MALCOLM ERNEST GRAY v. DIANE CARY BARBER GRAY

CACV 121/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 121 OF 2000

(ON APPEAL FROM FCMC 6831 OF 1991)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal from a judgment and order of Deputy Judge Geiser given on 4 January 2000.

The order

2. The Deputy Judge dismissed the petitioner's application for variation of the order of Deputy Judge Gill dated 14 October 1993. That order was a consent order. Amongst other matters that consent order contained an order for payment of a lump sum by way of monthly instalments and also an order for maintenance for the child of the petitioner and the respondent, namely their son James. There was also a judgment summons in respect of arrears of payments under the consent order. The Deputy Judge held that the petitioner was US$45,595 in arrears. The Deputy Judge made it part of his order that the petitioner had not shown cause why he should not be committed to prison :

"... as he had the ability to make the payment ordered as aforesaid but has wilfully failed so to do and is in contempt of this court's order of Deputy Judge Gill."

There then followed an order for committal to prison of the petitioner for a period of six months, which was to be suspended provided that the petitioner paid the arrears at the rate of US$500 per month and continued paying the maintenance for James in the sum of US$2,412 per month. The warrant for committal was to be issued upon the respondent's solicitors filing an affidavit of non-compliance with the terms of the suspension.

The background

3. The petitioner and respondent were married in February 1983. They lived in Hong Kong. On 12 June 1984 their son James was born. The marriage was not successful. The respondent left Hong Kong with the child of the marriage James in 1990. Eventually, the petitioner presented the petition on 5 December 1991. The decree nisi was made on 30 March 1993. The ancillary relief in relation to maintenance was dealt with by a consent order made on 14 October 1993. Both parties were legally represented prior to and on the making of that consent order. It is unnecessary to set out all the terms of the order. The two provisions thereof which are material for the present application are in relation to the lump sum and the maintenance for James. The monthly instalments in respect of the US$374,000 lump sum were calculated to be concluded in December 2000. In the initial period the payments would be at the rate of US$6,000 per month, quickly dropping in the years 1994 and 1995 to US$4,000 per month and thereafter at the rate of US$3,500 per month.

4. The maintenance for the son James was in the sum of US$2,000 per month, subject to an annual percentage increase equal to the petitioner's percentage increase in total salary, until James reached the age of 21 years.

5. According to the schedule in the respondent's affidavit of 2 November 1998, it would seem that except for minor amounts the petitioner had honoured his commitments to make payments until the end of 1997. It seems that there were arrears and discrepancies in the amount of the payments but there was also one occasion in May 1997 when there was a substantial payment in an obvious attempt to catch up on the arrears. It is clear, therefore, that the petitioner must have paid something in the order of over US$200,000 in the period up to the end of 1997.

6. In November 1998 the respondent issued a judgment summons. At that stage the arrears had amounted to US$45,595. By the time judgment was given on 4 January 2000 those arrears had apparently increased to US$116,000.

7. The judge below set out the basic elements of the petitioner's remuneration. He works for a bank in Hong Kong. He is currently involved in the technical operations rather than in relation to financial matters. His salary is HK$120,000 per month with a bonus of HK$10,000 per month. There is also a travel allowance and rent free accommodation.

8. The petitioner has remarried and there is one son of the new marriage. In addition, the petitioner has taken over responsibility for the children of his new wife by her former husband. It is quite clear that for a large part of the time after the consent order in October 1993, the petitioner was spending considerable amounts not only in respect of maintaining his new wife but in covering expenses of her business and in paying for the upkeep and education not only of the son of the new marriage but also of the children of his new wife's former marriage. Despite all this, apparently the petitioner did not inform his new wife of his commitments to his former wife and his son James. Put shortly, the petitioner was vastly overspending his income. As a result, he became deeper and deeper in debt not only to his employer bank but also to credit card companies.

9. Eventually in August 1997 the petitioner changed to local terms of employment. That meant that he received a substantial sum which would have constituted his pension rights under his employment. That money apparently went to pay off not only his own debts but the debts of his new wife. The respondent complains that the money should have been used to pay off the balance of the US$374,000 lump sum and points to paragraph 6 of the consent order. Eventually the petitioner became ill. No doubt his financial predicament has been at least part of the cause of his illness. The judge below summarised the situation in the words :

"As I say, I have read the petitioner's affirmation in support of his application for a variation of this order and I have listened to his evidence very carefully. One thing is clear, and that is that he has over-extended himself financially and to a large extent mis-managed his financial affairs."

First question on the appeal

10. The first question which arises on this appeal is whether the court has jurisdiction to entertain an application to vary a consent order for payment of a lump sum by instalments. Our attention was drawn to the provisions of the Matrimonial Proceedings and Property Ordinance, Cap. 192. I am satisfied that, under section 11(1) and 11(2)(b), the court does have power to vary an order for a lump sum payment by instalments since such an order comes within section 4(2)(b). The judge below so held at page 4 of his judgment. But after doing so he went on :

"But in the absence of circumstances which make the agreement voidable due to duress, a mistake, fraud or the like, it seems to me that this should only be done where there has been a material change of circumstances so drastic and unforeseen as to make it only fair to vary."

