the deterioration of the condition of his son and would need more resources for his care, this change of circumstances had not made the compliance of his undertaking “not feasible”.

b.     In considering the just and reasonable ground, he must also fail.  The Petitioner had never saw fit to raise any issue with the undertaking he gave over a course of 5 years, he never followed up on his complaint about Hastings being conflicted or that the 2014 Order was “one sided”, or of the fact that he continued to be a personal guarantor of the Respondent’s mortgage.  All these factors would have been apparent to him shortly after the 2014 Order was made, yet no action was taken by him over the following years.  On the other hand, the Respondent must clearly have taken the transfer of the CBC membership to herself (and maybe the proceeds arising from the Debenture) as part of her agreement to the Consent Order she signed in 2014, to now deprive her of this sum would be neither fair nor reasonable.

c.     Most important of all, I am unable to accept the Petitioner’s new undertaking in lieu of the previous one as the Court has no jurisdiction with regard to his 40 year-old son.

44.  On the first Issue, I therefore, find that the Petitioner should not be allowed to be discharged from his undertaking.

45.  It therefore follows, to give effect to the undertaking given by the Petitioner in the 2014 Order, the Respondent is entitled to the directions she sought under the present Summons.

Conclusion

46.  Taking into regard the amendments requested by CBC, I therefore make an Order that:

(1)     The Clearwater Bay Golf and Country Club membership (“the Membership”) as described in paragraph (A) of the Order of Deputy District Judge G Own (as he then was) dated 30 May 2014 (and the debenture issued thereunder) be surrendered and reissued in accordance with the Articles of Association of The Clearwater Bay Golf and Country Club (“the Club”);

(2)     All payment receivable under the surrender and re-issue of the Membership (and the debenture issued thereunder) be paid out and released to the Respondent solely, subject to the retention by the Club of part of the premium of the debenture in accordance with the Articles of Association of the Club.

Costs

47.  There is no reason why costs should not follow the event. I therefore make a costs order nisi that the Petitioner do bear the Respondent’s costs of and incidental to this application to be taxed if not agreed.  The nisi order will be made absolute if no application to vary the same is made within 14 days of this judgment.