MS v. SPC

FCMC 12160/2019

[2024] HKFC 132

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 12160 OF 2019

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J U D G M E N T
( Consent Summons, Xydhias )

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This Application

1.  This is a Xydhias Summons (“Summons”) by the Petitioner wife (“W”) dated 9 June 2023 (filed on 14 June 2023), supported by her 10^th Affirmation, attaching without prejudice communications and a draft order asking for the Court to make an order in terms on the basis that the parties have reached consensus on the ancillary relief issues.  She therefore calls for an abbreviated hearing whereby the Court will decide whether the parties have reached an accord, and if so found, for the Court to decide on what she alleges to be an outstanding minor issue, so that time and expense of a full trial can be avoided.

2.  Respondent husband (“H”) opposes her Summons and says there is no accord reached.  On 21 June 2023, H issued his own cross application with his own draft order and says that draft represents the common intention of the parties in the light of changing circumstances.  

3.  These two Summons came on the eve of an ancillary relief trial which has already been refixed 4 times.  The Summons were heard on day 1 and 2 of the scheduled trial dates of 26 and 27 June 2023, the ancillary relief trial has yet again been adjourned as a result.  

Parties’ background

4.  H was born in XX 1964 and almost 59 at the time of this hearing.  He is a lawyer, had worked at a law firm in HK, and from which he retired in 2019 XX XX XX X XX.  Since then, he has been working as a XX XX XX XX XX XX XX XX XX XX XX.

5.  W is a XX XX X national, she was born in XX 1970 and aged 53 at the time of hearing.  She is an air stewardess and has worked throughout the marriage. 

6.  Parties met in XX  in Hong Kong and was married in 1999.  There are two children of the family, born XX XX 2001 and XX XXX XX 2002; now adults and both studying in XX XX.

7.  The marriage broke down in 2013.  They separated in February 2018 when H moved out from the former matrimonial home (“FMH”).

8.  W petitioned for divorce first time in December 2018, she filed a notice of discontinuance in February 2019; and re-filed her petition again on 11 October 2019.  Decree nisi was pronounced on 4 August 2020.

9.  Parties have properties in Hong Kong, Japan and Australia.  The major asset is the FMH which was bought in early 2004.

Proceeding History

10.  The first time that the ancillary relief matter was set down for trial was for 2 March 2021.  When the parties found out about a Collective Sale Scheme (“CSS”) for the FMH, the trial date in March 2021 was adjourned on the W’s application to 6 July 2021.  It has since been rescheduled four times, and it has been three and half years from the date of W’s Petition in October 2019 until this current hearing.

11.  H applied for MPS in March 2021.  Upon undertakings from both parties accepted by the Court, this was dismissed in HHJ Melloy’s judgment of 12 March 2021.

12.  A PTR was set down on 8 May 2023.  There was contention even then as to the parties’ position at this PTR.  W argued that she was concerned H would seek to adjourn the trial and further delay proceedings.  She maintained that the proceeding should proceed despite the uncertainty surrounding the CSS, and that the Court can make decisions on contingent profits.  H argued that the matter was not ready for trial.  He said the FMH valuation as at January 2021 was outdated, other properties in Japan and Australia were not valued, companies were not valued, and the previous narrative affidavits dating back to December 2020 need updating.

13.  At the PTR, I gave directions for updating of narrative affidavits, additional evidence regarding a property in XX XX, updating valuation for the FMH and other properties in Hong Kong, XX XX XX Japan and Australia, contesting Duxbury experts, stamp duty expert report, and usual trial directions. 

About the CSS and communication with Savill

14.  The major issue in dispute for this hearing concerns the FMH.  It has held up the ancillary relief trial due to the uncertainty surrounding the CSS which was offered to the parties and owners in the same complex.

15.  It appears that Savills first informed the parties about the CSS in around November 2019.  It was a letter addressed to both parties sent to the FMH.  As H has moved out by that time, he says he was not aware, nor did W inform him.

16.  The parties signed an agreement on the CSS in August 2022 for the price of $72.9M.  The CSS requires agreement from 80% of the owners of the complex to proceed.

17.  On 17 May 2023, H heard from Savills that (1) the August 2022 CSS agreement has expired (2) the CSS may take as long as 6-7 years to take place and (3) there could be a pre-CSS sale for $51-55M.  It also transpires that W through her lawyers was in touch with Savills at least two occasions on 29 April and 6 May and have learnt of this information before the PTR on 8 May and H’s knowledge on 17 May 2023.

18.  The CSS continues to evolve during the course of the relevant negotiation in May 2023 and after.

W’s case

19.  W says that the parties are in accord but for one factor, which she calls the H’s request for exclusivity.

20.  W’s case starts with WP correspondences from 9 May 2023, and says that was when H made a “consolidated offer of a full and final settlement” of the W’s ancillary relief claims.  She says she agreed to the majority of the clauses by her letter of 11 May 2023.  She says that H replied on 12 May 2023 saying that parties were close, to which she agreed. She then says her reply on 15 May 2023 recorded further agreements; and that the parties by H’s letter of 17 May 2023 have “in principle reached agreement to settle the financial issues” subject to payment of club fees. She further says she agreed to the club fees on 23 May 2023.

21.  Her opening submission states that “By 17 May 2023 (or 23 May 2023), the parties had reached agreement as to the terms that the Wife’s ancillary relief claims would be disposed of and that a full trial of the claims would not be necessary”.

