LEE TAK CHEONG v. CHAN LEE DIANA

1998, No. 44
(Civil)

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H E A D N O T E

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DIVORCE - ancillary relief - consent order - duty of legal representatives in drafting order to ensure no room is left for future doubt or misunderstanding : dicta of Lord Oliver of Aylmerton in Dinch v. Dinch [1987] 1 WLR 252 at p.255 endorsed.

1998, No. 44
(Civil)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

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J U D G M E N T

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Godfrey, J.A. (giving the first judgment at the invitation of Chan, CJHC) :

Introduction

1. The parties in these proceedings, formerly husband and wife, were divorced, on the husband's petition, in 1979. Following the divorce, a consent order ("the Rhind order") was made in the District Court by H.H. Judge Rhind on 12 July 1979, which provided, among other things, for what was to be done in relation to a flat occupied by the wife at Chung Hom Kok. It provided as follows :-

"d. with regard to the Chung Hom Kok flat

(i) the Petitioner will allow the Respondent to remain thereat as a licensee until her remarriage or upon her death whichever event may first occur;

(ii) the Petitioner will continue to pay for the monthly mortgage repayments and rates therefor;

(iii) the Petitioner will name [the only child of the marriage] as his beneficial successor in respect thereof upon his death in accordance with the by-laws of Villa Piubello for Operative Building Society Limited;

(iv) the Respondent will give an undertaking to the Petitioner not to violate or commit breach of any of the regulations imposed by the Government Housing Society and of any of the by-laws of Villa Piubello for Operative Building Society Limited and to indemnify the Petitioner of any damages as a result;

(v) in the event that the Respondent's licence is revoked for any reasons save for those under Clauses d(i) and d(iv) above, the Petitioner will, subject to the prior approval of the Respondent, provide her with alternative comparable accommodation or alternatively will pay to her a sufficient amount to enable her to rent alternative comparable accommodation."

2. The provisions of the Rhind order were varied by another consent order made in the District Court by H.H. Judge Caird on 26 June 1984 ("the Caird order'). But that order did not contain any variation of the provisions relating to the Chung Hom Kok flat.

3. The husband later sought a further variation of the Rhind order in an application which did relate to the Chung Hom Kok flat. His application resulted in yet another consent order, made by Mr. Winston Leung, sitting as a deputy judge of the District Court, on 30 April 1997 ("the Leung order"). It is against this order that the husband now appeals. Both parties appear in person before us.

The Leung order

4. This order was made at a hearing at which the husband was represented by solicitors and counsel; the wife was unrepresented. It was intended to produce what is known in this field as a "clean break". It recited that the parties had agreed that the mutual obligations under the Rhind Order and the Caird Order should be discharged and never be enforced in any court and in any jurisdiction in whatsoever manner. It recited that the husband had undertaken to contribute HK$100,000 towards stamp duty in relation to the transfer of the Chung Hom Kok flat. It recited that the parties acknowledged and agreed that the provisions of the order were to be accepted in full and final settlement of all claims the husband and wife might have against each other for both capital and periodical payments or other property adjustment orders, including all claims arising out of the Matrimonial Proceedings and Property Ordinance or any other ordinance whether in Hong Kong or elsewhere. It was ordered as follows :-

"1. The Petitioner do transfer all his interest legal and beneficial to the Respondent in the Chung Hom Kok flat within 2 months from the date of this Order.

2. The Petitioner do pay the Respondent periodical payments for a fixed term from May 1997 to December 1997 (i.e. 8 months) at the rate of HK$20,000 per month, such payments to be paid by cheque through the Petitioner's Solicitors.

3. Upon fulfilling clauses 1 and 2 above, the Respondent's claims for lump sum, and/or property adjustment orders, and/or periodical payments, secured or otherwise, do stand dismissed."

5. No order was made as to the costs of the proceedings. The parties were given liberty to apply for the implementation of the order relating to the transfer of the husband's interest in the Chung Hom Kok flat to the wife.

The problem

6. No mention is made in the Leung order of any payment to be made to the government in relation to the proposed transfer of the flat from the husband to the wife. It is this omission which creates the problem which we are now called upon to resolve.

How did this happen?

7. The situation is clearly explained in a letter written by counsel for the husband to her instructing solicitors in relation to the events leading to the making of the Leung order. I propose to read from counsel's letter to her instructing solicitors :

"The parties walked out of the Court and started to negotiate for settlement. [The husband] reconfirmed his position to achieve a 'clean-break' with [the wife] by giving his interest in the property to her. He mentioned she would in practical terms be getting a property worth of millions of dollars after paying the premium to the government. [The husband] also mentioned that one could only sell upon paying the premium to the government. He said he was in no position to pay the premium, which he did not know how much it was, but likely in the region of a few million dollars. I still remember him saying that [the wife] could either continue to stay in the property, or if she wished to sell in the future, she could pay the premium to the government and get the profits.

