EDUARD WILLIAM RUDOLF HELMUTH WILL v. MARY REGINA WILL

1992, No. 211
(Civil)

H E A D N O T E

Family law - practice - wife's ex parte application under s.17(1)(a) of Matrimonial Proceedings and Property Ordinance (Cap. 192) for injunction restraining her husband from disposing of property - whether judge has discretion not to require undertaking as to damages from wife - whether discretion properly exercised.

IN THE COURT OF APPEAL

1992, No. 211
(Civil)

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J U D G M E N T

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Fuad, V.-P.:

1. On 14th January 1993 we dismissed this appeal by a husband from the order of Judge Surman dated 24th December 1992 made in connection with matrimonial proceedings instituted by his wife, and now give our reasons.

2. The parties were married in 1978. The wife filed a petition for divorce on 15th December 1992 on the ground of the irretrievable breakdown of the marriage - the petition was based upon section 11A(1)(a) of the Matrimonial Causes Ordinance, Cap. 179. The woman with whom the husband was alleged to have committed adultery was joined as the 2nd respondent to the petition.

3. On the same day the wife applied to the judge, ex parte, for two orders. We are not concerned with the first order which concerned the child of the marriage. The second relief sought was a restraining order under section 17(1)(a) of the Matrimonial Proceedings and Property Ordinance, Cap. 192. The latter application was supported by a long and detailed affidavit sworn by the wife. She was represented by Mr. Ian Payne. The restraining order was granted.

4. On 21st December 1992 the solicitors acting for the husband wrote to the wife's solicitors complaining about the form of the restraining order. There were certainly a number of defects frankly acknowledged by the judge in what he called his "Judgment Notes", presumably prepared and provided under section 60 of the District Court Ordinance, Cap. 336. The only matter to which we need refer was the complaint that the order did not contain an undertaking as to damages in favour of the husband, for it was this omission which led ultimately to this appeal.

5. On 24th December 1992 the matter came before the judge on the husband's application to discharge the injunction by reason of the defects identified in his solicitors' letter of 21st December. On this occasion Mr. Payne again appeared for the wife; the husband was represented by Mr. McCoy. The judge varied the order he had made on 15th December but declined to order the wife to give an undertaking as to damages in respect of any damages suffered by the husband. This refusal was the sole foundation for the appeal before us.

6. This is what the judge said about the matter in his Judgment Notes:

"The Husband's Submissions

8. The Husband's Solicitors raised five points conveniently listed in their 21st December letter. Two of them (Point 1 and Point 4) were not argued. Two of the remaining three (Points 2 and 5) were accepted by me and remedied by amending my 15th December order. The remaining Point (No.3) concerned the matter of an undertaking to be given by the Wife to indemnify her Husband against damages in consequence of my 15th December Order. Counsel for the Husband submitted that the failure to secure the Wife's undertaking was fundamental to the issue of the Injunction and its absence meant the Injunction was unlawful and/or an abuse of process.

The suggested Undertaking to be given to the Husband by the Wife

9. No authority was cited for the proposition submitted on behalf of the Husband.

I did not accept the submission, and refused to ask Counsel for the Wife to give me any such undertaking.

In my view it was unnecessary, I therefore refused to discharge the Injunction, after making certain amendments, or adjustments, to the 15th December Order (as described in paragraph 8 above.)"

7. The appeal, which was brought by leave of the judge, was filed on 31st December 1992. The husband sought an order discharging the judge's orders of 15th December on 24th December 1992. The grounds of appeal were as follows:

"1. The learned Judge erred in so far as he wrongly concluded and/or held that the injunction order dated the 15th December, 1992 was not a Mareva type injunction, and was therefore not subject to the usual terms and conditions upon which such Orders are granted, in particular, an undertaking as to damages by the Petitioner.

2. The Judge erred in so far as he wrongly concluded and/or held that as a matter of principle, the Petitioner was not required to give an undertaking as to damages as a condition precedent to the granting of the injunction Order.

3. Alternatively, if an undertaking as to damages is not a condition precedent to the granting of an injunction order and is a discretionary requirement, the learned Judge erred in the exercise of his discretion by not requiring that such an undertaking be given.

4. The learned Judge erred in the exercise of his discretion in so far as he wrongly granted the injunction order notwithstanding the Petitioner's refusal to give such an undertaking.