22.  W contends in her opening submission that the outstanding issue is how the proceeds of a private sale of the FMH will be distributed.  She says their difference is small and “eminently suitable for summary determination”, the following is quoted from her opening submission:

“The Wife proposes that if she decided to sell the FMH she will offer the Husband the right to match any offer she would otherwise choose to accept on the private market, to be completed within 3 months, the costs of sale being met by the Husband.

The Husband proposes either:

(1)   He [has] an exclusive right to purchase the property, should the Wife decide to sell; or

(2)   The FMH ‘simply’ be put on the open market for sale at current market value, with neither party being entitled to buy the other out

23.  She says that by H’s letters of 19 May 2023 and 24 May 2023, he has agreed that W would have the unilateral right to sell the FMH except with the condition that it can take place only after 12 months from the signing of a consent summons.  She allows H a pre-emption right, and the opportunity to match any offer she receives.  These terms are contained in her proposed terms in her draft consent summons on 31 May 2023.  

H’s Case

24.  H says there has been no agreement nor consensus.  Parties are still in the process of negotiating.

25.  H’s counsel submits that after some inter-parties discussion for settlement, the process started with a proposal in June 2022.  He seems to have agreed to have the W receives the equity of the FMH up to an agreed value of $38,742,480, and for upside of this amount to be shared, after certain agreed payments have been made.

26.  This latter point became what the parties now called waterfall payments, these have evolved with time as the parties worked on their consensus on the amounts, and as of the last version of a draft consent summons, consist of the following: 

-     W to receive a reimbursement for her payment of the H’s legal fees, $1,243,480

-     W to receive the mortgage payment she has paid to discharge the FMH’s mortgage at $62,283.7

-     H to receive $2.5M which is a conceded amount on his part representing his contribution to maintaining the matrimonial assets over the past years

-     $1,884,013 to each of the two children

-     W to further receive $125,748

These waterfall payments tally to approximately $7.7M; and any surplus after these payment will be divided equally between the parties.

27.  H says he has as far back as April 2022, made it clear that it is important for him to maximize the sale price so that these water payments could be covered.

28.  In his closing submission, H’s position is summarized as “All that he has done is to propose amendments to the yet to be agreed provision in the settlement agreement dealing with the CSS and to make a counterproposal to give effect to the intention of the parties in light of the continual changes and uncertainty surrounding the CSS”.

The Legal Principles

29.  The case upon which this application is made is Xydhias v Xydhias [1999] 1 FLR 683.  In that case, in the run up to a final hearing, there were lengthy pre-trial negotiations.  As the parties’ positions grew closer, proposals shifted to consent order form, with various versions passing between the solicitors and counsels.  Towards the end of these negotiations, the focus was on drafting, dealing with errors, and proposals for security of the lump sum payment which was to be made in instalments over a period of time.  The legal team had kept the court informed of the process and that it was subject to two items, namely the terms of the security for the lump sum and the duration of the H’s obligations.  The court was told that the parties will need a short appointment with court for approval of the consent and dealing with the outstanding points.  At that hearing, the husband withdrew from all negotiations.  The wife sought to enforce the agreement that she asserted had been reached.

30.  The district judge found ‘the essential building blocks of an agreement were in place’ and excised from the final draft order those matters which the husband did not agree.  The husband’s first appeal was dismissed.  His second appeal to the Court of Appeal was also dismissed by Thorpe LJ, who set out the following important principles:

“My cardinal conclusion … is because of the fundamental distinction that an agreement for the compromise of an ancillary relief application does not give rise to a contract enforceable in law. The parties seeking to uphold a concluded agreement for the compromise of such an application cannot sue for specific performance. The only way of rendering the bargain enforceable, whether to ensure that the applicant obtains the agreed transfers and payments or whether to protect the respondent from future claims, is to convert the concluded agreement into an order of the court. The decision of the Privy Council in De Lasala v De Lasala … demonstrated that thereafter the rights and obligations of the parties are determined by the order and not by any agreement which preceded it. The order is absolute unless there is a statutory power to vary or unless vitiated by a fact that would vitiate an order in any other division. Additionally, as was demonstrated in Robinson v Robinson … an order in ancillary relief proceedings may be set aside if the product of a material breach of the duty of full and frank disclosure. An even more singular feature of the transition from compromise to order in ancillary relief proceedings is that the court does not either automatically or invariably grant the application to give the bargain the force of an order. The court conducts an independent assessment to enable it to discharge its statutory function to make such orders as reflect the criteria listed in s.25 of the Matrimonial Causes Act 1973 …

…

In consequence, it is clear that the award to an applicant for ancillary relief is always fixed by the court. The payer’s liability cannot be ultimately fixed by compromise as can be done in the settlement of claims in other divisions. Therefore the purpose of negotiation is not to finally determine the liability (that can only be done by the court) but to reduce the length and expense of the process by which the court carries out its function. If there is a dispute as to whether the negotiations led to an accord that the process should be abbreviated, the court has a discretion in determining whether an accord was reached. In exercising that discretion the court should be astute to discern the antics of a litigant who, having consistently pressed for abbreviation, is seeking to resile and to justify his shift by reliance on some point of detail that was open for determination by the court at its abbreviated hearing. If the court concludes that the parties agreed to settle on terms then it may have to consider whether the terms were vitiated by a factor such as material non-disclosure or tainted by a factor within the parameters set in Edgar v Edgar. Finally in every case the court must exercise its independent discretionary review applying the s.25 criteria to the circumstances of the case and to the terms of the accord. This approach particularly applies to accords intended to obviate delivery of briefs for trial. Different considerations may apply to agreements not negotiated in the shadow of an impending fixture.

