AY v. AKL also known as KLR

FCMC 8527 / 2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 8527 OF 2010

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J U D G M E N T
(Preliminary issues hearing)

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Introduction

1. This is a preliminary issues hearing arising out of the Respondent wife’s judgment summons dated the 19 June 2012. At the first day of trial it quickly became clear that the central issue to be determined related to the meaning and effect of a court order dated the 22 October 2010 and in particular whether or not the husband had paid the wife the sum of HK$1.4 million. I was also cognizant of the comments made by Mr Justice Lam in the Court of Appeal judgment CYM and YML aka YMLJ, CACV 14 of 2010 dated the 12 December 2012, when he said that

51.   It has to be remembered that judgment summons is a draconian procedure.  It may result in the imprisonment of the judgment debtor.  We understand that judgment summons procedure has often been adopted by family practitioners in enforcement of arrears.  Unfortunately, there is a tendency of using this as the primary means of enforcement without considering whether less draconian means is more appropriate. …….… In my view, like committal proceedings in other types of civil litigation, judgment summons should be a last resort.  In cases where the parties have genuine bona fide disagreement on the interpretation of an order instead of a recalcitrant judgment debtor, or where the parties have bona fide dispute about the quantum of an item under an order for payment, such disputes should be resolved by a summons taken out under Order 45 Rule 6 instead of a judgment summons.  Likewise, in cases where there is genuine bona fide dispute on the judgment debtor’s ability to pay (and very often such debtor would take out an application for variation), those representing a judgment creditor should reflect on the appropriateness of the continuation of the judgment summons procedure after seeing the evidence of the judgment debtor.  Given the penal consequence, like a committal for civil contempt, the judgment creditor has to satisfy the court beyond reasonable doubt that the judgment debtor has the means to pay the judgment debt, see Kao, Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830.  If a judgment creditor has no firm and cogent evidential basis to discharge such onus, it would not be appropriate to proceed by way of judgment summons.

2. With that in mind the parties’ solicitors agreed that it would be more appropriate to determine first whether or not the sum of HK$1.4 million was indeed outstanding or if the husband had infact paid the wife all that was due and owing to her before proceedings with the judgment summons.

3. This case also serves to highlight the importance of accurate drafting and the need to ensure that court orders properly reflect the reality of the situation.

4. In essence the husband argues that notwithstanding the wording of the court order dated the 22 October 2010 (please see paragraph 9 below) that he has paid the wife the full amount of HK$3.3 million as agreed. The wife for her part says that a further HK$1.4 million is due and owing to her. She relies on the wording of the court order in support of her stance.

5. The husband for his part says the wife’s construction of the court order makes no sense if one bears in mind the reality of the situation. He asks that the wife’s judgment summons be dismissed. He seeks his costs.

Background

6. The husband is Japanese and the wife Korean. The parties met in Guam in 1991 and married in Hong Kong in September 1993, which is where the husband was working at the time. Both had been married before. There are no children of this marriage. The husband is 59 years old and the wife a little older at 62. According to the divorce petition the parties separated on the 1 April 2008. It seems that the husband formed a new relationship around that time. This is then a marriage of some 15 years duration. The decree nisi was pronounced on the 22 October 2010 and the decree absolute followed on the 19 January 2011.  The husband has since had another child.

7. It is accepted that during the course of the marriage the parties invested in a number of properties in Hong Kong, Korea and Shenzhen. The dispute has been with respect to the contribution made by each to the acquisition of those properties.   

The issues

8. Notwithstanding that however from the court’s perspective there is really only one issue to be determined namely whether or not the husband has already paid the wife the sum of HK$1.4 million in compliance with the court order or whether or not that sum is still due and owing to her. 