On the basis of [the husband's] instructions, negotiation talks started between [the wife] and her son on the one part, and [counsel's instructing solicitors and counsel] ..... [The wife] also expressed her understanding that a premium had to be paid to the government upon the sale of the property. Likewise, she said she had no money to pay the premium.

By that time, it became clear that [the husband] was happy to transfer his interest in the property to [the wife], and [the wife] happy to accept it, provided that no one should bear the incident of paying the premium for the transfer.

Then, I suggested that I heard of cases in which the government agreed to waive the premium requirement. I said this because I made phone call enquiries to some conveyancing practitioners and they confirmed there were Home Ownership cases whereby the requirement to pay a premium was waived. Moreover, I thought there were merits in this case to ask the government to waive."

And counsel gave her reasons for that belief. Counsel recalls that the instructing solicitors' representative :

"called and tried to get someone at her office to contact the government for clarifying whether the government would waive the premium requirement, but in vain because obviously no one was in a position to confirm such a matter and with such urgency over the phone.

Eventually, it was agreed that the parties would enter into an order by consent whereby [the husband] would transfer his interest in the property to [the wife]. That was done on the express understanding that [the husband] would not pay the premium to the government. I remember distinctly that we were talking to [the wife] and her son in one of the conference rooms outside Court. We told [the wife] that [the husband] did not have the means to pay the premium and [the wife] indicated her understanding by saying it was a huge amount involving millions of dollars. Then we said, with an order of the Court, she should go to the Land Office, equipped with the consent order, show them the same, and 'beg' them to waive the requirement of paying the premium. That was the only way that she could get the property from [the husband]. Both [the wife] and her son nodded their heads and agreed they would 'beg' the Land Office to waive the premium.

On this basis, the consent order was drafted. One thing was sure: [the husband] never agreed to transfer the property to [the wife] free of the premium; and [the wife] understood that was the deal. Both parties were labouring under the high hopes that the government would dispense with the requirement for premium payment upon having sight of the consent order. As to what should happen if the government did not waive, neither party had actually given it much thought. But for [the husband], my understanding was his position would still be the same, ie., he transfers whatever interest he has in the property to [the wife] and he should not be required to pay the premium."

8. But it transpired, unfortunately, that the government was not prepared to waive what counsel describes as "the premium". The husband, believing that (if necessary) the wife was to pay the premium, and the wife, believing that (if necessary) the husband was to pay the premium, had neither of them anticipated this.

The appeal

9. The husband sought leave to appeal from the Leung order, and on 20 January 1998 leave to appeal was granted by the deputy judge, who stayed the execution of his order pending the hearing of the appeal. The husband asks us to set aside the order, given that the wife cannot or will not pay the premium.

The wife's position

10. The wife does not accept the accuracy of all that was said in counsel's letter to her instructing solicitors. She told us this morning the flat was provided with her money in the first place, and that the husband had agreed to pay the premium (the husband disputes this). She wants the order to stand, and the husband to be made to pay the premium.

What went wrong?

11. I propose first to make some observations on what happened in the court below, and to cite, for this purpose, a passage from the speech of Lord Oliver of Aylmerton in Dinch v. Dinch [1987] 1 WLR 252, at p.255 which is of importance generally and in this case in particular :-

"The appeal is yet another example of the unhappy results flowing from the failure to which I ventured to draw attention in Sandford v. Sandford [1986] 1 F.L.R. 412 to take sufficient care in the drafting of consent orders in matrimonial proceedings to define with precision exactly what the parties were intending to do in relation to the disposal of the petitioner's claims for ancillary relief so as to avoid any future misunderstanding as to whether those claims, or any of them, were or were not to be kept alive. The hardship and injustice that such failure inevitably causes, particularly in cases where one or both parties are legally aided and the only substantial family asset consists of the matrimonial home, are so glaring in the instant case that I feel impelled once again to stress in the most emphatic terms that it is in all cases the imperative professional duty of those invested with the task of advising the parties to these unfortunate disputes to consider with due care the impact which any terms that they agree on behalf of their clients have and are intended to have upon any outstanding application for ancillary relief and to ensure that such appropriate provision is inserted in any consent order made as will leave no room for any future doubt or misunderstanding or saddle the parties with the wasteful burden of wholly unnecessary costs. It is, of course, also the duty of any court called upon to make such a consent order to consider for itself, before the order is drawn up and entered, the jurisdiction which it is being called upon to exercise and to make clear what claims for ancillary relief are being finally disposed of. I would, however, like to emphasise that the primary duty in this regard must lie upon those concerned with the negotiation and drafting of the terms of the order and that any failure to fulfil such duty occurring hereafter cannot be excused simply by reference to some inadvertent lack of vigilance on the part of the court or its officers in passing the order in a form which the parties have approved. Having said this, I must add that the consent order which has given rise to such unfortunate consequences in the instant case is not one which was drawn by any of the counsel appearing before your Lordships or for which they can be held in any way responsible." (emphasis added.)

