YN also known as YN (A) v. NA

CACV 240/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 240 OF 2013

(ON APPEAL FROM FCMC NO. 11910 OF 2011)

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J U D G M E N T

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Hon Kwan JA:

Introduction

1.  The parties to this appeal will be referred to as the wife and the husband, even though a decree nisi has been made dissolving their marriage.

2.  On 31 July 2013, Deputy District Judge Carlson gave judgment in the wife’s application for ancillary relief, after a ten-day hearing.  The effect of the capital division in the judgment was that the wife would receive 70% of the matrimonial assets.  In addition, the husband was ordered to pay the wife periodical payments of J¥416,460 (equivalent to $33,000) per month for ten years from the date of the order.

3.  The time for appealing this judgment expired on 28 August 2013.  One day before the expiry of time, the wife issued a summons seeking leave to appeal.  The husband did not apply for leave to appeal against the judgment until 18 October.  He was 51 days out of time.  In his summons, he sought leave to appeal out of time and stay of execution of the judgment pending appeal insofar as he had made payment only in part of the lump sum ordered by the judge.  A draft Notice of Respondent’s Cross Appeal was annexed to his summons.

4.  The wife’s summons and the husband’s summons were heard by the judge on 4 November 2013.  At the hearing, he granted leave to the wife to appeal against the judgment.  She has filed a Notice of Appeal on 11 November 2013 (CACV 236/2013) and this will come before the Court of Appeal on 24 September 2014.  In her appeal, she will be seeking to increase the lump sum award and the periodical payments.  As to the husband’s summons, the judge took a peculiar approach at the hearing.  He was aware that the husband was out of time in seeking leave to appeal but instead of deciding whether an extension of time should be granted to allow him to apply for leave, he first decided to grant leave to appeal to the husband.  He said this in granting leave:

“I decided that Mr Surman [counsel for the husband] ought to have leave to appeal. It’s not been straightforward as in the case of the wife petitioner, but it seems to me where my order entails a package of measures, on the one hand, 70 per cent of capital and on the other, albeit a maintenance order which comes to an end in 10 years’ time, a substantial maintenance order, it seems to me, that there must be a reasonable prospect of Mr Surman being able to demonstrate that the package, as a whole, was unduly generous to the wife. And so for those reasons, I have decided to grant the husband leave to appeal.

And now we come to the application for an extension of time. What would you want to say about that? Mr Surman …”[1]

5.  The judge proceeded to hear arguments from counsel for both parties.  At the end of the hearing, he informed the parties he would deliver a reasoned ruling on the application for extension of time to apply for leave to appeal on 8 November 2013.

6.  In his ruling on 8 November 2013, the judge decided to extend time to allow the husband to apply for leave to appeal.  I will quote the pertinent reasons in his ruling:

“It is a fact that there is now going to be an appeal by the wife. I have also found sufficient merit in the husband’s grounds to grant him leave. In my judgment, he has reasonable prospects of success. Whilst in both cases I do not harbour any doubts about the correctness of my orders, the fact is that I recognise, on an objective basis, in this tricky case that both parties have reasonable prospects of success.

It seems to me therefore that in these circumstances the Court of Appeal should have the full range of options available to it in adjudicating on this matter. If I refuse to extend time to the husband, this would leave him with having the option of filing a respondent’s notice to the appeal which would have the limited effect of seeking to affirm the judgment on other grounds. Such a notice would not have the reach of a cross-appeal by him.

Therefore, I have decided that I should extend time to allow both parties and the Court of Appeal itself to explore the full breadth of the merits of my orders and of the parties’ respective cases. I believe where I have given the wife leave, but in the circumstances of this particular matrimonial jurisdiction where the husband has shown that he has a meritorious appeal that I should let him have an extension of time. I will be able to address his delay in bringing this appeal by an appropriate order for costs. … May I say for the avoidance of doubt that had it been the husband only who had been seeking leave to appeal and as he was out of time, I would have refused him leave to extend time. I should also say that this ruling is not to be taken as any indication that just because one party has appealed that a delayed appeal by the other party, albeit with sufficient merit, will be given an extension. I have granted the extension in this case because of the particular features and difficulties of the case which have emerged from my judgment. This decision cannot be taken as any sort of precedent to be waved at another judge in similar circumstances. The decision is based on the particular facts of this ancillary relief application and of its particular features and difficulties.”[2]