Background to the litigation

9. On the 15 July 2010 both parties entered into a simple consent summons. They were both legally represented at the time and their solicitors endorsed the consent summons together with the parties. The consent summons stated that it was in full and final settlement of each party’s claims against the other, that each was aware of the other’s financial position and that neither required the other to file any further discovery. It should be noted that there was no discovery and that Form E’s had not been filed.  The consent summons continued:

AND UPON the Petitioner and the Respondent agreeing and acknowledging that subject to the terms herein, the ownership of all other investments, property, chattels, personal belongings and/or other assets which are presently in the parties’ respective sole name or held jointly with others, to which the parties are beneficially entitled shall remain undistributed and shall remain the sole property of that party and be retained absolutely as the sole property of the respective party with possession and neither party shall be entitled to make any claims against the other in respect of such investments, property, chattels, personal belongings and/or other assets.

AND The Judge ordered by consent that:

1.  The Petitioner do within 30 days from the issuance of the decree absolute of these proceedings pay to the Respondent a lump sum of HK$3,300,000.00;

2.  There be no order as to costs of this action.

10. It is accepted that on the 3 May 2010, prior to the consent summons being signed, that the husband paid the wife the sum of HK$1.9 million. What is in dispute is the remaining HK$1.4 million. The husband says that this was also paid prior to the consent summons being signed. The wife says that it has not been paid and relies on the preceding paragraph in support of her case. The preceding paragraph states that the parties shall retain all other assets held in each party’s sole names as at the time that the consent summons was signed.

11. It is however accepted that on the 3 May 2010 the parties also signed the following note, which was evidence of the agreement reached between them.

CONFIRMATION FOR DIVORCE

Between

AY (HK ID No. PXXXXXX(X), Passport No. XXXXXXXX)

And

AKL(HK ID No. PXXXXXX(X), Passport No. XXXXXXXX)

Agreement:

1.  We agreed to pay in the sum of 3.3M HK$ to AKL

2.  Whatever asset of AY have, AKL give all rights away.

And whatever asset of AKL have, AY give away all rights.

In the future as up to date we agree divorce without any farther complex.

3^rd MAY, 2010

12. Each side presents a very different case. In truth I am asked to determine the credibility of each party. I am asked to believe one side over the other. In recognition of this the solicitor for the Respondent wife has pointed me to the case of Chiu Chi Tong v Lau Chong Sai & Lau Wai Ying, HCA 765 of 2002, where the

Honourable Mr. Justice Chung said as follows:-

“ Credibility of Witnesses

28. There are two objective tests for assessing a witness’s creditability regarding a matter to which he has testified:-

(a) Whether that part of his testimony is inherently plausible or implausible;

(b) Whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).”  

Each side’s case

13. As a general point and as will be seen below; I have found the husband to be a more credible witness than the wife.

14. The parties spent a long time during the hearing discussing the source of their assets. From a legal perspective however it should be noted that a) this was a reasonably long marriage of at least 15 years, b) assets were accumulated during the marriage, and c) all assets existing as at the date of the divorce should have formed part of the “matrimonial pot”.

15. The husband’s case on affidavit is that there was a “February agreement”, whereby the parties came to terms on a division of their assets post divorce. The wife denies any such agreement. Having heard the husband in the witness box it seems to me that rather than an “agreement”, there was probably an “understanding” reached between the parties with respect to their finances. Certainly nothing was reduced to writing. There was no separation agreement as such. No private agreement entered into personally between the parties. There was no inter solicitor correspondence evidencing any such agreement.

