DX v. LN

CACV159/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 159 OF 2016

(ON APPEAL FROM FCMC NO 7870 OF 2014)

__________________

__________________

__________________

JUDGMENT

__________________

Hon Cheung JA:

1.  I agree with the judgment of Yuen JA.

Hon Yuen JA:

2.  This is an application by the Petitioner in FCMC 7870/2014 (“the Wife”) for payment out to her of a sum of money in court.

Background

3.1.   Briefly, the background facts are as follows.

3.2.   The Wife married the Respondent (“the Husband”) in 2006.  There are two children of the marriage under 7 years of age.

3.3.   The Husband, now 40, comes from a wealthy family in the PRC and works in the family business which is based there.  The Wife, now 33, did not work.  The family enjoyed a very comfortable lifestyle in Hong Kong and in the PRC. 

4.  In February 2014, the Wife petitioned for divorce. 

The Wife’s applications for MPS and costs provisions

5.  In April 2015, the Wife issued a summons for maintenance pending suit (“MPS”).

6.  In June 2015, Bruno Chan DJ (“the judge”) gave an order giving care and control of both children to the Wife.

7.  Also in June 2015, the Wife issued a further summons for an order that the Husband should provide for her legal costs (“costs provisions”).

8.  The Wife’s applications for MPS and costs provisions were heard together in August 2015.  The case of the Husband (who was represented by counsel) was as follows:

(a) although he is the registered owner of a number of properties in the PRC and Hong Kong, he holds them on trust for his father (“the Father”) or his parents, and he has no beneficial interest in any of the properties;

(b) although he has continued to work in the family business, his father has “cut him off” financially after the Wife complained to his father that he was having an affair and commenced divorce proceedings, and his income was now restricted to a salary of $15,000 a month.  He was dependent on his mother and sister for financial support.

The judge’s orders for MPS and costs provisions

9.1.   In his judgment of 21 September 2015, the judge ordered that the Husband pay the Wife

(1) a sum of $100,000 a month as MPS for herself and the children, such payment to be dated back to 1 May 2015, and

(2) a sum of $1.2m as costs provisions, to be paid by 9 monthly instalments of $133,333 each, the instalments to be dated back to 1 July 2015.

9.2.   The Husband did not appeal against those orders.

Proceedings regarding properties held in the Husband’s name

10.1.  1. Meanwhile, as far as the properties held in the Husband’s name were concerned,

(a) the Husband’s parents joined as interveners in the proceedings in Hong Kong for determination of the issue of beneficial ownership (“the preliminary issue”), and 

(b) the Father commenced proceedings in the PRC for an order that he was the beneficial owner of the properties (“the PRC proceedings”).

10.2.   As far as the preliminary issue is concerned, we have been told that the hearing has been set down for August this year in the Court of First Instance¹.

10.3.   As far as the PRC proceedings are concerned,

(a) in November 2015, the judge granted an injunction restraining the Father from dealing with any property in which the PRC court finds he has an interest, pending the Hong Kong court’s determination of the preliminary issue; 

(b) in August 2016, the Intermediate People’s Court of Wuhan City held that the Father was the beneficial owner of the properties.

The Wife’s applications consequential upon the Husband’s default

11.1.   Meanwhile, the Husband was in default of payment of the MPS and costs provisions.  By January 2016, the sum in default was approximately $1.4m (“the $1.4m sum”).  

- Prohibition Order

11.2.   On 16 January 2016, the judge made a prohibition order (“PO”) against the Husband².

- Judgment summons

11.3.   On 20 January 2016, the Wife issued a judgment summons against the Husband on the ground that he had failed to pay the $1.4m sum.

Committal Order

12.1.   On 14 July 2016, the Husband appeared without legal representation at the hearing of the judgment summons.  He said he was not able to pay the sums in default.  He gave oral evidence and was cross-examined by the Wife’s leading counsel.   