…

… Litigants in ancillary relief proceedings are subjected to great emotional and psychological stresses, particularly as the date of trial approaches. In my opinion there are sound policy reasons supporting the conclusion that the judge is entitled to exercise a broad discretion to determine whether the parties have agreed to settle. … The court has a clear interest in curbing excessive adversariality and in excluding from trial lists unnecessary litigation. A more legalistic approach, as this case illustrates, only allows the inconsistent or manipulative litigant to repudiate an agreement on the ground that some point of drafting, detail, or implementation had not been clearly resolved. Ordinarily heads of agreement signed by the parties or a clear exchange of solicitors’ letters will establish the consensus. Hopefully a case such as this requiring the exercise of the judge’s discretion will be a rarity.” (Emphasis added)

31.  On finding for the wife, Thorpe LJ held that

“the parties had concluded a compromise during the week before the hearing. Throughout that week it was the husband who was pressing for a settlement and plainly there came a point at which the wife agreed his terms. All that remained unresolved was either mechanics or trivial.” (emphasis added)

32.  The guiding principles extracted from this case are therefore as follows:

a.     Contractual principles do not apply within financial relief proceedings to create an enforceable contract on agreement

b.     An agreement needs to be converted into an order of the Court before it can be enforced

c.     The court will not rubberstamp agreements and must its exercise discretion undertaking the s.25 MCA exercise (the equivalent of our S.7 of the MPPO)

d.     The court can also, by way of an abbreviated procedure, determine whether an agreement has in fact been reached, and if so whether there are any vitiating factors, before then coming to the s 25 exercise

e.     Where substantive issues are agreed, residual matters (which are mechanics or trivial ) can be determined by the court

f.     By retaining the ability to determine whether an agreement has been reached, the court aims to reduce further litigation arising from attempts by any party playing “antics” to resile from agreement on peripheral grounds

g.     Signed heads of agreement or exchange of solicitors’ correspondences can be used as an indication of a final agreement

33.  I was also referred to another Hong Kong case which considered these principles.  In the case of CMJF nee T v MGF (Consent Summons; Agreements) [2018] HKFLR 557, HHJ G Own found that there was no accord between the partis, and his decision was upheld by the Court of Appeal. The Court of Appeal quoted the leave for appeal decision by HHJ G Own, in paragraph 13 to 16 of this decision:

13. On Ground 1, the husband contended that reserving any dispute on division of chattels to the court did not mean that there was no complete agreement.  Similar arguments had been raised before the Judge.  The Judge rejected them at [24] to [26] of the Leave Decision:

' 24. … it is undisputed that the list of chattels consists of a sizeable quantity and are of valuable sum in the region approximately around 3 million Hong Kong dollars.  Having said, it is not uncommon for parties to further agree as to how the chattels are going to be divided, whether by quantity, brand names, value or otherwise, leaving aside any sentimental value any of those chattels may have.

25. … Reason being that the central issue is whether there was a concluded agreement on all aspects of W's ancillary reliefs, including how the chattels are to be divided so that the time and expense required of from the Court to discharge its statutory duty under the relevant provisions could be reduced by simply making an order in terms of the signed HA (see Xydhias v Xydhias [1999] 2 All ER 386, [1999] 1 FLR 683, [1999] 1 FCR 289).  The mere fact that there was a mechanism of division as Mr Surman so submitted, namely, by resolving through process of trial in case of dispute, could not be equated with the situation of a concluded agreement over all aspects of ancillary reliefs as in the Xydhias case which the Court could readily endorse on it to become an order.

26. As Mr Egerton in his reply so submitted, which I agree, any dispute as to whether there was a concluded settlement would have to be scrutinized by the Court upon further evidence.  In any case, the court must exercise its independent discretionary review applying the section 7 of Cap. 192 factors to the circumstances of the case and to the terms of the alleged concluded agreement.'

14. Section 7 of MPPO imposes on the court a duty to decide whether to exercise its power to make orders for financial provisions, transfer or sale of property etc. in relation to a party to a marriage and, in making such orders, to have regard to the conduct of the parties and all the circumstances of the case.  The court is required to carefully scrutinize an intended settlement before sanctioning it and making it an order of the court.  This in Xydhias v Xydhias [1999] 2 All ER 386, [1999] 1 FLR 683, [1999] 1 FCR 289, Thorpe LJ held that the court has an overriding and discretionary power when scrutinizing an agreement for the compromise of an ancillary relief application.  It was said that (at 394f, 395g to 396b and 396d): 'My cardinal conclusion is that ordinary contractual principles do not determine the issues in this appeal.  This is because of the fundamental distinction that an agreement for the compromise of an ancillary relief application does not give rise to a contract enforceable in law.  In consequence, it is clear that the award to an applicant for ancillary relief is always fixed by the court.  The payer's liability cannot be ultimately fixed by compromise, as can be done in the settlement of claims in other divisions.  Therefore, the purpose of negotiation is not to finally determine the liability (that can only be done by the court) but to reduce the length and expense of the process by which the court carries out its function.  If there is a dispute as to whether negotiations led to an accord that the process should be abbreviated, the court has a discretion in determining whether an accord was reached.  In exercising that discretion, the court should be astute to discern the antics of a litigant who, having consistently pressed for abbreviation, is seeking to resile and to justify his shift by reliance on some point of detail that was open for determination by the court at its abbreviated hearing.  If the court concludes that the parties agreed to settle on terms, then it may have to consider whether the terms were vitiated by a factor, such as material non- disclosure, or tainted by a factor within the parameters set out in Edgar v Edgar [1980] 3 All ER 887, [1980] 1 WLR 1410.  Finally, in every case, the court must exercise its independent discretionary review applying the s.25 criteria to the circumstances of the case and to the terms of the accord. In my opinion there are sound policy reasons supporting the conclusion that the judge is entitled to exercise a broad discretion to determine whether the parties have agreed to settle.'

