PLTO v. KLK AND ANOTHER

CACV 157/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 157 OF 2012

(ON APPEAL FROM HCMC NO 2 OF 2010)

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REASONS FOR JUDGMENT

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Hon. Yuen JA:

1.  At the conclusion of the hearing on 18 June 2013, we refused to grant leave to the Appellant to appeal out of time against the Ruling of Deputy Judge Carlson given on 29 June 2012 and ordered the Appellant to pay the costs of the 1^st and 2^nd Respondents, with the costs of 2^nd Respondent to be on an indemnity basis. My reasons appear below.

2.  For convenience, I shall refer to the Appellant as “the Wife”, the 1^st Respondent as “the Husband” and the 2^nd Respondent as “the Trustee”.

Background

3.  Very briefly, the background of the matter is as follow.

4.  In HCMC2/2010, the Husband petitioned for divorce from the Wife.  He had a very successful business, with the bulk of the shares of the holding company (“the company”) being vested in a Jersey discretionary trust (“the trust”).  The Trustee was subsequently joined as a party.

5.  The application for ancillary relief was heard before Deputy Judge Carlson in October and December 2011. 

Deputy Judge Carlson’s ancillary relief order

6.  On 10 February 2012, the learned judge gave judgment.  He ordered, amongst other things, that a lump sum of $370m be paid by the Husband to the Wife in 7 instalments ending in 2018. 

7.  At issue is para. 1(2)(a) of the order: that the first instalment of $250m (“the sum”) be paid by the Husband to the Wife within 3 months, ie by 10 May 2012.   

8.  The judge was aware that the Husband did not have the sum in cash and it was expected that payment would be effected in the following way: the company would declare a dividend in the sum in favour of the Trust, the Trustee was “judiciously encouraged” to distribute it to the Husband and he would then pay it to the Wife.  In fact $262m was made available by the company to the Trustee on 30 April 2012. 

9.  However, the Trustee took the view that an application to the Jersey Court was necessary before it could make the distribution.  Unfortunately a hearing date in that court was not available until August 2012.

Husband’s summons for extension of time (“the time summons”)

10.  On 3 May 2012, the Husband issued a summons for an order that the time for compliance with para. 1(2)(a) of Deputy Judge Carlson’s order be extended for 4 months (“the time summons”)

11.  On 9 May 2012, there was a hearing before Deputy Judge Carlson.  The solicitors for the Trustee suggested that it was “looking at ways to get the money paid out much earlier by advancing the husband a soft loan and getting the Jersey court’s sanction at the hearing in August”.  Consequently the learned judge adjourned the summons “in anticipation that the payment out could be resolved quickly” (Deputy Judge Carlson’s Ruling 29.6.2012, paras. 11-2).   

12.  In the event, the sum was paid to the Wife on 30 May 2012.

Husband’s summons regarding interest (“the interest summons”)

13.  The Wife demanded interest on the sum for the 20 days between 10 May and 30 May.  On 15 June 2012 the Husband took out a summons under s.28AA of the Matrimonial Proceedings and Property Ordinance Cap. 192 (“MPPO”) for an order that he need not pay interest  (“the interest summons”).  This was also set down before Deputy Judge Carlson.

Deputy Judge Carlson’s extension of time order

14.  The learned judge heard both summonses together and on 29 June 2012 handed down his ruling.  In respect of the time summons,

-  the learned judge observed that in the order he made for ancillary relief, he had given the parties liberty to apply as he had envisaged that “there might be some difficulty or delay” (para. 20),

-  he was satisfied that the Husband was “ready and willing to comply with the judgment as soon as he could” (para. 6),

-  “[the Husband] was at all times genuinely motivated in paying the wife whatever it was that the court would order him to do for her by way of a lump sum payment” (para. 20),

-  “in all the circumstances the 20-day delay is perfectly understandable and in order” (para. 20) and that

-  “on the merits the husband is entitled to some formal recognition from this court that he should have had time to comply in the circumstances that confronted him” (para. 18). 

The learned judge therefore extended time for compliance with para. 1(2)(a) to 30 May 2012 (“the extension of time order”).   

Deputy Judge Carlson’s no interest order

15.  The interest summons was issued before Deputy Judge Carlson had decided whether to extend time under the time summons. 

16.  The interest summons was based on s.28AA MPPO, which provides:

“28AA. Interest on arrears of maintenance

(1) In this section and section 28AB –

‘commencement date’ means the date on which the Interest and Surcharge on Arrears of Maintenance Ordinance 2003 (18 of 2003) comes into operation [1 May 2005];

‘judgment creditor’ means a person entitled to enforce a maintenance order;

‘judgment debtor’ means a person liable under a maintenance order.