12.2.   Suffice it to say at this stage that in an extemporary oral judgment, the judge found the Husband in contempt of court and sentenced him to three months imprisonment with immediate effect unless he paid the Wife the sum of $2,423,548 (“the $2.4m sum”). 

Events after the Committal Order

- Husband’s application for variation of the MPS and costs provisions orders

13.1.   On 20 July 2016, the Husband (now legally represented again) applied by summons for the MPS order to be “varied downwards, suspended or discharged with all arrears to be remitted”.  This summons was subsequently³ amended to include variation of the costs provisions. 

13.2.   We have been told that no date has yet been fixed for the hearing of this summons.

- Husband’s appeal against the Committal Order

14.  On 21 July 2016, the Husband lodged a Notice of Appeal against the Committal Order.  The grounds of appeal include:

(a) grounds based on breaches of constitutional rights (eg breach of the privilege against self-incrimination, reversal of the burden of proof)⁴, and

(b) grounds based on defects in the contempt proceedings (eg although the judgment summons was issued for arrears of the $1.4m sum, the committal order required him to pay the $2.4m sum which included interest and costs). 

Appeals in cases of contempt of court

15.1.   It may be convenient at this stage to set out the relevant law governing appeals in cases of contempt of court.  Such appeals are governed by s.50 High Court Ordinance, Cap 4 which provides (where material):

“(1) Subject to this section, an appeal shall lie from any order ... of a court ... in the exercise of jurisdiction to punish for contempt of court ...; and in relation to any such order ... this section shall have effect in substitution for any other law relating to appeals in civil or criminal proceedings.

(2) An appeal under this section shall lie to the Court of Appeal in any case at the instance of the person against whom the proceedings for contempt of court were brought or the order was made ....

(3) The Court of Appeal may on appeal reverse or vary the order or decision of a court, and make such other order as may be just; and without prejudice to the powers of any court to grant bail, provision may be made by rules of court for authorizing the release on bail of an appellant under this section”.

(Emphasis added).

15.2.   The relevant rule of court is Order 59 rule 20, of which para. (2) is pertinent to the matter before us⁵:

“(2) Where, in the case of an appeal as is mentioned in paragraph (1), the appellant is in custody, the Court of Appeal may order his release on his giving security (whether by recognisance, with or without sureties, or otherwise and for such reasonable sum as that Court may fix) for his appearance within 10 days after the judgment of the Court of Appeal on the appeal shall have been given, before the court from whose order ... the appeal is brought unless the order ... is reversed by that judgment”. (Emphasis added).

15.3.   The editors of Hong Kong Civil Procedure 2017 refer to the jurisdiction under this rule as “bail pending appeal”⁶.

- Husband’s application to this court on 22 July 2016

16.1.   The day after the Notice of Appeal was filed (22 July 2016), this court was convened as a matter of urgency to hear an application by the Husband.  At the time of the hearing, no summons or motion⁷ had been filed.  What was placed before the court was a skeleton submission of the Husband’s counsel for a “Stay and Release from Prison application”.

16.2.   The application was opposed by the Wife, but at the conclusion of the hearing, a Consent Order was made, including the following orders:

“1. There be a stay on the Order of His Honour Judge Bruno Chan, made under Matrimonial Proceedings action no.7870 of 2014 of the District Court on 14 July 2016, on the following conditions:

(i) That the [Husband] shall comply with the Prohibition Order made on even date which has been filed separately under these proceedings;

(ii) That the [Husband] shall pay or cause to be paid a sum of $2,069,010⁸ into Court within 14 days from the date hereof, that is, on or before 6 August 2016; and

(iii) In the event the [Husband] fails to comply with sub-paragraph (ii) hereinabove, the stay be uplifted forthwith and a Warrant of Arrest will be issued forthwith and the [Husband] will be returned to prison to complete the sentence of imprisonment ordered on 14 July 2016 by His Honour Judge Bruno Chan.