15. It is therefore clear that in case of dispute as to whether the negotiations had resulted in an accord in ancillary relief application, the court has to determine whether an accord has been reached.  Even in the case where a compromise had been reached between the parties, the court will not automatically grant an order in terms of the compromise, but will conduct an independent assessment to enable it to discharge its statutory duty under s 7 of MPPO.  With these principles in mind, the Judge is perfectly entitled to come to the conclusion at [34] of the Leave Decision that: ' 34.  Given careful consideration; in particular, my decision that only a mechanism over division of chattels being in place but without the value of the divided chattels actually worked out or otherwise agreed, it would not be sufficient to ground a concluded agreement having been reached on ancillary reliefs, I find there are no other grounds of which interest of justice calls for leave to appeal be given to H (husband).'

16. We find no errors in law or reasoning in the Judge's decision and we see no basis to interfere with it …”

34.  W has further quoted the case of CYM v YML [2013] 1 HKLRD 70 (CA) and CSFK v HWH [2020] HKCA 207 in which the Court respectively quoted the case of Xydhias and mentioned its discretion to determine if parties had reached a settlement, to resolve outstanding issues as to mechanics, and the factors to consider in such an exercise.  It was also submitted that the Court should give effect to agreements which parties have freely entered, giving due respect to their autonomy.  

Discussion

Issues to consider

35.  Following the principles set down by the caselaw, the issues to consider are the following:

a.     Do the parties have accord?

b.     If accord is found, are there vitiating factors per Edgar v Edgar

c.     Exercise of Court’s discretion with regard to S. 7 MPPO

What is the starting point for considering this case.

36.  W’s opening submission says the starting point and the basis of the present accord is the H’s formal offer of 9 May 2023. Basically, her counsel Mr Todd says that that I do not need to look at the time prior to 9 May.  He also says the without prejudice correspondences on 17 April and 25 April 2023 were materially different to the 9 May 2023 proposal.  Mr Todd therefore starts his submission with the WP correspondences from 9 May 2023.

37.  H refers me to discussions starting in December 2021 progressing to May 2022 resulting in a June 2022 proposal, which according to him creates the structure for the financial settlement.

38.  The case law did not exactly say how I am to decide whether the parties have accord, except to reference solicitors’ correspondences and heads of agreement.  Contrary to the Mr Todd’s submission, I find the genesis of the parties’ discussion helpful in understanding the background, the bases of their respective stance, and how the parties got to the rounds of discussion which eventually took place in May 2023. 

39.  I find that H has indicated his intention for payments to be made from the sale proceeds of the FMH which was communicated as far back as mid-2022 and has remained unchanged throughout the negotiations.

40.  According to the chronology submitted by W, she puts forward that the “Parties … come to a Xydhias Accord on 17 May 2023 (and no later than 23 May 2023).”  According to the oral submission, Mr Todd submits that there were accord on 29 May 2023.  This goal post has moved twice.

41.  I will therefore look at where parties’ discussions were at on these dates, namely 17, 23 and 29 May 2023 respectively.

Development leading up to 17 May 2023

42.  I will start with the negotiations leading up to the 17 May 2023.  To start with, H’s solicitors wrote to W’s on 9 May 2023 setting out in letter form draft settlement proposals.  In this letter and going forward, the relevant clause in discussion is Clause 17 which deals with the FMH; H proposed that:

H’s letter of 9 May 2023     

a.     The parties to hold the FMH pending CSS for a period of 3 years until sale under the CSS or agreed by the parties to be sold

b.     W not to unreasonably oppose the CSS or private sale if the net sale proceeds exceed the W’s proposed market value of $38,743,380

c.     For the purpose of settlement, H conceded to accept $2.5M as reimbursements for payments he has made since February 2018 to maintain joint marital assets and discharge marital liabilities

43.  On 11 May 2023, by letter from her lawyers to the H’s, W agreed to hold the FMH for 3 years, but she added the following:

W’s letter of 11 May 2023

“…subject to provision being made that should your client pass away during the CSS period, before the Formal Matrimonial Home is sold or transferred to our client, that your client’s interest will transfer to our client”.  (“Death clause”)

44.  On 12 May 2023, by the letter from his lawyers, H indicated that this clause was not acceptable.  When W wrote back on 15 May 2023, she did not address this issue.  This letter from W says “We are instructed to respond to the following remaining issues...”  And as the Death clause was not covered in this letter, Mr Todd submits that this Death clause is “not a remaining issue”, and that “… we have given it up.  And that’s exactly how we proceeded.”  Mr Todd then says H cannot now say this was a live issue, and went on to criticize H’s stance as having the “hallmarks of opportunism of someone trying to put this case off”.  As Mr Todd relies on the silence of the W’s letter to represent that the Death clause issue has been “abandoned”, H’s counsel Ms Rattigan in her oral reply queried why would H somehow know that the issue was abandoned by W’s silence, and why W’s letter did not say clearly that this point was no longer pursued.  I have to agree, looking at this letter of 15 May 2023, when referencing Clause 17, W had indicated which sub-paragraphs she agreed to, it left open and did not address at all whether she had indeed abandoned the Death clause she requested. 