(2) Where a maintenance order has been made against a judgment debtor, and the judgment debtor fails to make full and punctual payment in compliance with the maintenance order, the judgment creditor is entitled to interest in respect of the arrears of maintenance which accrue on of after the commencement date.

(3) Subject to subsection (5) and for the purposes of subsection (2) --

(a) the arrears in respect of each periodical payment, secured periodical payment or payment of a lump sum, as the case may be, under a maintenance order shall be treated as a judgment debt for the purposes of section 50 of the District Court Ordinance (Cap.336);

(b) the interest under subsection (2) shall be calculated in accordance with that section 50; and

(c) for the purposes of that section 50, the date on which payment is due as specified by the maintenance order shall be treated as the date of judgment.

(4) The judgment debtor is liable to pay the interest under subsection (2).

(5) If the court grants leave, on the application of a judgment creditor for leave under section 12, to enforce arrears of maintenance which became due for more than 12 months, the interest under subsection (2) shall be calculated from the date specified by the court as being the date on which the judgment creditor is entitled to enforce the payment of the arrears.

(6) If any payment under a maintenance order is not paid and interest in respect of the arrears has accrued under subsection (2), and subsequently the judgment debtor makes payment, the payment is deemed to be made in the following order in or towards the discharge of –

(a) interest accrued under subsection (2);

(b) surcharge payable under section 28AB;

(c) if there are any proceedings instituted for enforcing the maintenance order, the costs ordered by the court to be paid under those proceedings;

(d) any sums from time to time falling due under the maintenance order, with the sums discharged in the reversed chronological sequence of the dates on which payment is due (that is, the most recent arrears will be discharged first);

(e) if the court makes an order in any proceedings instituted for enforcing the maintenance order, the amount of the maintenance in arrears, whether in one amount or by instalments, payable by the judgment debtor under the order.

(7) A judgment debtor who considers that he has reasonable grounds not to pay the interest under subsection (2) may, within a reasonable time after having knowledge of the requirement to pay, apply by summons to the court not to pay the interest, and shall set out the grounds in the application.

(8) If an application is made under subsection (7), in deciding whether to require the judgment debtor to pay interest and, if so, the amount of interest, the court shall take into account all the circumstances of the case, including (but not limited to) the following --

(a) whether the judgment debtor has a reasonable excuse for his failure to comply with the maintenance order;

(b) whether the judgment debtor has evaded service of court documents;

(c) the judgment debtor’s past record and conduct in connection with the making of maintenance payments to the judgment creditor pursuant to the maintenance order or an undertaking in any proceedings;

(d) whether the judgment debtor has given the judgment creditor a reasonable explanation for his failure to comply with the maintenance order; and

(e) the judgment debtor’s ability to pay.

(9) A judgment debtor who is aggrieved by a requirement under subsection (8) to pay interest may appeal to the Court of Appeal against the decision under section 63 of the District Court Ordinance (Cap.336)”.

(Emphasis added).

17.  The italicized passages above show clearly that: 

(a)  the liability to pay interest under subsection (2) and

(b)  the facility for a judgment debtor to apply for exemption from paying interest under subsection (7)

are predicated upon a “failure” to comply with a maintenance order.  It must follow that when the learned judge granted an extension of time to 30 May 2012 for compliance with the order, payment made on that day was due and proper compliance.  There being no failure to comply, section 28AA simply would not be engaged.  That must be the logical consequence of the extension of time order, whatever may have been the parties’ understanding of the position.  H v H [2006] 1 FLR 327 does not assist the Wife at all, because in that case there was no court order for extension of time of payment beyond 5 May 2005.   

18.  Nevertheless the learned judge considered the arguments on the interest summons independently of the time summons.  He was in any event “overwhelmingly satisfied that the husband has demonstrated a reasonable excuse for late payment for the reasons ... previously discussed” (para.28).  Accordingly he ordered that the Husband need not pay interest (“the no interest order”).  

Notice of appeal from the extension of time and “no interest” orders

19.  On 12 July 2012 the Wife filed a notice of appeal (CACV157/2012) from the learned judge’s extension of time and “no interest” orders.

Appeal from the ancillary relief order

20.  In fact, a few months earlier on 8 March 2012, the Wife had filed a notice of appeal against the learned judge’s ancillary relief order made on 10 February 2012.  That appeal (CACV48/2012) was set down to be heard on 13-14 December 2012. 