7.  The particular features and difficulties mentioned by the judge related to the unusual feature of this litigation that neither party has been living in Hong Kong since 2008.  The wife, who is Japanese, has returned to live in Tokyo and as the ancillary relief application turned largely on her needs, this had presented difficulties to the judge who was not conversant with the living and working conditions in Tokyo and had to do the best he could on the available evidence[3].

8.  After the ruling was read in court, the wife’s solicitor applied for leave to appeal against the decision to grant an extension of time to the husband to apply for leave to appeal.  The judge granted leave immediately[4].  Hence this appeal (CACV 240/2013) was brought by the wife with the leave granted by the judge.  She seeks an order to set aside the judge’s decision on 8 November 2013.

Jurisdiction

9.  The husband’s counsel, Mr Giles Surman, contended that there is a jurisdictional bar to an appeal against the granting of leave to appeal out of time.  He submitted that the refusal of leave to appeal, in itself, cannot be made the subject of an appeal, and the same goes for the granting of leave to appeal.  The granting or refusal of leave to appeal is a discretion exercised by the court the appeal lies before, and that court has the right to consider whether an appeal is meritorious and whether it should be allowed.  To allow an appeal to a higher court against the grant or refusal of leave in itself, as a discretionary matter, is against the concept of the requirement of granting leave.  And although a party may apply to a higher court for leave to appeal when his application for leave is turned down by the District Court, that party may not bring an appeal to the Court of Appeal against the District Court’s decision in refusing leave to appeal.

10.  In support of the above propositions, Mr Surman relied on the speeches of the law lords in Lane v Esdaile [1891] AC 210 at 212 to 213 per Lord Halsbury, LC and at 214 per Lord Herschell, as well as the judgment of Ribeiro PJ in HLF v MTC (2004) 7 HKCFAR 167 at §§23 to 26.  It was stated by Ribeiro PJ that “it has long been recognized in the case-law that a refusal of leave to appeal is generally to be regarded as final and incapable of itself being made the subject of an appeal”.

11.  To resolve the issue on jurisdiction, it is necessary to consider the relevant statutory provisions.

12.  I start with these relevant provisions in the District Court Ordinance, Cap 336:

“63. Appeals in civil matters

(1) Subject to subsection (3), an appeal can, with leave of a judge or the Court of Appeal, be made to the Court of Appeal from every judgment, order or decision of a judge in any civil cause or matter.

            …”

“63A. Leave to appeal

(1) Leave to appeal granted under section 63 may be granted –

(a) in respect of a particular issue arising out of the judgment, order or decision; and

(b) subject to such conditions as the judge, the master or the Court of Appeal hearing the application for leave considers necessary in order to secure the just, expeditious and economical disposal of the appeal.

(2) Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.

            …”

“63B. Decision on leave to appeal final

No appeal lies from a decision of the Court of Appeal as to whether or not leave to appeal to it should be granted.”

13.  It is pertinent to note also section 14(3) of the High Court Ordinance, Cap 4, which reads:

“14. Appeals in civil matters

…

(3) No appeal shall lie –

(a) from an order of the Court of First Instance allowing an extension of time for appealing from a judgment or order;

                  …”

14.  I make these observations about the statutory provisions and the case law:

(1) We are concerned first and foremost with the decision to grant an extension of time to apply for leave to appeal.  If we are of the view that it was wrong for the judge to grant an extension of time, whether he was right to grant leave to appeal does not arise.  In that situation, we would not be concerned with the decision to grant leave to appeal or with any jurisdictional issue in appealing a decision of the District Court to grant leave to appeal.