45.  On 17 May 2023, H sent out a Draft Consent Summons leaving the Death clause out.  It is not clear from the evidence that H is certain the Death clause was no longer an issue.  Clause 17 now reads as per H’s proposal in his letter of 9 May 2023.  The waterfall payments had been updated to, inter alia, include payments to the children.

46.  W did not respond on 17 May 2023.  I cannot see how by the state of affairs at this point of time, that the parties have reached accord.

Further developments leading up to 23 May 2023

47.  On 18 May 2023, W by her lawyer’s letter seek to add the following in Clause 17:

W’s letter of 18 May 2023

“… The Petitioner may not unreasonably oppose the CSS provided that net sale proceeds of a CSS or a CSS-type private sale exceeds the Petitioner proposed market value of $38,743,480. A CSS type private sale means a premium sale for a price similar to that which might be expected under a CSS … (my emphasis)

48.  An important development took place during the evening of 17 May 2023, this was contained in a letter H’s lawyers wrote on 18 May 2023.  Apparently, H received news from Savills that the previously signed CSS contract in August 2022 had expired.  That the CSS if proceed will take 9-12 months but in a worst-case scenario can take up to 6-7 years, and that the developer may pre-purchase some units, at around $51-55M range.

49.  H says that apparently W’s lawyers had spoken to Savills on two occasions being 29 April and 6 May before he learnt of this news on 17 May, W’s lawyers never revealed this fact, and H asked to see the record of conversation between W’s lawyers and Savills.  H further says that W has misled the Court during the PTR on 8 May as these new development was not revealed and was not reported to the Court.

50.  H says that it was due to this development that he proposed new terms to W in his lawyer’s letter of 19 May 2023.  This include:

H’s letter of 19 May 2023

a.     Period of CSS to change to 5 years, and

b.     “If your client wishes to dispose of the FMH anytime sooner than 3 years, our client shall have a first right of refusal to buy you client out” (my emphasis)

This letter also reads: “The structure of the settlement hinges on a sale or a CSS netting at least greater than $55M – as our client is deferring entitlements to the contingency of an FMH sale.”

51.  This is the first time that H brought up the condition of “first right of refusal”.

52.  W in her lawyer’s letter of 23 May 2023 acknowledged that H is likely to agree to a pre-CSS sale at $55M, and that if W wanted to dispose of the FMH prior to the CSS, H will buy her out.  However, she did not agree to the 5 years period proposed by the H and insisted on 3 years.  In a counter proposal on wordings, she suggested:

W’s letter of 23 May 2023

“In the event the Petitioner wishes to dispose of the FMH any time sooner than 3 years, the Respondent shall have a first right of refusal to buy out the Petitioner at the then market value or at a price/mechanism to be agreed between the Parties. The Parties may not unreasonably oppose a sale or completion pursuant to [CSS] or [private sale] if the net proceeds will exceed $55M.” (my emphasis)

53.  W was still not agreeing to the 5 years which H asked for regarding the CSS.  I also note that at this point, W still proposed for decision to be made jointly.  As at 23 May 2023, the parties had no agreement as to how long the FMH is to be held pending the CSS.

Ongoing development leading up to 29 May 2023

54.  On 24 May 2023, H proposed that if W agreed to the 5 years, he would share with her the premium on the sale of their Niseko property above the agreed value if sold with 5 years.  In the same letter, he also added that if W wishes to liquidate sooner, he is to have right to buy her out at then current market value or as otherwise agreed:

H’s letter of 24 May 2023

“In the event the Petitioner wishes to liquidate her jointly held interest in the FMH any time sooner than 5 years, then she may do so under the following conditions:

(1) Offering the Respondent only the right to buy out her interest at the then current market value of the FMH or as otherwise agreed.

(2) Unless otherwise agreed, she may not exercise that right for 12 months after signing of the consent summons.

(3) She must give the Respondent no less than 1 month to accept the offer and no less than a further 5 months to organise financing to purchase her interest.