21.  No reason has been given by the Wife (who had the carriage of both appeals) why the two appeals were not set down to be heard by the same court at the same time.   

22.  On 25 March 2013, a different division of this court (Cheung and Fok JJA and Macrae J) handed down judgment in the ancillary relief appeal.  It held that the Wife should be entitled to a lump sum of $510.4m (the $370m ordered by the judge plus an additional $140.4m) (para. 79):

“to be paid as follows:

1) $250 million within one month;

2) $130 million on or before 1 March 2014; and

3) the balance of $130.4 million on or before 1 March 2015.”

In other words, the court set aside the learned judge’s order and substituted it with its own as set out above.  The court ordered the sum of $250m to be paid within one month of its order (25 April 2013) even though it was aware that the sum had already been paid.  In respect of interest, the court held (para. 80):     

“The wife asked for interest to be paid on the instalment payments. I will not order interest in view of the shorter time frame of the payment and the fact that the Husband carries the risk of the business which generates the lump sum payment.”

I shall return to this order later.

Discussion

- Failure to obtain leave to appeal

23.  Coming back to this appeal, at the outset the court noted that leave had not been obtained. 

24.  Mr Lynn counsel for the Wife accepted that the extension of time order was an interlocutory order and therefore leave to appeal was required.  However he sought to argue that the appeal from the “no interest” order did not require leave. 

25.  First, it would appear to me, for the reasons set out in para. 17 above, that the extension of time order and the “no interest” order were inextricably joined and it would be artificial to attempt to sever them. 

26.  That should really be the end of the matter but even if the appeal from the “no interest” order could be regarded as a stand-alone appeal, independent of the appeal from the extension of time order, I take the view that leave would still be required. 

26.1 Section 28AA(9) MPPO provides that a judgment debtor who is aggrieved by a requirement under subsection (8) to pay interest may appeal to the Court of Appeal against the decision under section 63 of the District Court Ordinance (which stipulates that leave is required). 

26.2 It would appear that this provision contains two anomalies.  First, it stipulates the procedure for appeal under s.63 of the District Court Ordinance, even though MPPO proceedings may be carried on in the High Court as well as in the District Court: see the definition of “court” in s.2 MPPO.  (However even if the matter were to stay in the High Court, leave would still be required for an appeal).

26.3 Secondly, there is only provision for a judgment debtor to appeal, but no provision for a judgment creditor to appeal. 

26.4 The Legislative Council paper in the Wife’s list of authorities does not address this omission.  But even if we were to assume (without deciding) that a judgment creditor may also appeal, there is no reason for the legislature to have intended that a different procedure would apply, depending on whether the judge’s decision had gone one way or the other.

27.  Accordingly we took the view that leave was required, and no leave having been obtained, the appeal was incompetent.

- Leave out of time not given

28.  An application was then made orally on behalf of the Wife for leave to appeal out of time.

29.  Quite apart from the fact that the application should have been made to the judge first, no grounds have been proffered for the substantial delay (of nearly a year) in making the application.  Further, no reasons have been proffered as to why the matter was not set down before the same division that dealt with CACV48/2012.  

30.  Moreover, I take the view that in any event there are no merits in the intended appeal.  It is clear from the Court of Appeal’s order on 25 March 2013 that the learned judge’s order had been set aside and replaced by its order.  The appellate court was aware that the sum of $250m had in fact been paid, and interest on instalments had been the subject of arguments before the court.  By ordering the sum of $250m to be paid within one month of its order and all other instalments totalling $260.4m to be paid within an accelerated period of 23 months (ending 3 years earlier than under the learned judge’s order), expressly with no interest, it is clear beyond peradventure that the court intended that there should be no question of ante-dating and that it intended to preclude any arguments for interest for the period prior to its order.  This intention is consistent with the practice of the court set out in Hong Kong Civil Procedure 2013 Vol. 1 para. 42/3/2:

“Where a judgment is set aside by the Court of Appeal and another judgment ordered to be entered in its place, the practice is to date the second judgment as of the date of the order the Court of Appeal, and interest upon the debt or damages to be recovered runs from that date unless the Court of Appeal should make an order under this rule, antedating its judgment.”

31.  The Court of Appeal’s order having superceded Deputy Judge Carlson’s order, any arguments over the latter would be entirely academic.  There are therefore no merits in the appeal.

Order

32.  Leave to appeal out of time was accordingly refused with costs to be paid by the Wife to the Husband and the Trustee, the latter’s costs to be on an indemnity basis.

Hon. Chu JA:

33.  I agree and have nothing to add.

Hon. Lam JA:

34.  I agree and have nothing to add.