(2) The wording in section 63(1) in Cap 336 is sufficiently wide to include a decision or order granting an extension of time to apply for leave to appeal as the subject matter of an appeal to the Court of Appeal.  As Lord Donaldson of Lymington, MR had said in Rickards v Rickards [1990] Fam 194 at 201E to F, “the grant or refusal of an application for leave to appeal is one thing.  The grant or refusal of an application to extend the time limited for taking a step in proceedings, including but not limited to giving notice of appeal, is quite another.”  He held that the latter was not “inherently unappealable”.

(3) Section 14(3)(a), which provides that no appeal shall lie to the Court of Appeal from an order allowing an extension of time for appealing, applies only to an order of the Court of First Instance.  There is no statutory provision prohibiting an appeal from an order of the District Court allowing an extension of time for appealing from a judgment or order of the District Court.  The words “of the Court of First Instance” are referred to specifically in each of the subsections in section 14(3) with the exception of subsection (3)(d), qualifying the order or judgment for which no appeal shall lie to the Court of Appeal.  Subsection (3)(d) refers to an order absolute for the dissolution or nullity of marriage.  As noted by Yuen JA in LCM v LYY [2003] 2 HKLRD 690 at §30, this is a pointer that in subsection (3)(d), all orders absolute wherever made are included.  Similarly, the inclusion of the words “of the Court of First Instance” in subsection (3)(a) is a clear pointer that there is no bar prohibiting an appeal from an order of the District Court allowing an extension of time for appealing.

(4) Section 63B of Cap 336, which was added to the legislation under the Civil Justice Reform, provides that no appeal lies from a decision of the Court of Appeal as to whether or not leave to appeal to it should be granted.  Section 63B has superseded the rule established by case law in Lane v Esdaile and HLF v MTC (Hong Kong Housing Society & Anr v Wong Nai Chung trading as Sun Chung Flower Shop, HCMP 880/2009, 22 September 2010, §§5 and 33).  There is no provision providing that no appeal lies from a decision of the District Court as to whether or not leave to appeal to the Court of Appeal should be granted.

(5) To the contrary, under section 63A of Cap 336 which was introduced as part of the Civil Justice Reform, it is expressly provided that leave to appeal from a judgment, decision or order of the District Court may be granted by the District Court or the Court of Appeal.  Obviously, a decision of the District Court refusing leave to appeal is not final, as an unsuccessful party may renew his application for leave to the Court of Appeal.  There is no reason to think that a decision of the District Court granting leave to appeal should be final.  But, as mentioned earlier, we may not be concerned with this if we should arrive at the conclusion that the judge was wrong in granting an extension of time to apply for leave to appeal.

15.  I rule that there is no jurisdictional bar to this appeal, which was brought with leave granted by the judge.

Test for granting extension of time for appealing

16.  The judge had cited to him the cases of Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd & Anr [2001] 1 HKC 125 and Chiu Sin Chung v Yu Yan Yan Angela [1993] 1 HKLR 225 for the approach to be adopted in an application to extend time for appealing.  In Hong Kong & Yaumati Ferry at 129I, Le Pichon JA had this to say regarding the merits of the appeal: “Where the delay is inexcusable, the party seeking an extension of time must show a real prospect of success on the merits.  See the Chiu Sin Chung’s case at 229 line 45.”

17.  This test regarding the merits of the case where the delay is inexcusable has been applied in quite a number of decisions of the Court of Appeal, including matrimonial cases, see, for instance, KNM v HTF, HCMP 288/2011, 7 September 2011, §§2, 19, 20; Law Bing Kee v Person(s) in occupation of RP & Anr, HCMP 672/2013, 9 May 2013, §§4, 16, 18, 35; Chow How Yeen Margaret & Anr v Wex Pharmaceuticals Inc & Anr, HCMP 1516, 5 September 2013, §§8, 15.  In those circumstances, the threshold for granting an extension of time is not simply the test of a reasonable prospect of success, but a real prospect of success on the merits.  To establish a real prospect of success, the applicant would need to demonstrate a strongly arguable case.