(4) The Petitioner acknowledges and agrees that her “interest” in the FMH is always no less than receiving HK$38,743,480 representing her share of the joint marital assets but is thereafter subject to the payments under the waterfall provisions from any surplus herein below.” (my emphasis)

55.  In her lawyer’s letter of 29 May 2023, W agreed to 5 years and accepted H’s offer to share the upside of sale of Niseko property.  However, she further said she wanted to be able to sell anytime sooner than 5 years and to sell at "any offer she may choose to accept":

     W’s letter dated 29 May 2023

“… .Therefore our client is prepared to agree to continue to hold the FMH jointly through Txx Hxx Ltd for a period of 5 years from the date of the signed Consent Summons and not to exercise her right to sell the property within 12 months of signing the Consent Summons, only on the basis that should she wish to liquidate her interest in the FMH any time sooner than the 5 years, she will offer your client the right to match any offer she may choose to accept for the property after marketing it on the open market; she is not prepared to agree to your client only having the right to buy out her share in the FMH. If our client does wish to dispose of the property after a 12 month period, and before a binding agreement is entered into in respect of a CSS, our client is willing to offer your client the right to match the sale price for the property (Taking into consideration the value of our client’s sole interest in the property and the agreed waterfall payments) on the condition that your client pay the necessary deposit that would be paid pursuant to a sale to a third party on the open market pursuant to offer received, and for your client to complete the sale within 3 months of the payment of that deposit, failing which he will forfeit the deposit and our client will be at liberty to proceed with the sale on the open market with your client consenting to and undertaking to facilitate the sale ….” (my emphasis)

56.  It was submitted by Ms Rattigan, that having agreed to hold the FMH for 5 years, and taking the benefit of the Niseko property, W has now by the rest of her terms indicates that she can choose to sell unilaterally before the 5 years term, I agree that this has clearly rendered this agreement nugatory.

57.  I am of the view that at this point the negotiations took an even more divergent view.  W interprets H’s 24 May 2023 letter as H asking for exclusive right to purchase the FMH.  She disagrees; she says this is unfair and gives various reasons.  By Mr Todd’s opening submission, this includes, inter alia, that it may prevent W from marketing the property to ascertain market value, it may require W to sell below market value, or W says H may delay matters should she wish to sell urgently.

58.  H interprets W’s 29 May 2023 letter as asking to make unilateral decision to sell the FMH.  He disagrees as he insists all the while that the decision for disposition of the FMH must be a joint decision. 

Unilateral decision?

59.  Mr Todd submits that H has agreed to W having this unilateral right by his previous letters on 19 May 2023 and 24 May 2023.  His closing submission deals with the letter of 19 May 2023 as follows:

“The next letter dated 19 May 2023 and from HFW [4.9/191] is important as it was the first time that H suggested that W may unilaterally decide to sell the FMH pre-CSS.  H noted that he received a call from Mr Terry Tan of Savills on “Wednesday night” (17 May 2023) in terms that the CSS was “likely” to proceed but could take 6-7 years.  H therefore “required” that paragraph 17 of the settlement terms be amended so that the CSS period be changed to 5 years and so that “if [W] wishes to dispose of the FMH anytime sooner than 3 years, [H] shall have a first right of refusal to buy your client out”.  This unilateral option was repeated in the sixth paragraph: “[W] can exit the property … by seeking to sell or liquidate to our client.”  (my emphasis)

60.  During Mr Todd’s oral submission, I asked him specifically where he found the H’s agreement for W to sell unilaterally, he took me to the paragraphs from the letter of 24 May 2023 I quoted in paragraph 54 herein.  For ease of reference, I shall repeat the quotes here: Mr Todd says the sentence “In the event the Petitioner wishes to liquidate her jointly held interest in the FMH any time sooner than 5 years” means “if she wants to liquidate unilaterally, she can do.”  

61.  But one should really look at the whole paragraph in that letter:

“In the event the Petitioner wishes to liquidate her jointly held interest in the FMH any time sooner than 5 years, then she may do so under the following conditions:

(1) Offering the Respondent only the right to buy out her interest at the then current market value of the FMH or as otherwise agreed

(2) Unless otherwise agreed, she may not exercise that right for 12 months after signing the consent summons.

(3) She must give the Respondent no less than 1 month to accept her offer and no less than a further 5 months organise financing to purchase her interest.

(4) ….

(my emphasis)

62.  I do not agree with Mr Todd’s interpretation that by either of these two letters, H has given W a unilateral decision to sell the FMH.  Unilateral in this context means she can decide when to sell, to whom, and at whatever price she wants.  The letter of 19 May 2023, which was the first time H asked for the first right of refusal suggested that an agreement to sell to him would require some form of agreement between the parties.  Furthermore, if she thinks that H has given her unilateral right on 19 May 2023, it makes no sense that when she wrote back to H on 23 May 2023, she did not seize the opportunity to document this unilateral right.  As for the H’s letter of 24 May 2023, if one reads the whole paragraph, it is quite clear that there are joint decisions to be made as there are references for matters to be “otherwise agreed”.  At best, these sentences in either letter could be interpreted as giving W an option to trigger a process but by no means does this equate to W having a unilateral right to sell the FMH.

63.  At all times, H has maintained that the decision to dispose of the FMH is to be joint.  Looking at the negotiation process and the proposed terms, it makes no sense that H would have relinquish the decision-making process on the FMH disposition in favour of the W’s sole discretion.

64.  It is clear to me even at this point on 29 May 2023, the parties were not ad idem on how to deal with the sale of the FMH.  On one hand, H says he is not asking for exclusivity, although by the plain reading of his letter of 24 May 2023, I agree with W that he did ask for this.  However, in H’s 6^th affidavit, he says that he had not sought the right to purchase the FMH on an exclusive basis, nor could he readily afford to purchase the FMH.  He says that he had introduced this option to preserve the upside of a CSS and in response to the W’s desire to exit earlier than the anticipated completion time of the CSS.  I accept that this condition of exclusivity is no longer live at the hearing. 

