LYI v. LCY

FCMC 5468 /2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 5468 OF 2008

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J U D G M E N T

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INRODUCTION

1. This is an application by the Petitioner (“W”) for an order to stay (or to suspend) the performance of certain of her undertakings in a consent order and the Respondent (“H”) opposes her application.

BRIEF BACKGROUND

2. The parties were married on 28 February 1987.  They have one daughter, who was born in October 1993, and is now 15 (“the Child”).

3. The parties started to live apart from about January 2007, and on 14 May 2008, W issued a divorce petition based on their separation for over one year, and H consented to the divorce.

4. At the time of issuing the divorce petition, the parties had already reached agreement on custody and finances and such agreement was recorded in the Minutes of Consent Order (“the Minutes”) signed by the parties and their respective solicitors, which were attached to the petition.  The Minutes were dated the same date as the petition. 

5. On 26 May 2008, this Court made an order for maintenance pending suit for W, custody and periodical payments for the Child, reflecting part of the terms agreed in the Minutes.  The other terms of the Minutes were adjourned to be dealt with at the hearing of the DN.

6. A Decree Nisi was pronounced about 2 months later, on 28 July 2008, and on the same day, the rest of the terms of the Minutes were approved by this Court and made an order of the Court (“Consent Order”).  The Consent Order later had to be amended but the amendments are not relevant to the present application.   

7. Under the Consent Order, certain agreements and undertakings by the parties were set out in the recital.  In particular, under paragraph 1 and 1.1 of the undertakings, W undertook :

(i)    to move out of the parties’ matrimonial home in Yuen Long  which was  registered in joint names of the parties (“Matrimonial Home”), latest by 31 December 2008; and

(ii)    to transfer the Matrimonial Home to H at nil consideration at the date of Decree Absolute or when W moved out therefrom.

      (“Undertakings”)

8. The Decree Nisi was made absolute on 18 September 2008.

9. On 9 October 2008, W changed her solicitors and appointed her present solicitors.

10. On 17 October 2008, W issued High Court Action 2030 of 2008 (“the HC Action”) against H in respect of a dishonoured cheque for HK$4m given to her by H (“the Cheque”).

11. On 6 November 2008, W issued the present summons before this Court to apply for an order to stay (or suspend) the performance of the Undertakings pending the outcome of the HC Action or until further order (“the Summons”).

12. At the direction hearing of the Summons on 15 December 2008, this Court granted an interim stay until further order, and gave directions for the filing of affirmations and submissions.

13. Up until the present, W has not complied with the Undertakings in that she has not moved out of the Matrimonial Home, and she has not effected the transfer of the Matrimonial Home to H.

W’S CASE

14. W said she and H signed a memorandum in Chinese (“Chinese Agreement”) on 21 August 2007, and at the same time H gave her the Cheque which was postdated to 21 November 2007, pursuant to clause 14 of the Chinese Agreement.  W said she had prepared the Chinese Agreement in about July 2007 and sent it to H for his consideration.  W said at the time H had already moved out of the Matrimonial Home and her only means of contact with H was by phone or to see him at his office.  In August 2007, according to W, when she tried to contact H, he deliberately refused to answer her calls.  Thus, on 21 August 2007, accompanied by her brother, she went to his office to talk to H regarding the Chinese Agreement.  When she asked H whether he was ready to sign the Chinese Agreement, again according to W, H, without saying anything, took out the already signed Chinese Agreement and the Cheque to hand to W, but then a moment later, he asked her to give him back the Chinese Agreement and later deleted clauses 6 and 9 therein before giving back the Chinese Agreement to W.  W said H urged her to accept the Cheque, which was post-dated as he needed time to arrange his cash flow, and assured her that the sum of HK$4m would be available by 21 November 2007.  W said she agreed to defer the presentation of the Cheque.  W said there was no duress, coercion nor threats on her part to make H sign the Chinese Agreement.

15. W’s version of what happened on 21 August 2007 at H’s office and how the Chinese Agreement was signed was quite different from H’s version. 

16. It was stated in her solicitors’ letter of 9 October 2008 and further it now appears to be W’s case that H’s payment of $4m to her and/or obligation to honour the Cheque was a condition precedent to W’s performance of the Undertakings, although in her 1^st affirmation she did not make this clear.  As H’s obligation to pay the sum of $4m was a condition precedent, W’s case is that she should be given an extension of time to perform the Undertakings until the disposal of the HC Action.