The judge’s approach

18.  The judge found there was nothing especially compelling in the husband’s reasons for delay in applying for leave to appeal.  The delay of 51 days, which was substantial, must sound heavily against the husband.  I agree with these assessments.  Hence, the correct threshold test, in considering the merits of the appeal for the exercise of his discretion whether to extend time, is a real prospect of success on the merits.

19.  It would appear from the ruling quoted above that the judge did not apply this test.  He only considered that the husband had reasonable prospects of success.  He stated clearly “had it been the husband only who had been seeking leave to appeal and as he was out of time, [he] would have refused him leave to extend time”.

20.  The judge had approached the husband’s application from the wrong end.  He should not have granted leave to appeal first and then to consider whether he should grant extension of time to make the application.  In the course of counsel’s submissions, he recognised that in taking that route, he had looked at the factors to be taken into account in granting extension of time from a “materially different perspective”[5].  Having held that the husband had reasonable prospect in granting him leave to appeal, it was still possible for the judge to hold that the merits of the husband’s appeal would satisfy the higher threshold for the purpose of granting an extension of time, but that was not his holding.

21.  The judge was in error in thinking that a lesser burden or looser approach could be adopted where there is an appeal afoot and the applicant was just seeking to cross-appeal.  See Mak Yuk King v The Personal Representatives of Wong Wah Wai, deceased, CACV 47/2013, 8 August 2013, §10.5.

22.  For all the above reasons, the judge fell into error when assessing the merits of the husband’s appeal in the course of exercising his discretion whether to extend time to the husband in which to seek leave to appeal.  It falls to this court to exercise the discretion afresh.  As we agree with the judge’s view of the husband’s excuses for the delay, the issue for us becomes, essentially, whether the husband’s proposed grounds of appeal would have a real prospect of success on the merits.

Proposed grounds of appeal

23.  In the draft Notice of Respondent’s Cross Appeal, the husband sought to vary the judgment in these respects: (1) the sum found by the judge to be the matrimonial assets be increased by adding the value of a house in Tokyo (“the Japanese property”) which the wife has inherited from her father; and (2) the matrimonial assets thus increased be divided equally between the parties and the periodical payments to the wife shall be for two years only from September 2013 to August 2015; or the matrimonial assets thus increased be divided on the basis of 55% to the wife and 45% to the husband, and there would be no order for periodical payments.

24.  It is not sufficient to say just because the judge’s order for ancillary relief entails a package of measures, there must then be a reasonable prospect of the husband being able to persuade the appeal court that the package was unduly generous to the wife and must be reduced or adjusted somehow.  It is incumbent on the husband to formulate specific grounds to back up his contention why the judgment was in error and should be altered in the manner as put forward in the draft notice.

25.  Three broad grounds of appeal were advanced in the draft notice.

26.  The first ground was that the judge had failed to apply the “yardstick of equality” in the division of matrimonial assets as discussed by the Court of Final Appeal in LKW v DD (2010) 13 HKCFAR 537 and had departed from the sharing principle without good reason by awarding 70% of the assets to the wife, given the findings that the wife had and would continue to have earning capacity, that she had a property of substantial value in Tokyo, and that the husband had and would continue to have to support his family which was and to date remains in India.  It was contended that if the case was assessed as a ‘needs case’, the result should be an equal division of assets as the judge should have found that the wife would have her needs met under an equal division of assets, which would have included the Japanese property.  Alternatively, if the case was assessed as a ‘surplus case’, the result should again be an equal division of assets.

27.  The judge had approached this as a ‘needs case’, given the manner in which the husband’s case was opened during the trial that it was the wife’s needs that stood to be satisfied[6].  Two sets of SJE Duxbury reports had been commissioned pursuant to the order of the court in respect of the necessary capital provision to be made to the wife.  It was only in the course of the trial and at the husband’s closing submission that he advanced the proposition there should be a 50/50 division of capital[7].