65.  On the other hand, W has asked for the unilateral right to the sell in her 29 May 2023 letter saying that H has agreed to this position.  On this Mr Todd says the parties have therefore reached accord, with the only outstanding matter to be the H’s ask for exclusivity which can be determined by the Court.  As said above, I do not agree with Mr Todd’s interpretation of the letters of 19 and 24 May 2023.  I am of the view that H never had the intention to and did not give W the unliteral decision on the FMH.

66.  There is no accord between the parties.  H’s lack of agreement at this stage can also be discerned from H’s response to the W’s letter of 29 May 2023, by sending a draft consent summons to W’s lawyers, wherein he deliberately left blank Recital R, which is the clause regarding the FMH (equivalent to Clause 17), this covering email reads:

     H’s email of 29 May 2023

“Our client is considering your client’s proposal in your Without Prejudice letter to us this morning, hence we leave Recital R - FMH blank in attached draft for now. Please feel free to insert your suggested amendments regarding other terms and circulate the same for our consideration. Meanwhile we will let you have our proposed Recital R as soon as possible.”

67.  Based on W’s case that the parties have reached accord latest by 29 May 2023, I can stop here; as all the dates which Mr Todd submits the parties have reached accord have been assessed to be otherwise. For completeness’ sake, I will cite further events which took place after 29 May 2023 leading up to the present Summons.

What happened on and after 30 May

68.  H says that having seen W’s letter of 29 May 2023 and in order to accommodate her wish to liquidate sooner; and recalling that Savills had informed that the developer will be offering to buy at approximate $51M, he proposed that the parties place the FMH on the market for sale with no provisions for buy out.  He sent off this proposal via email on 30 May 2023, he says he never received any response from W.

69.  On 31 May 2023, W sent back a draft consent summons.  Although H had specifically requested her to insert amendments other than Recital R, she decided to fill in Recital R anyways in the manner of her proposal to H as per her letter of 29 May 2023, the only obvious change in wording is that H shall have a “pre-emptive right to purchase the FMH by matching any offer the Petitioner may choose to accept”.  She also inserted in Recital T her entitlement to the upside of the sale from Niseko.  In the covering letter, she says that they have reached “a Xydhias level of accord”.

70.  In H’s letter of 24 May 2023, when he asked to have the (exclusive) right to buy out W’s interest, his condition was that W would only exercise a right to sell only 12 month after the consent summons was signed; W agreed to this provision in her letter of 29 May 2023.  However, in the draft Consent Summons she sent back on 31 May 2023 and in the draft Order accompanying her Xydhias Summons which she asks this Court to confirm, this 12 months clause has not been included.  It is inconceivable that with this omission, how she could expect H to agree to her terms.  When this matter was brought up at the hearing, Mr Todd says it might be a “drafting infelicity”.

71.  On 1 June 2023, on seeing that W did not mention his 30 May proposal in her 31 May 2023 draft, H asked W if she has considered that proposal, H’s letter reads as follows:

     H’s letter of 1 June 2023

“We note that your comments on Recital R seem to be derived from your WP letter dated 29 May 2023. We would therefore be grateful if you could clarify whether our proposal in my email of 30 May 2023 below has been considered by your client or has been rejected by your client. Pending your clarification, we will withhold commenting on Recital R in the revised draft Consent Summons.”

72.  From the W’s opening submission, she is dismissive of H’s 30 May 2023 proposal, saying that “his belated proposal to ‘sell now on open market’ should be withdrawn by him or discounted as an after-the-event attempt to repudiate an otherwise complete agreement – being the form of conduct that Thorpe LJ cautioned against endorsing.”

73.  In the W’s lawyer letter on 1 June 2023, it is noted even at this point, W knew that there were still issues in dispute, although she calls it small:

     W’s letter of 1 June 2023

“The Recital is not drawn from any without prejudice letters. It is simply intended what we believe the parties agreed or where there is a dispute between them. The issue is in fact fairly small – ie mainly whether there should be an exclusivity agreement (which had not been previously raised) ….

74.  According to H, he waited another week for W to respond, and on hearing nothing, sent out another draft Consent Summons on 8 June 2023, this time incorporating his proposal from 30 May 2023 into the Recital R, and removing W’s wordings regarding the Niseko property in Recital T because he says the basis upon which he offered the Niseko upside profit sharing is no longer in place.

75.  On the very next day on 9 June 2023, W issued her Xydhias Summons.

Exclusivity, Unilateral decision making: purely mechanical or trivial?

76.  W submits that the outstanding issue concerns the “mechanism” by which a private sale will proceed in the event only that W decides to sell pre-CSS and pre-expiry of 5 years period.  In her closing submissions, W also says:

“The only outstanding issue was whether in the event of a sale before CSS, H should be able to exclusively purchase W’s interest or pre-emptively match a market offer.  That was a “mechanical” one (i.e., concerned mechanism for achieving the accord).  As such it was suitable for this Court’s resolve.”

77.  As discussed above, I do not accept W’s allegations that H has given her the unilateral right to sell.  Be that as it may, it was the issue to which H has understandably disagreed. 

78.  Although I have found no accord between the parties, I will consider the outstanding issues from the perspectives of the respective parties and to consider if these are mere mechanics or of a trivial nature.