12. I cannot, for my part, do more than indorse what was said there by Lord Oliver of Aylmerton. It was most unfortunate that the order in our case was made leaving to hang in the air the whole question, of very considerable importance, as to who was to pay any premium payable in the event of the transfer of this flat from the husband to the wife.

13. The fact, as we can see, is that the Leung order was made under a fundamental misapprehension. The husband believed, or at least hoped, that no premium would be payable. The husband believed, or at least hoped, that if it was to be payable, it would be paid by the wife. The wife also believed, or at least hoped, that no premium would be payable. But she believed, or at least hoped, that if any premium was to be payable, it would be paid by the husband. As counsel's letter makes clear, nobody properly addressed his, or her, or their, minds, to the problem which I have identified.

The legal position

14. The Leung order was a consent order; but in matrimonial proceedings a consent order can be set aside where it is necessary to do justice between the parties. All the circumstances attendant to the making of the agreement leading to the consent order are relevant : cp. Edgar v. Edgar [1980] 1 WLR 1410, per Ormrod LJ, at p.1417 :

"Undue pressure by one side, exploitation of a dominant position to secure an unreasonable advantage, inadequate knowledge, possibly bad legal advice, an important change of circumstances unforeseen or overlooked at the time of making the agreement, are all relevant to the question of justice between the parties."

15. I would also refer to Barder v. Barder [1988] AC 20, in which Lord Brandon of Oakbrook said, at p.43 :

"A court may properly exercise its discretion to grant leave to appeal out of time from an order for financial provision or property transfer made after a divorce on the ground of new events, provided that certain conditions are satisfied. The first condition is that new events have occurred since the making of the order which invalidate the basis, or fundamental assumption, upon which the order was made, so that, if leave to appeal out of time were to be given, the appeal would be certain, or very likely, to succeed. The second condition is that the new events should have occurred within a relatively short time of the order having been made."

16. In the present case, what happened was that the parties (one of whom was unrepresented) having unwisely entered into their agreement without finalising the question of the premium and its payment, went off and found that the government were not prepared to waive the premium. This falsified the assumptions of both parties upon which the Leung order was made. I have no doubt that, in these circumstances, it would be an injustice to allow the Leung order to stand.

Conclusion

17. Accordingly, I would, for my part, propose that we do set the Leung order aside, as the husband asks us to do. On the other hand, we cannot possibly make any order such as he was initially disposed to ask us to make, such as that the transfer of the flat should take place but the wife should pay the premium. That would be manifestly unjust too, particularly, if as the wife contends, it was with her money that the flat was provided in the first place. So we must not only set aside the Leung order; we must also send this case back to the District Court to be disposed of on any application that the husband or the wife may make for variation of the other orders which, in the meantime, remain in force, that is to say, the Rhind Order and the Caird Order.

18. For those reasons, and to the extent I have indicated, I would allow this appeal.

Nguyen, J. :

19. I agree that the appeal should be allowed and the consent order set aside, and that the case be remitted back to the Family Court for further determination of all outstanding issues. I agree with what my Lord, Godfrey, J.A. has said in his judgment and I have nothing further to add.

Chan, CJHC :

20. I also agree. The agreement of the parties as reflected in the Consent Order made on 30 April 1997 was clearly reached on the understanding that neither the husband nor the wife would pay the premium, if any, for the transfer from the husband to the wife of the flat and that the Government would, both parties believed and hoped, allow the transfer without payment of premium subject to whatever covenant the wife might be able to offer. Unfortunately, the parties' belief was wrong and their hope did not materialise. In these circumstances, the basis for the agreement and Consent Order has disappeared. The Consent Order simply cannot be carried into effect. For the reasons given by Godfrey JA, I would allow the appeal. I would also agree with the way in which the matter is to be disposed of as suggested by him. We will make no order as to costs.