5. The learned Judge erred in so far as he wrongly concluded and/or held that the absence of and/or refusal to provide an undertaking as to damages was not fatal to the validity of the injunction order, and as a consequence erred in concluding that the injunction order should not be set aside.

6. Alternatively, if the absence of and/or refusal to provide an undertaking as to damages is not fatal to the validity of the injunction order, the learned Judge wrongly exercised his discretion in concluding that the injunction order should not be set aside.

7. The learned Judge erred in concluding that an undertaking as to damages was not required as a matter of practice, and wrongly failed to consider and/or rejected that such practice was unlawful.

8. The ex-parte order of 15th December, 1992 (as amended on 24th December, 1992) was unlawful in the absence of an undertaking as to damages."

8. I think it is convenient here to set out the material part of section 17(1) of the Matrimonial Proceedings and Property Ordinance:

"17. Avoidance of transactions intended to defeat certain claims

(1) Where proceedings for relief under any of the relevant provisions of this Ordinance (hereinafter in this section referred to as 'financial provision') are brought by a person (hereafter in this section referred to as 'the applicant') against any other person (hereafter in this section referred to as 'the other party'), the court may, on an application by the applicant -

(a) if it is satisfied that the other party is, with the intention of defeating the claim for financial provision, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;

(b) if it satisfied that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property);

(c) if it is satisfied, in a case where an order under the relevant provisions of this Ordinance has been obtained by the applicant against the other party, that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies, make such an order and give such directions as are mentioned in paragraph (b);

and an application for the purposes of paragraph (b) shall be made in the proceedings for the financial provision in question.

(2) - (5) ..."

9. Mr. McCoy submitted that the effect of the order which the husband had sought to have discharged was the same as that of a Mareva injunction granted under RSC 0.29 and therefore the almost invariable practice of requiring an undertaking as to damages should have been followed. He drew our attention to Chappell v. Davidson (1856) 8 De GM & G 1 where the report shows that Knight Bruce LJ, during argument, asked counsel:

"Has it not been for the last twelve or thirteen years an almost universal practice to require, on granting an injunction, an undertaking on the part of the Plaintiff to be answerable in damages? Must not the Plaintiff shew, in any case, that such terms ought not to be required?"

10. And at p.3 said this:

"In my opinion, notwithstanding the jurisdiction which this Court clearly has in cases of fraud, this is one especially fit to be submitted to a jury. I am of opinion, therefore, that (as the condition of this injunction being allowed to continue) the Plaintiff must give an undertaking to be answerable in damages as from the date of the first interim order, and for the whole period of the continuance of the injunction, and must undertake to bring an action within a limited time."

11. Mr. McCoy cited Smith v. Day (1882) 21 Ch D 421 which reviewed the history of such undertakings and where Jessel MR noted, at p.424, that while originally they were insisted upon only in relation to ex parte injunctions, later the requirement had been extended to all interlocutory injunctions. Mr. McCoy also referred us to Tucker v. New Brunswick Trading Co. of London (1890) 44 Ch D 249 where the Court of Appeal observed that although an applicant for an injunction could not be compelled to give an undertaking, the court could refuse to grant the injunction if he would not, Lindley LJ observing at p.253: "An undertaking is the price of an injunction, and if a man gets an injunction he must pay the price."

12. Mr. McCoy drew our attention to paragraphs 1072-1074 of Vol.24 of Halsbury's Laws of England, 4th Edition, where the principles derived from the cases are set out. I will quote only the opening sentence of para.1072: "An undertaking as to damages is the price which the person asking for an interlocutory injunction has to pay for it, and it ought to be required on every interlocutory order, except in High Court and county court matrimonial and children's matters concerning personal conduct and except, possibly, in a clear case of fraud." I do this because in one of the foot-notes there is a reference to a Practice Direction in force in England (it appears at [1974] 1 WLR 576) which I set out here:

"[FAMILY DIVISION]

PRACTICE DIRECTION (INJUNCTION: UNDERTAKING

AS TO DAMAGES)

Husband and Wife - Practice - Injunction - Undertaking as damages - Matrimonial and children's cases - Undertaking respect of damages sustained by respondent usually inappropriate

The following direction is issued by the President of the Family Division with the concurrence of the Lord Chancellor.