79.  To cite a few examples of mechanisms pertaining to an order for sale of property, this would include discussion on the timing for a sale, when parties would deliver vacant possession, how to agree on the value of the property in question (expert valuation, bank valuation, internet search) and how to cater for fluctuating market conditions, engagement of agents / lawyers for the transaction etc.  In the context of this case, an exclusive rights to buy affects the W’s interests, and a unilateral right to sell affects the H’s interest; both in such a way that it could not be brushed off as mere mechanics or triviality.  It goes to the heart of the parties’ ongoing need to protect their personal interests, which has underpinned their negotiations for more than a year.

80.  This further reinforces my finding that the parties had not reached accord as at 29 May 2023, or at anytime before the W’s Summons.

Other Issues

81.  As the W has failed in her case to prove that accord had been reached, I do not see the need to venture onto whether there had been any vitiating factors or to consider a S.7 exercise.

H’s Cross Summons

82.  This Summons came in on 21 June 2023 under Rule 6 MCR, and sought to be heard at the same time of the W’s Xydhias Summons.  This asks for :

1.     An Order be made in the terms attached hereto (attaching a draft Order);

2.     The Petitioner’s inter-partes Summons filed on 14 June 2023 be dismissed with no order as to costs;

3.     No Order as to Costs.

83.  There was not a lot of submissions on this.  H in his closing submission says that he has attached a draft order that he proposes to his cross summons and this was the draft consent summons of 8 June 2023 he sent to W; but he was not seeking to say that the parties have reached an accord on Recital R of his proposed draft order.  In Court, Ms Rattigan submits that H was putting forward an option for parties to settle but acknowledged that the basis of his proposal may be gone even as the parties attend this hearing due to the continually changing situation of the CSS. 

84.  Mr Todd in his oral submission questions what Summons this is. I believe all are in agreement that H’s cross summons is not Xydhias, nor was it worded as a show cause application.  Mr Todd also submits that it does not provide a solution to end the case, I agree.

85.  I have decided to dismiss the H’s Summons, there was no basis upon which I can make a proper decision on this Summons.  It looks like a knee-jerk reaction on the H’s part in response to the W’s Summons, although it does show to me that H has every intention to settle this matter expeditiously.

Conclusion

86.  Mr Todd warns me to guard again the antics that H plays.  Going through the correspondences, I actually find that H has been actively pursuing a settlement in his effort to bring matters to a close.  He was left hanging when he was not aware whether W was insisting on the Death clause; his change of stance for a pre-emption right of purchase on 19 May 2023 was due to the news from Savills; he offered Niseko upside profit sharing on 24 May 2023 when W did not agree to holding out for 5 years pending the CSS; when he could not agree to W’s ask for unilateral right to sell “at any offer she may choose to accept”, he then proposed to put the FMH out to the market without any buying out provisions so that W could liquidate sooner. 

87.  By Ms Rattigan’s submission, it has also been helpful in looking at intention of the parties, and quite obvious that as far back as mid-2022, H has maintained he wanted to maximize the sale so that the waterfall payments could be covered; and that decisions must be joint.  H has continued to maintain this view throughout the correspondences and drafts that I looked at for this hearing.

88.  I must acknowledge that in a case such as this, it is not easy to manage with an ongoing evolving status of the CSS.  While I can appreciate W may be feeling aggrieved at how long this matter has dragged on, I am of the view that this application is misconceived.  I also think that the high-handed manner in which she chose to put her preferred terms into the draft consent summons and put that forward as having reached accord with H is rather disingenuous.

89.  Looking at the various points in time which W says accord had been reached, I conclude that there was no accord at any point of time; and her Summons is to be dismissed.

90.  I acknowledge the rationale behind a Xydhias Summons is to bring matters to a close when parties have reached a certain stage of negotiation where only minor or trivial matters are left and for the Court to assist parties to finalize their agreement applying the above-mentioned legal principles.  It maybe also be applicable when one party is seen to be delaying matters unreasonably or dragging his or her feet in negotiation, and such “antics” are of course discouraged.  But a Xydhias Summons is not to be used to compel one party’s preferred state of affairs in the midst of bona fide negotiations.

What is next?

91.  The ancillary relief trial has been derailed.  I have mentioned during the morning of 26 June 2023 when discussing with the counsels this very consequence, that should they proceed with this application by W and I find her case wanting, as I do now; that they need to get into the queue of yet another Judge as I have seen all the without prejudice correspondences. It is also apparent that yet a lot of evidence have to be updated, and the parties maybe looking at another 12-15 months before getting to a trial before another Judge.  This matter will therefore be referred to a Master for case management.

Costs

92.  W’s Summons has been dismissed.  Under normal circumstances, I would have made a Costs Order which follows the event.  However, I have also looked at H’s Cross Summons, which asks for W’s Summons to be dismissed with no order as to Costs.  I shall therefore make the Costs Order so requested by H.  Accordingly, there shall be no Order as to Costs on the W’s Summons.

93.  As tor the H’s Summons which I have also dismissed, I shall likewise make no Order as to Costs.

Order

94.  W’s Summons is dismissed.

95.  H’s Cross Summons is also dismissed.

96.  There shall be no Order as to Costs for both Summons, this to be a Costs Order Nisi, to be made absolute 14 days hereof, with certificate for one counsel for each party.

97.  The parties are directed to refix this matter before a Master and to inform the Court the state of compliance of the PTR Order made on 8 May 2023.

For Petitioner: Mr Richard Todd KC and Mr Josh Baker instructed by Messrs CRB  

For Respondent: Ms Mairead Rattigan (SC) instructed by Messrs Holman Fenwick Willan