16. The wife denies that the parties even discussed finances until May 2010.  I find that a little hard to believe on the evidence. According to the husband the parties began to discuss the possibility of a divorce at the end of 2009. He says that they also began to discuss a division of assets and that those discussions took place over the next three months or so.  Consequently he says that the Shenzhen property was put on the market for sale and sold at the beginning of 2010. I do not accept the suggestion made by the wife that as this property was in her sole name that somehow it stood outside the pot and outside the parties’ discussions. It is accepted that the Shenzhen property was sold for HK$1.96 million and that on the 1 March 2010 the wife received the net sale proceeds in the sum of HK$1.4 million. The husband said in his evidence that as the market was a bit low that a real estate agent suggested that he consider remortgaging the property in Hong Kong as opposed to selling it. On the 11 March 2010 his application for a remortgage was approved. It is inconceivable for the parties not to have reached some form of “understanding” at this stage – why else would the husband have remortgaged the matrimonial home? I do not therefore accept the wife’s claim that there was no agreement at all in February 2010 (although I would accept, as I have said, that it was more of an understanding between the parties as opposed to a formal agreement) or that the parties only began discussing the matter in May 2010. That simply makes no sense at all. It is accepted by both sides that the sum of HK$1.9 million was paid to the wife on the 3 May 2010. The wife’s assertion in the witness box that the first time that the parties discussed finances was in May 2010 simply does not hold up to scrutiny. Likewise the suggestion that the parties only discussed matters for 20 – 30 mins and that they then signed the May agreement is also a little hard to believe.

17. After the adjournment the husband produced a document that he said was evidence of the February discussions. It is a hand written scrawl allegedly dated the 2.28.2010. The wife’s lawyer has criticized the husband for its late production and for the husband’s explanation in the witness box. For my part however I found the husband’s oral testimony entirely credible and more probable than either side’s written evidence. In essence he said that there was an agreement in principle in February and that this was subject to some fine tuning. He said that the agreement was confirmed on the 11 March 2010.

18. It is suggested that if the February agreement does not exist then the husband’s case must fail. With respect I do not agree. Rather it seems to me more likely than not, that on the balance of probabilities, that the parties entered into negotiations over a period of time and that an agreement was reached along the lines of the hand written document produced. This was subject to some fine tuning with respect to valuations and the like. Monies were paid to the wife on the basis of that understanding.

19. It is suggested that I do not need to consider whether or not the agreement was “fair” or not. With respect I do not agree. If the agreement was within the realms of what the court would consider to be fair and reasonable in all of the circumstances of this particular case, then it goes to support the husband’s position that full payment has already been made. If the payment of an additional HK$1.4 million would take it outside the realm of what is fair and reasonable then it goes to undermine the wife’s position that that additional sum of HK$1.4 million is due and owing to her.

20. Solicitors for the husband have argued throughout that if an additional HK$1.4 million is to be paid the husband will be virtually wiped out financially. The original so called agreement meant that the wife roughly received two thirds of the family assets – c HK$7.2 million, whereas the husband received c. HK$3.8 million. This was however on a clean break basis. The husband had some earning capacity and he believed that the Hong Kong property might rise in value. He was willing to do this deal. He agreed to the wife keeping the insurance bond. This made sense.  It is a good agreement. It made no sense at all for the husband to agree to pay the wife an additional HK$1.4 million. The wife’s suggestion during the hearing that this was because the husband had other undisclosed assets simply does not come up to proof. There is absolutely no evidence to support this claim. It was not made on the papers.

21. The wife’s credibility was further undermined by her additional evidence in the witness box. For example she claimed to be a business woman and to have had a money lending business. No evidence was produced in support of these bare assertions.

Conclusion   

22. In conclusion therefore I accept that the husband has already paid the wife the sum of HK$3.3 million and that no further sums are due and owing to her. Consequently it follows that the wife’s judgment summons dated the 21 June 2012 shall be dismissed. Costs of this hearing shall be to the husband on a party and party basis to be taxed if not agreed.

23. One final word of caution. This case has emphasized the need for accurate drafting. This dispute would not have arisen had the solicitors involved ensured that the consent summons of the 15 July 2010 was accurately drafted. The consent summons should have recorded the fact that two sums of money had already been paid – i.e. the HK$1.4 million on the 1 March 2010 and the HK$1.9 million on the 3 May 2010. There should have been a dismissal of claims on that basis. Had that been done the costs associated with this hearing would most probably have been saved. The lawyers involved should perhaps reflect on that.