H’S CASE

17. As I have said earlier, H gave a different version as to how the Chinese Agreement was signed.  H said that in or around July 2007, he and W were having marital problems, and W gave him the Chinese Agreement which contained terms she wanted.  He refused to sign at the time.  In about August 2007, H alleged that the relationship between the parties further deteriorated and on 21 August 2007, W attended his office to create disturbances.  To stop W’s harassment and to make her leave, he was left with no choice but to sign the Chinese Agreement and gave her the cheque.

18. H said after signing the Chinese Agreement, in about October 2007, the parties reconciled, but their harmonious relationship did not last long. 

19. H considered that the Chinese Agreement was made subject to a formal document to be drafted by a law firm and that in February 2008, he and W had fresh negotiations.

20. H said that W did not refer to or rely on the Chinese Agreement and the Cheque at the time of negotiations in relation to the preparation of the Minutes and this was because she and he had agreed that the Chinese Agreement was already cancelled. 

21. H further denied that he made any assurance that he would honour the payment of HK$4m.  It is H’s case that all along the Cheque was unenforceable because, inter alia:

(i)   the Chinese Agreement was “subject to contract”;

(ii) the Chinese Agreement had been rescinded and superseded by the Minutes.

THE SUMMONS

22. The Summons was originally issued purportedly under the inherent jurisdiction of this Court and section 11 of the Matrimonial Proceedings and Property Ordinance (“MPPO”).  As pointed out by H’s Counsel, Mr. Chow, section 11 of MPPO clearly does not apply to the Undertakings.

23. At the hearing, Counsel for W, Mr. Yip, clarified that W’s application was actually for an extension of time to comply with the Undertakings and he told the Court that the extension of time was “until final disposal of the HC Action or until 2 weeks after 30 January 2009 (i.e. the hearing date fixed for W’s 2^nd application for extension of time to file her reply affirmation in connection with her Order 14 application in the HC Action), or until further order, with liberty to apply.”

24. As Mr. Chow does not dispute that this Court has jurisdiction to grant extension of time to comply with the Undertakings, I will not go into the authorities lodged by him in connection with stay applications.

DISCUSSION

25. The main issues between the parties appear to be whether the Minutes contained all the terms agreed by the parties and whether there was any condition precedent.  In my view, if the Minutes did not represent all the terms agreed by the parties, and that W only signed the Minutes based on an assurance or agreement of payment of $4m from H, or that there was a condition precedent not complied with, then the proper procedure would be for W to try to set aside the Consent Order.  W had not, however, made any application to set aside the Consent Order.  I agree with Mr. Chow that W’s present application appears to be misconceived.

26. W had said she should be entitled to a reasonable share of at least 50% in the Matrimonial Home and that she gave up her entitlement based on H’s assurance to pay her HK$4m, which she could use to purchase a small apartment for her and the child.  H, on the hand, alleged that he had purchased certain properties in the name of W’s mother, who was holding them on trust for him, and that for the full entitlement of the Matrimonial Home, he was willing to give up such interest.  W then produced land searches of the properties alleged by H to prove that what H had alleged was not credible, as one of the properties was held in the name of W’s father instead of her mother.  Mr Yip has invited this Court to reject H’s version.

27. In the Minutes it is stated that the parties were aware of their respective legal rights as to disclosure and discovery and their prospective claims and they agreed to dispense with the disclosure and discovery as to income and assets of each other.  H’s case is that W knew very well H’s financial situation and that her demand for the HK$4m was unrealistic and H could not afford this payment.  This was denied by W.

28. I have pointed out during the hearing that neither party had filed any Form E (Financial Statement) at the time of the divorce, and there was no information before this Court as to what the matrimonial assets were.  It is simply not possible for this Court to make any finding or take any view at this stage as to whether what H, or what W said, was more credible or whether the terms in the Consent Order were reasonable and fair.  In any event, I agree with Mr. Chow that what the matrimonial assets were at the time of the divorce is not really relevant as there is no application before this Court to set aside the Consent Order.

29. To summarise, the chronology of relevant events is as follows:

(i)    On 21.08.07, the Chinese Agreement was apparently signed by parties and the Cheque was given by H to W.

(ii)  In October 2007/November 2007, whether it was for reconciliation or not, H moved back to the Matrimonial Home. The harmonious relationship did not apparently last. 