2. On the basis of paragraph 1 above, the [Husband] shall be forthwith discharged from custody”.

16.3.   Pursuant to that Consent Order, the Husband was released from custody and on 3 August 2016, the sum referred to in para. 1(ii) (“the $2.06m sum”) was paid into court.

Wife’s application for payment out

17.1.   On 21 September 2016, the Wife issued a summons for an order that there be

“ payment out of [the $2.06m sum] from the money paid into Court by the [Husband] pursuant to the [Consent Order] to the [Wife’s] solicitors ... to be released to the [Wife] in settlement of the principal sum due and owed by the [Husband] to the [Wife] under paragraphs 1 and 2 of the MPS Order dated 21st September 2015 (under FCMC 7870/2014) for the maintenance pending suit and costs provisions up to and including July 2016”.

17.2.   The Husband opposed the application.  Although the Wife had asked for the matter to be disposed of on paper, directions were given for an oral hearing. 

Discussion

18.1.   Miss Anita Yip with Miss Lily Yu for the Wife submitted that payment out could be ordered under Order 22A rule 1 RHC which provides:

“Subject to Order 22, rule 17, any money paid into court in an action (whether or not in accordance with Order 22) may not be paid out except in pursuance of an order of the Court which may be made at any time before, at or after the trial or hearing of the action”.

18.2.   Miss Yip cited three cases⁹ in support of her submission that the court has an unfettered discretion to order payment out under this rule so as to achieve justice between the parties¹⁰.  She emphasized the following factors in the present case:

(a) the Husband had not appealed the MPS and costs provisions orders;

(b) although the Husband has applied for variation of those orders, the usual practice in such applications is that orders would not be backdated to before the date of application;

(c) the Wife and children have been living in straitened circumstances for more than a year¹¹;

(d) the Wife is not able to get legal aid as she has a property in the PRC which she says she has not been able to sell;   

(e) the Husband would be able to clawback any overpaid sum from payments under the final maintenance order.

19.  These are cogent factors.  However, whilst I understand the Wife’s wish to enforce the MPS and costs provisions orders, I am not persuaded (with respect to Miss Yip) that it is open to the Wife to do so by appropriating the sum in court at this stage.

20.1.   In my view, it is important to understand the nature of the sum in court.  Whatever the parties may have chosen to call the application before this court on 22 July 2016 and whatever the terms of the Consent Order, what is crucial is the fact that the Husband had been found in contempt of court, and the sum had been paid into court specifically to secure his release pending the hearing of his appeal. 

20.2.   Whilst the judgment summons was issued by the Wife in order to benefit herself and the children, contempt proceedings are not simply a lis between the parties only.  In finding the Husband in contempt, the judge in effect held that he was obstructing the fair administration of justice, a matter which involves the court in its own right.  (As an illustration of the court’s role in contempt proceedings, it has the power to discharge a contemnor, despite opposition from the other party to the proceedings, even though he has not purged his contempt).

20.3.   Once a committal order is understood in the context discussed above, it seems to me that the sum paid into court to secure the Husband’s release pending appeal takes on a special character by reason of the court’s role in contempt proceedings.  It is a security offered to the court as bail pending appeal, and should the Husband fail to attend court in compliance with the terms of O.59 r.20(2), the sum would, generally speaking, be forfeited. 

20.4.   Accordingly, it seems to me premature for the Wife to apply now for payment out of the sum so paid in, when the Husband’s appeal against the finding of contempt of court has not yet been heard and before he is required¹² to attend court in compliance with O.59 r.20(2).  In my view, it is not open to the Wife at this stage to seek payment out of what is in effect bail pending appeal as an alternative means of execution.

21.  In my view, that is enough to dispose of this summons.  In order not to prejudice any applications that may be made upon the determination of the appeal, I do not think it would be appropriate in this judgment to discuss the other arguments raised by counsel regarding the factors to be taken into account in the disposal of the funds in court.

Order

22.  For the reasons set out above, I would dismiss the summons.  As the interests of the children are affected, I would make an order nisi that there is to be no order as to costs.