This statement was criticised by Mr Clough on behalf of the petitioner who said that in the light of the provisions of the Ordinance to which I have referred, the court should approach the matter on the basis that it did have jurisdiction to vary the order and should take into account the various factors listed in section 7 of the Ordinance.

11. In my view, the judge below correctly stated the law in relation to consent orders and the way in which his discretion should be exercised. I would refer in this respect to one case, namely, Edgar v. Edgar [1980] 1 WLR 1410. This was a decision of Ormrod & Oliver LJJ. I would draw attention to passages, for example, at page 1417F-H, 1418F.

12. The judge considered the petitioner's allegation in relation to duress and the petitioner's allegations in respect of the respondent's conduct and conversations which they had had. I see no grounds for disturbing the judge's findings in this respect. Nor do I see any grounds for disturbing the judge's finding that there had been no material changes in circumstances which could warrant the court's interference with the consent order. At the time that the petitioner entered into the consent order, he was well aware of his future commitments and likely commitments. The difficulties in which he has found himself undoubtedly stem from his overspending. That overspending may well have stemmed from a benevolence towards his new wife and her family. His reticence in explaining his own financial affairs to her has contributed to his predicament. All this, however, has been misguided. It cannot constitute grounds for varying the consent order.

13. One further matter should be referred to. Subsequent to be first hearing in this matter it came to the attention of the Court that the petitioner had applied for membership of the Hong Kong Country Club. This matter was then drawn to the attention of the parties and a further hearing was ordered. The matter was important because it was the petitioner's case that he was, in effect, impecunious. Application for ordinary membership of the Hong Kong Country Club is a matter which entails some expense, although it is unnecessary to specify the exact amount in this judgment.

14. When the matter was restored the petitioner drew the Court's attention to the fact that that his application for membership of the club was as a result of his applying to his employer for the benefit of the use of one of the corporate nominee memberships which his employer held. It was a condition of his application to his employer to become a corporate nominee that, at the same time, he should apply for ordinary membership so that, in due course, he could make use of the ordinary membership and release the nominee membership. The petitioner was frank that there was no way in his present circumstances in which he could take on full membership of the Hong Kong Country Club, entailing as it did, a substantial capital payment on entry. He indicated that should he be offered membership of the club he would have to decline it.

15. Whilst I accept that the petitioner did not expect to become a full member of the club, it does seem a little surprising to me that he should contemplate even being a corporate nominee member. That would involve probably substantial payments in the way of monthly subscriptions and the various other expenditures which would be incident upon membership of and use of the club. Indeed even to take over the corporate nominee membership would entail paying a transfer fee.

16. It seems to me that this is yet another example of the petitioner's inability to conduct his own financial affairs in an orderly manner. To put it shortly the petitioner has been overspending for many years and appears to have an inability to be able to control that expenditure.

The suspended committal

17. The judge having found that the defendant was in default of his obligations under the consent order went on to hold that the petitioner had knowingly and wilfully breached that order. There is clear justification for the judge's criticism that the petitioner had chosen to take upon himself added responsibilities which a rational and proper management of his financial affairs would have shown him were beyond his capability. He was thus, for a number of years, complying with the consent order by putting himself in greater and greater financial jeopardy. The epithet "wilful" might be appropriate in those circumstances and, as the judge held, there was certainly mis-management and imprudence.

18. The court's primary function must be to ensure that the petitioner's responsibilities both to his former wife and his son by his first marriage under the consent order, and to his new wife and his son by the second marriage and, if and where possible, to his adopted children should be honoured. A sentence of imprisonment for contempt is often said to be a matter of last resort in matrimonial matters. The most obvious fact in this case must be that were the petitioner to be imprisoned for any length of time, it is likely that he would lose his employment. Not only would he therefore lose his income but he would also lose his ability to finance the education of those of his children in respect of whom he is entitled to an education allowance from his employers. It is clear that the petitioner has no capital from which any payments could be made. Immediate imprisonment would therefore jeopardise, even further, the petitioner's ability to make the payments provided for in the consent order. In those circumstances, imprisonment can only be a matter of pure punishment, which, if imposed, would not assist the respondent.

19. Although not explicitly stated, it would appear that the purpose behind the suspended order for committal in this case was to mark the Court's disapproval of the petitioner's conduct and to ensure that the payments which the judge ordered should be made.

20. In respect of the former factor, there is one matter in particular which in my view requires comment. In the consent order the petitioner consented to transfer to the respondent all his legal and beneficial interest in the property known as 11 Clearwater Lane, Hilton Head, South Carolina, USA on the occurrence of one or more events. One of those events was the receipt of all his pension from his employers. That expression might itself be unclear. However it is clear that the petitioner transferred to local staff terms in August 1997. As a result he cashed in his pension and received some ￡470,000. That money was used for other purposes than paying the maintenance to the respondent. It is understood that there is a separate application to set aside the transfer of the petitioner's interest in the Hilton Head property which he made to his present wife, Marianne, for the sum of $5. In those circumstances it would be inappropriate to comment further.