28.  The judge had found, on the evidence before him, that the joint assets were $16,816,463.33, that the husband’s assets were in the order of $4.25 million, and that the wife’s assets came to just over $6 million with her inherited house.  Excluding the Japanese property worth about $2.8 million, the total of joint and net assets each separately held was in the order of $14.5 to 14.7 million.  He considered the Duxbury calculation prepared by accountants on joint instructions and stated that this could not be a true Duxbury case where one is looking to find out from substantial capital what a wife would need to live out her years based on her generously assessed monthly requirements, as it was plain there was not a huge amount of capital here.  He noted the change of stance of the husband, who opened the case on the basis of proposals giving the wife over 80% of the capital, to the position that “all bets are off” and there should be a 50/50 split instead[8].

29.  The judge went on to consider the prognosis for the wife, the length of her working life, her pension provision, her monthly budget, and came to the view it was not possible to achieve a clean break.  He then considered the correct figure to be awarded by way of lump sum, having regard to the cost of re-housing the wife (assessed at $5 million) and the cost to equip a new flat (assessed at $400,000).  He decided to award the wife a lump sum of $9 million.  That meant she would have capital assets of $11.8 million, including the Japanese property.  The husband would have left $5.5 million.  The judge was of the view that the amount of capital provided to the wife would be more than sufficient for her to purchase and equip a flat for herself outright and to run a car, and would leave her with a nest egg to invest, but could not provide her with a sufficient income for her retirement[9].

30.  He then turned to periodical payments and ordered an amount of $33,000 per month for ten years, the purpose of which was to enable the wife to prepare for her retirement, whilst leaving the husband with capital and free income to start a new life and to provide for himself and his new family[10].

31.  He acknowledged it was a difficult balancing exercise, in which he had to give full consideration to the wife’s more vulnerable situation whilst at the same time permitting the husband to plan for his future[11].

32.  The judge’s decision on the lump sum award and periodical payments was reached as a matter of discretion based on his findings of fact.  The husband has not condescended to particulars in what way the findings of fact would be challenged for the appeal court to interfere with the exercise of discretion by the judge.  In fact, in the exchanges Mr Surman had with the judge at the hearing on 4 November 2013, counsel had indicated to the judge that he would not challenge the findings of fact but accept them for what they are and that his first ground of appeal was “a simple point of law” and “a crisp appeal”[12].

33.  I am unable to see things that way. In the absence of particulars of how the findings of fact may be challenged, I do not think the husband has begun to show a real prospect of success in contending that there would be a valid basis to interfere with the division of assets ordered by the judge and there should be a 50/50 division of capital on the facts as found by the judge.

34.  I turn to the second ground of appeal in the draft notice.  It was contended that the judge should have found the Japanese property to be a matrimonial asset, or even if it were not, it should have been taken fully into account as the importance of the source of the asset will diminish over time and he should have applied the yardstick of equality to its division.

35.  I agree with Mr Andrew Lynn, who appeared for the wife, that this issue is academic, as the judge had assessed the wife’s needs and found that they exceeded $11.8 million, which included the value of the Japanese property.  Besides, the contention that the Japanese property should be regarded as a matrimonial asset is weak.  The parties had only lived in it when it was still the home of the wife’s parents[13] as their first matrimonial home, for seven months.

36.  The third proposed ground of appeal relates to a contention that the judge had not taken “full account” of all sources of income of the wife, including her earned income and ‘unearned’ income including investment and pension.  Mr Surman was not challenging the findings of fact made by the judge.  What he was saying was that having found those facts, the judge should have given them additional weight when considering the division of assets[14].

37.  The judge had taken the wife’s pension into account[15].  The rate of investment return was assessed by the accountants in the Duxbury report which was considered by the judge.  What weight he should give to these matters in the overall assessment and balancing exercise is a matter within his discretion and not something the appeal court would lightly interfere with.  I do not think there is a real prospect of success on this ground either.

38.  In my view, none of the grounds of appeal advanced by the husband in the draft notice would have a real prospect of success.  The judge would appear to be of this view as well, because he said in his ruling had it been for the husband only who had been seeking leave to appeal, and as he was out of time, he would have refused leave to extend time.

39.  The judge only decided to grant an extension of time because the wife was given leave to appeal and he appeared to think that if the husband was not allowed to cross-appeal, the appeal court would not be able to explore the full breadth of the merits of his orders and would not have the full range of options available to it in adjudicating on the matter.  This is a wrong approach.