The form of interim injunction in a county court case (Form 79, printed in Rayden on Divorce, 11th ed. (1971), p.2736 and in the County Court Practice 1973, p.699) includes a reference to an undertaking by the applicant, by his counsel or solicitor, in respect of damages sustained by the respondent. While such undertakings may be required when an interlocutory injunction is granted in an action under the general jurisdiction of the county courts, they are unnecessary and inappropriate in High Court and county court matrimonial and children's matters concerning personal conduct. An undertaking as to damages will not be incorporated in an order for an injunction unless it is specifically required by the court and has been expressly given. This is likely to occur only when the injunction concerns property matters, and then only when the claim is to protect rights (as in applications under section 17 of the Married Women's Property Act 1882) rather than to invoke discretionary powers (such as applications for transfer of property).

April 26, 1974"

I merely mention here (a) that, as must be expected, the full import of this Practice Direction is not reflected in Halsbury and (b) the attention of the judge was not drawn to it before he made his decision.

13. Mr. McCoy pointed out that this Practice Direction does not apply to Hong Kong and that the one that does (No.12 in the 1990 revision) which deals with ex parte applications recognises that an undertaking in damages will usually be required and that the applicant's solicitors should prepare a draft minute of the order.

14. Mr. Payne's fundamental proposition was that in a case such as this, the generally accepted practice was that an undertaking should not be given unless there is some special reason which alerts the judge to conclude that he should require one, and here there was not. As regards safeguarding the rights of third parties, the position was different.

15. Mr. Payne traced the history of the legislation upon which our section 17 (of Cap. 192) is based, before the enactment of which it was not possible for a court to make a restraining order of the kind we have before us. First, the Matrimonial Causes (Property and Maintenance) Act 1958 whose reach was extended by the Matrimonial Proceedings and Property Act 1970. Now the matter is governed by section 37 of the Matrimonial Causes Act 1973. I observe in passing that section 37(2)(a) of the 1973 Act is in terms almost identical with, and in its effect precisely the same as, our section 17(1)(a).

16. Mr. Payne suggested that it was quite wrong, for the purposes of restraining orders for which provision is made by section 17, to apply the practice appropriate for injunctions under the RSC. He referred us to this passage in para.29/1/1 of the 1993 Supreme Court Practice:

"For similar reasons these rules no longer deal with injunctions in proceedings between husband and wife, e.g. under the Domestic Violence and Matrimonial Proceedings Act 1976. These matters are dealt with in the Family Division or in the County Courts and are closely connected with the matrimonial jurisdiction to which the R.S.C. have very limited application. Reference should be made to part 7 and to the standard textbooks on matrimonial causes."

17. Mr. Payne also referred us to Shipman v. Shipman [1991] 1 FLR 250, a decision of Anthony Lincoln J which demonstrates the distinction between an injunction under section 37 of the UK Act (section 17 of our Ordinance) and an injunction under the Mareva jurisdiction. In that case, following earlier authority, the judge held that although the wife had not made out a case to satisfy section 37, the court nevertheless possessed, and would exercise, its inherent jurisdiction to restrain the husband. At p.253 of the report, Anthony Lincoln J observed:

"As in all such cases of injunctive process, the balance of convenience has to be considered. Counsel for the husband urges me to have regard to the many restrictions and safeguards surrounding the use of worldwide Mareva injunctions, and to assimilate the use of, and procedure for, injunctions in the Family Division to those in commercial law. In my view the matrimonial field calls for a different approach."

18. Of course an injunction granted under section 17 of the Matrimonial Proceedings and Property Ordinance can legitimately be described as a "Mareva type" injunction for it certainly has some features in common with the Mareva relief, however there are differences and in my view they are important. For a Mareva injunction, the plaintiff need do no more that depose to objective facts from which it can be inferred that the defendant is likely to transfer assets abroad or otherwise dissipate them. Shipman v. Shipman demonstrates that to found jurisdiction under section 37(2)(a) of the English Act (section 17(1)(a) of our Ordinance), as dictated by the statutory language, the court must be satisfied that the other party, with the intention of defeating the claim for financial relief, is about to make any disposition etc of any property. This is a considerably higher threshold than that which has to be crossed when applying for ordinary Mareva relief. Moreover it will surely be extremely unlikely that the spouse (usually the wife) will not have some legitimate claim to at least a part of the family assets involved. Since when exercising its powers under section 7 of the Ordinance (Cap. 192) the court is required to have regard to the conduct of the parties, no doubt irresponsible, vindictive or unjustified procedural steps taken by a spouse which result in the depreciation of the family assets will be taken into account. Referring to slightly differently worded provisions in force in England (section 25(2)(g) of the Matrimonial Causes Act 1973) at p.583, para.29.64, the learned authors of Rayden and Jackson, 16th Edition, Vol.1 say this:

"... and there is no reason in principle why other procedural misbehaviour should not also constitute 'conduct which it would be inequitable to ignore' within the section."

19. It seems to me that greater safeguards are necessary for the defendant in any ordinary action before the plaintiff's claim has been adjudicated upon and that an undertaking in damages is one such safeguard.

20. When comparisons are made between a restraining injunction in matrimonial proceedings and a Mareva injunction, it must be borne in mind that the former relief has been available in England since 1958 and the latter was unknown until 1975. In the matrimonial jurisdiction, no case has been referred to us where it is apparent that an undertaking of the kind Mr. McCoy insists upon was given.

21. I return for a moment to the Practice Direction in force in England and Wales since 1974. It will have been noted that towards its conclusion there is a reference, in parenthesis, to section 17 of the Married Women's Property Act 1882. Mr. Payne has shown us that Hong Kong has equivalent provisions to be found in section 6 of the Married Persons Status Ordinance, Cap.182. Subsection (2) of that section allows a judge to make an order with respect to property in relation to which a question has arisen between husband and wife regarding the title to the property, on the application of either spouse. As Mr. Payne pointed out, no discretion is involved in the ultimate decision. It will be a matter of law.

22. The "discretionary powers" referred to, if the Practice Direction were applied mutatis mutandis to Hong Kong, would be a reference to sections 3-6, 8, 11 and 15 of the 'Matrimonial Proceedings and Property Ordinance, Cap. 192.

23. Of course, the Practice Direction does not apply to Hong Kong but I have not been persuaded that it necessarily introduced new practice. I think it more likely that it in most matrimonial proceedings relating to the discretionary powers given to the court to re-distribute the family resources an undertaking in damages was regarded as inappropriate. It may be that the main purpose of the Practice Direction was to correct the impression given by the Forms then appearing in Rayden and the County Court Practice that an undertaking was invariably required before an interlocutory injunction could be given whatever the nature of the proceedings. If I am right, then I respectfully agree with Hunter J.A. inC. v. C. [1990] 2 HKLR 183 (cited to us by Mr. Payne) where he suggested at p.185A-B:

"... the history of matrimonial legislation, and more particularly of that relating to financial provision, demonstrates a legislative intent in Hong Kong to use English experience and to follow English's example."

It seems to me to be good sense that we should, unless good reason is shown, normally follow English practice.

24. However that may be, Mr. Payne has persuaded me that good practice does not require that an undertaking in damages be given in applications made by a spouse in matrimonial proceedings unless specifically required by the judge. Of course, he will not make an order under section 17(1)(a) (of Cap. 192) unless the applicant has succeeded in overcoming the onerous burden provided for. If the judge considers that there are sound reasons in any particular case for an undertaking in damages despite the fact that he has been satisfied that the respondent is about to make a disposition etc. with the intention of defeating the applicant's claim, he will require it and an applicant who declines to give the undertaking will be denied the relief sought.

25. The hearing, inter partes, when the judge would have decided whether the injunction should be continued, was due to be heard on the day this appeal came up for hearing and was therefore postponed pending its outcome. When it is resumed, although I do not wish to be understood to be encouraging such a course, I see no reason why the husband should not be permitted to seek to persuade the court, for particular and sufficient reasons he puts forward, to refuse to continue the injunction unless the wife gives the undertaking he has sought all along. The court could, after all the evidence is in, if it considered it right to do so, order that the undertaking it requires shall have effect from the date the ex parte injunction was granted. It will be recalled that this is what Knight Bruce L.J. ordered in Chappell v. Davidson (supra). I think that Mr. McCoy's expressed fears that the judge's decision on 24th December 1992 about the undertaking would be held to make the matter res judicata are groundless. The judge has yet to investigate the merits of the respective cases in the light of any evidence the husband might choose to present opposing the injunction. If the judge does not discharge the injunction he will no doubt consider whether, when continued, its embrace should be reduced.