(iii)    On 23.02.08, W’s previous solicitors wrote to H to set out the terms of a divorce, custody and ancillary relief, which included a proposal that the Matrimonial Home should be sold and the net sale proceeds be divided equally. 

(iv)    On 14.05.08, the Minutes were signed by the parties and their solicitors whereby W agreed to transfer all her interest in the Matrimonial Home to H at nil consideration, and there was only an order for periodical payments for her and for the Child.

(v)  On 20.05.08, the Cheque was presented for payment by W for the first time and it was dishonoured.

(vi)    On 21.05.08, W affirmed her Form 21 to apply for a date for the Decree Nisi and in her Form 21, W asked, inter alia, this Court to make an order in terms of the Minutes.  Her Form 21 was filed on 28 May 2008.

(vii)  On 26.05.08, this Court approved and made an order for maintenance pending suit for W, custody and maintenance for the Child pursuant to part of the agreed terms of the Minutes.

(viii)    On 28.05.08, W’s former solicitors wrote to the Court to seek leave to amend certain clerical error in the Minutes.  

(ix)    On 27.07.08, this Court pronounced the Decree Nisi, and approved and made the Consent Order which incorporated the rest of the agreed terms of the Minutes.

(x)  On 18.09.08, the Decree Nisi was made absolute.

(xi)    On 09.10.08, W’s present solicitors wrote to H’s solicitors, mentioning for the first time that H’s obligation to honour the Cheque was a condition precedent to W’s performance of the Undertakings.

(xii)  On 17.10.08, W issued HC Action.

(xiii)    On 06.11.08, W issued the Summons.

(xiv)   On 18.11.08, W’s present solicitors wrote to the Court to apply for leave to amend certain clerical errors in the Consent Order.

30. There was no evidence from W as to why the Cheque or H’s alleged assurance to honour the Cheque or any alleged condition precedent was never mentioned in her former solicitors’ letter of 23 February 2008, nor in the Minutes, nor at any stage when the above-mentioned orders in (vii), (ix), and (xiv) were made.  The Cheque was dishonoured on 20 May 2008, 6 days after the date of the Minutes, which was 14 May 2008.  As could be seen from the above chronology, after the Cheque was dishonoured, W affirmed her Form 21 to confirm seeking an order in terms of the Minutes.  No step was taken by W to reflect the dishonour of the Cheque at all until October/November 2008.  No reason or explanation was given by W for this delay.

31. As I have said earlier, W has not sought to set aside the Consent Order.  Thus, the Consent Order remains valid and binding. 

32. Applications for extension of time are normally made under Order 3 rule 5 of the Rules of the High Court.  As pointed by Mr. Chow, there was no evidence as to why W was not able to comply with the Undertakings or why time was required.  Mr. Chow has submitted that the time now sought by W could be “forever”, as in the HC Action, there have now been 2 applications by W for extension of time to file a reply to H’s affirmation in connection with her Order 14 application.  I do not understand why W needed to seek 2 extensions of time to file a reply affirmation in her Order 14 application at the same time she is seeking an extension of time to comply with the Undertakings.  The period of time extension sought by Mr. Yip on behalf of W as set out in paragraph 23 above could be indefinite.

33. Furthermore, H has already complied with his part of his undertakings in the Consent Order, in particular paragraph 3.1, in that H has already paid W HK$150,000, being the agreed sum for her removal expenses, including but not limited to the renovation costs, costs of furniture and electrical appliances.  H has also paid W’s mother the sum of HK$700,000 under his undertaking in paragraph 4.1, as in paragraph 4.2, it is provided that if H is in default, then W may at her absolute discretion refuse to move out from the Matrimonial Home or to transfer her interest therein to H. This is the only provision in the Minutes under which W could refuse to comply with the Undertakings.

34. Having considered the above circumstances, I am not prepared to allow W’s application as sought. 

35. Mr. Yip has submitted that in the event that I am not prepared to allow W’s application as sought, I should still allow her time to move out.  Mr. Yip suggested 4 months, but Mr. Chow said 7 days.

36. In my view, 2 months would be reasonable.

ORDER

37. My order is therefore:

a. The Petitioner's summons issued on 6 November 2008 be dismissed with costs to the Respondent in any event, to be taxed on party and party basis, if not agreed, with certificate for counsel.

b.    The interim stay granted on 15 December 2008 be uplifted.

c.    The time for the Petitioner to comply with paragraph 1.1 of her undertakings in the Consent Order of 28 July 2008 be extended for 2 months from the date of this order.