21. Nevertheless, it appears that the petitioner has failed to honour his obligations under the consent order. Clearly he could have honoured those obligations, but he sought to benefit his present wife and family albeit in circumstances into which he had put himself. In those circumstances it is apparent that the conclusion that the petitioner was in contempt must be correct. The deputy judge clearly found it appropriate to mark the court's disapproval of the petitioner's conduct by making an order for committal. But in doing so he recognised the undesirability of an immediate order of imprisonment for the reasons which have already been set out. In my view in this he was correct. I, therefore, would not disturb either the finding of contempt or the suspended committal order which the deputy judge imposed. The only variation which I consider should be made to the order would be to make the existing paragraph "(a)" and the inclusion of a new sub-paragraph 4(b) as follows :

"That the order in (a) shall remain in force until such time as the Judgment debt shall have been paid."

22. In my view, the need to ensure payments calls also for an attachment order. A suspended order for committal without an attachment of earnings order may well result in the committal order being put into effect. An attachment order would ensure that the money which the court considered the petitioner could and should pay would be paid and not diverted in other directions and would be a protection for the petitioner against his own proven inability to manage his affairs in a proper manner.

23. The figures for the petitioner's expenditure appear to me to be almost unfathomable since not only did they change but oral submissions show that different figures were given at different times. It is clear, however, that the petitioner has no option but to pay off his loan to his employer bank at the rate of HK$23,000 per month and HK$2,500 per month interest until July 2001. There is the outstanding amount on his credit cards, which will be paid over the next two to three years at the rate of some HK$13,000 per month. There is a tax liability in Hong Kong, which he has agreed with the Revenue to discharge at the rate of HK$25,000 per month, and there is a continuing tax liability which on the petitioner's gross income of HK$1,560,000, must be in the region of at least HK$234,000 per year or HK$19,500 per month. Taking into account, therefore, his monthly income and assuming that the bonus is paid annually and will be used to discharge at least part of his tax liability, it would seem that there is still a monthly expenditure of something in the region of HK$60,500 per month. The judge fixed the payment of arrears at US$500 per month and the payment in respect of James is US$2,412 per month. These payments would total US$2,912 per month or approximately HK$22,700. This I would consider should be within the petitioner's capability. From August 2001, however, there should be no further payments in respect of the loan from the employer bank. The amount ordered seems to be the limit of the petitioner's present and foreseeable financial capacity. In view of the delays which have occurred it would seem appropriate that payments under this order should commence on the 1st day of the month following the handing down of this judgment.

24. Whilst this court was informed that there is a second judgment summons, which is now awaiting hearing and is therefore not a matter which is before this court, it would seem that the appropriate course would be to make an order as I have proposed, effective immediately, irrespective of the pending hearing of the second judgment summons.

Hon Keith JA :

25. I agree that the Petitioner's appeal from Deputy Judge Geiser's refusal to vary the consent order made by Deputy Judge Gill should be dismissed for the reasons given by Rogers V-P. However, for my part, I would have varied the actual order made by Deputy Judge Geiser in three respects, not two:

(i) Deputy Judge Geiser ordered the Petitioner to pay the Respondent (a) the sum of US$500.00 a month in respect of the arrears of US$45,595.00 which had accumulated by November 1998, and (b) the sum of US$2,412.00 a month in respect of the maintenance of James. The latter sum was subject to an annual percentage increase equal to the percentage increase in the Petitioner's salary. The variation to Deputy Judge Geiser's order which Rogers V-P suggests (and with which I agree) is that these payments should be secured by an attachment of earnings order directed to the Petitioner's employer.

(ii) Deputy Judge Geiser ordered that "a warrant of committal be issued" upon the Respondent's solicitors filing an affidavit of non-compliance with the conditions which had to be satisfied if the order for the Petitioner's committal to prison was to continue to be suspended. I do not think that such an order can be made. There may be a dispute as to whether the Petitioner has failed to comply with the conditions for the suspension of the order. Moreover, the court may think that even if the conditions for the suspension of the order have not been satisfied, it would not be appropriate for the order of committal to be activated. In my view, the order of committal should not be capable of being activated except by the court, and only then if the court is persuaded that no other course is appropriate. Accordingly, for my part, I would in addition have varied Deputy Judge Geiser's order by removing the paragraph relating to the issue of a warrant of committal.

(iii) Although the Petitioner had wilfully disobeyed the consent order, so as to render him in contempt of court and therefore liable to committal to prison, I would not, for my part, have ordered that he be committed to prison, not even if that order had been suspended. However, I recognise that that decision was ultimately a matter within Deputy Judge Geiser's discretion, and I do not regard the exercise of his discretion as so beyond the ambit within which reasonable disagreement is possible as to justify intervention by an appellate court. I agree that the order suspending the committal order should be varied as Rogers V-P suggests so as to specify the period of suspension.

Hon Le Pichon JA :

26. I agree with the judgment of the Vice-President.

Hon Rogers VP :

27. The appeal by the petitioner will therefore be dismissed save that the order of the court will be varied as to paragraph 4 in the manner indicated above and by the inclusion of an attachment order. There will be an order nisi that the petitioner should pay the costs of this appeal.