26. It is to be noted that the husband did not seek to have the ex parte injunction set aside on grounds such as a failure to make full and frank disclosure or any other ground upon which a court might discharge an ex parte injunction improperly granted.

27. Mr. McCoy argued that the judge had not exercised a discretion for he had dealt with the matter as one of principle - that in a case such as this an undertaking was not to be demanded. However, as we have seen, the judge in his Judgment Notes stated that he did not think that one was necessary. In my view the husband's case was always put too high - that the giving of an undertaking was a condition precedent to the grant of the injunction and that its absence was fatal to its validity. The husband went so far as to suggest by his Notice of Appeal that the judge's order was unlawful without an undertaking as to damages. In the alternative, on the husband's behalf, it was in effect being said that if the judge did have a discretion not to insist upon an undertaking before granting the injunction, that a discretion properly exercised on the material then before him could only have resulted in an undertaking being required.

28. I have not considered it to be either necessary or desirable to attempt to suggest the kind of circumstances in which it would be, and would not be, appropriate for the court to require an undertaking in this kind of case. But I would express the view that the strength of the case put forward, the maximum amount, on a realistic view, the applicant might ultimately be awarded, as well as the impact of the proposed order, would surely all be factors.

29. For the reasons I have given, I was not persuaded that the judge had no discretion to decline to require an undertaking from the wife or that grounds existed which would entitle this court to interfere with the way he exercised his discretion.

Penlington, J.A.:

30. I agree with the Vice-President in the reasons he gives for dismissing this appeal. I think that it is clear that while orders made under Section 17(1)(a) of the Matrimonial Proceedings and Property Ordinance have similar consequences to a Mareva injunction, the evidential basis required for each is not the same. Section 17(1)(a) requires the court to be satisfied that the other party is about to make a disposition or transfer property with the intention of defeating a claim for financial provision. That is a heavy onus, more so than for a Mareva injunction.

31. Each case must be considered very much on its own facts and background which will vary enormously in each instance. Courts will no doubt consider the rights of spouses who genuinely have fears that assets over which they will very often have some claim may be placed beyond their reach. This is particularly so when the parties are members of the Hong Kong expatriate community. At the same time a Section 17(1)(a) order can have very serious consequences to a businessman in Hong Kong in restraining him from carrying out normal financial transactions. It may well have the effect of creating doubts as to his credit-worthiness which can be highly damaging. That may well ultimately reflect adversely on the person seeking the order as it will reduce the assets available but in the context of matrimonial proceedings with the bitterness which is often inevitably present, such considerations may not be given full weight.

32. It is not desirable or indeed possible to lay down guidelines for these cases but no doubt the courts will give serious thought to the granting of Section 17(1)(a) orders which relate to property matters, as opposed to personal conduct, without requiring an undertaking in damages.

Nazareth, J.A.:

33. I also agree with the reasons given by my Lord the Vice-President, in particular that there is no requirement that the wife should have given an undertaking. I would, however, add that where an applicant under section 17(1)(a) of the Matrimonial Proceedings and Property Ordinance holds substantial assets, and the restraint order sought would be highly damaging to the business operations of the other person, as strongly submitted by Mr McCoy to be the situation in this case, the desirability if not necessity for an undertaking and the reach of the order obviously assume increased importance and may require to be addressed with corresponding care. That said, it must be pointed out that it was not the husband's case that the judge wrongly exercised his discretion, but that he failed to do so. My Lord has shown that the judge did exercise his discretion and for myself, I also, am not able to see any reason that would entitle this court to interfere.

Fuad, V.-P.:

34. In handing down the reasons for our decision to dismiss the appeal, we make an order nisi that the appellant shall pay the respondent's costs. In the light of the undoubted and admitted defects in the contents of the order originally formulated on behalf of the wife for the judge's consideration, and accepted by him, we think that the fairest order regarding the costs of the application heard on 24th December 1992 (reserved by the judge) would be that there should be no order as to costs. We therefore also make an order nisi to that effect.