40.  The powers of the Court of Appeal in hearing an appeal are set out in section 13(4) of Cap 4 and section 64 of Cap 336. In the wife’s appeal, the husband may advance such arguments as appropriate to oppose her appeal.  If the appeal court should be of the view that any additional inference of fact should be drawn or any determination of fact should be reversed or varied or that the judge’s exercise of discretion was plainly wrong and outside the ambit of reasonable disagreement, it may set aside and vary the judge’s order.  If no leave is granted to the husband to cross-appeal out of time, all that it means is that he would not allowed to present the arguments in his draft Notice of Respondent’s Cross Appeal to contend that the judgment should be varied, which arguments are found not to have a real prospect of success.

41.  The judge should have refused an extension of time to the husband to apply for leave to appeal.  For the above reasons, I would allow the wife’s appeal against the judge’s decision on 8 November 2013.

Other matters

42.  Having arrived at the above conclusion, it is unnecessary to consider the three other grounds advanced by the wife: that the judge should have refused the husband leave to appeal irrespective of whether the threshold is real prospect of success or reasonable prospect of success; that the judge was wrong to find that the husband had been arranging to make lump sum payment between the date of the judgment on 31 July 2013 and the date of the husband’s summons on 18 October 2013; and that the judge was wrong not to have considered granting leave to appeal only on condition that the husband should pay in full the lump sum with interests and outstanding costs, whether to the wife or by making a payment into court. I do not propose to deal with any of these grounds.

43.  The same applies to the wife’s summons issued on 18 March 2014 for leave to adduce further evidence in this appeal relating to the husband’s use of joint funds and her allegations of non-disclosure by the husband.  The further evidence relates to the third and fourth grounds of appeal of the wife, which I do not find necessary to consider.

Costs

44.  We have heard arguments on costs.  I reject Mr Surman’s submission that in the event the wife’s appeal is allowed, this court should make no order as to costs.  I do not agree with him it is academic for the wife to bring this appeal, or that she could have raised her opposition that the husband should not be allowed to pursue his cross-appeal when her own appeal is heard in September 2014.  There is no reason why costs should not follow the event.  I would order the husband to pay the wife’s costs of this appeal, to be taxed on a party and party basis.

45.  For this appeal, the wife’s solicitors have placed before us one core bundle and 14 box files as additional appeal bundles.  I find this way over the top and most of the bundles are wholly unnecessary for the proper resolution of this appeal.  I would allow the wife only one quarter of the costs involved in the preparation of bundles for this appeal.

Hon McWalters J:

46.  I agree.

Hon Kwan JA:

47.  Accordingly, there will be an order in terms of paragraphs 41, 44 and 45 above.

[1] Transcript of 4 November 2013, p 66, lines L to Q

[2] Transcript of 8 November 2013, p. 4 line R to p. 5 line O

[3] Judgment on 31 July 2013, §§2 to 4

[4] Transcript of 8 November 2013, p. 7 line U to p. 8 line G

[5] Transcript of 4 November 2013, p. 94 line G

[6] Opening submission of the husband at the trial, §§12 and 14: “The Respondent knows that, at the end of a 12 year marriage, he must in law and as part of his moral obligation provide the Petitioner with financial support.” and “This is a needs case. The Petitioner needs to make provision for the future. The Respondent needs to provide for himself, his family and to see his child to adulthood. There is nothing left from the parties’ net assets, around HKD18.4 million, to be shared, after needs are catered for.”

[7] Closing submission of the husband at the trial, p. 15

[8] Judgment, §§14, 18, 19, 20, 29, 31

[9] Judgment, §§32, 33, 34 to 42

[10] Judgment, §§44, 45

[11] Judgment, §46

[12] Transcript of 4 November 2013, p. 50 lines A to K

[13] Transcript of 4 November 2013, p. 65 line O

[14] Transcript of 4 November 2013, p. 65 lines P to T

[15] Judgment, §§33 and 42