WZR v. LWC

FCMP 208/2018

[2019] HKFC 281

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 208 OF 2018

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Decision
(set aside ex-parte leave to issue Part IIA proceedings)

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Introduction

1.  This is the Respondent/Husband’s (“R”) application by Summons dated 24 April 2019 to set aside the ex-parte leave granted to the Applicant/Wife (“A”) on 27 September 2018 to apply for financial relief against R under Part IIA of the Matrimonial Proceedings and

Property Ordinance, Cap 192 (“the Setting-aside Summons”).

2.  It is clear from the Reasons for Decision dated 3 October 2018 that the main reason for granting the said ex-parte leave is that A was unable to seek redress regarding family assets in Hong Kong because the PRC court did not deal with the properties in Hong Kong for lack of jurisdiction.

History of Proceedings

3.  Pursuant to the said ex-parte leave, A commenced her Part IIA  proceedings by Originating Summons dated 4 October 2018. At the directions hearing on 12 December 2018, R submitted that family assets in Hong Kong have in fact been dealt with by the PRC court and should not be re-litigated. R asked the Court to dismiss the Originating Summons.

4.  In light of the said issue in dispute, the Court withheld giving directions for financial disclosure and filing of Form E. As proposed by the parties, directions were given for the filing of evidence and fixing this one-day hearing for substantive argument of whether the family assets in Hong Kong have already been dealt with by the PRC court.

5.  Subsequent to the filing of affirmations as directed, R took out the Setting-aside Summons on the following grounds :-

A’s ex-parte leave application was riddled with material non-disclosure and misrepresentations. A misled the Court that the PRC court did not deal with the properties in Hong Kong for lack of jurisdiction. A abused the process of the Court by trying to re-litigate matters which had been dealt with, and/or by adopting a stance contrary to her previous admissions. The ex-parte leave ought to be set aside; no re-grant ought to be made if applied for; the Originating Summons ought to be dismissed.

6.  The said issue in dispute is now subsumed under the Setting-aside Summons. At this hearing, despite her complaint and allegation of procedural unfairness and delay, A conceded not to file further affirmation and agreed to have the Setting-aside Summons argued on the available evidence.

7.  At the beginning of this hearing, the Court has reminded R that unless he could deliver a knock-out blow, the Setting-aside Summons ought to be adjourned and heard together with the financial relief claim.

see : C vH (Foreign Decree; Part IIA) [2012] HKFLR 199 at 210 §38

“Although MCR does not expressly make any rules for a subsequent application to set aside the leave granted, the court no doubt has jurisdiction to do so as a fundamental rule of procedure. The experience in England suggests that too much time and costs had been wasted on the setting aside applications. Now after Agbaje v Agbaje ([2010] 1 AC 628), once leave is granted, absent a knock-out blow from the respondent, the court will use its case management powers to adjourn the application to be heard with the substantive application: per Lord Collins said at para 33. In my respectful view, this practice makes perfect sense and fully accords with the spirit of our CJR. It should apply in Hong Kong equally”.

8.  However, R is comforted that there is merits for a knock-out blow. He would make a genuine and serious attempt to knock A out by showing material non-disclosure and/or misrepresentations which have misled the Court in granting the ex-parte leave.

The Law on Part IIA and Setting Aside Ex-Parte Leave

9.  “Part IIA aims at remitting the presence of a failure in a foreign jurisdiction to afford appropriate financial relief”

see : C v H (supra) at 208H-I §35

10.  “Rule 103A(1) of the Matrimonial Causes Rules (MCR) lays down the procedure for the leave application. It must be made ex parte in the prescribed form. Further, the application must be: ‘(b) supported by an affidavit by the applicant stating the facts relied on in support of the application with particular reference to the matters set out in section 29AF of [MPPO].’”

See : C v H(supra) at 205G-I §24

11.  The law on the duty to make a full and frank disclosure in an ex- parte application is trite. HKCP 2019 §29/1/51 –

“On any ex-parte application, the applicant must proceed “with the highest good faith”.”.

12.AA v BB [2014] EWHC 4210 (Fam) esp. at §73-§83 :-

“There would be a compelling reason, if the materials previously before the court were so inaccurate or incomplete that the judge had granted permission when otherwise they would not have done ...... An applicant for permission to appeal made without notice is under a duty to make full and frank disclosure to the court, and where that duty is not discharged the applicant runs the risk that any permission granted may be set aside on the respondent’s application ......” [at §79];

“it is clear from the authorities, and the White Book, that there is a duty on an applicant for leave under Part III to make full and frank disclosure. It is an important obligation and it is clear that, when it has not been discharged, the court may set aside the grant of leave. This is in part to protect the court’s process from abuse” [at §83].

13.  In Obsession Hair and Day Spa Ltd v Hi-Lite Electrical Ltd [2011] EWCA Civ 1148 at §28, it was held that a failure to disclose material information by the applicant amounts to an abuse of the due process of the court, and the court, while observing a sense of proportion, may deprive him of the fruits of the advantage wrongfully obtained.

14.  “The disclosure of material facts is not to be confused with discovery and should be made in the affidavit, not in the exhibits which should only contain key documents”; further, “It is of course the duty of legal advisers and counsel to call the judge’s attention to everything that he must see if there is a mass of material” [HKCP 2019 §29/1/51]. Non-disclosure is not cured by pointing to passages hidden within exhibits. To comply with the high duty to provide full and frank disclosure, the party seeking leave was duty bound to point out to the Court all material matters.

Relevant Background Facts

15.  The parties married in 1993 in Guangzhou.

16.  In contemplation for a divorce, the parties by agreement dated 15 October 2007 reached an agreement on distribution of their family assets covering both PRC properties and their then 5 Hong Kong properties, namely

Flat H on 3^rd Floor of a residential building on Hoi Ting Road, Kowloon (“3H Unit”);

Flat B on 10^th Floor of a residential building on Nathan Road, Kowloon (“10B Unit”);

Flat E on 10^th Floor of a residential building on Nathan Road, Kowloon (“10E Unit”);

Flat B on 27^th Floor of a residential building on Hoi Ting Road, Kowloon (“27B Unit”); and

Office B on 13^th Floor of a commercial building on Nathan Road, Kowloon (“13B Unit”).

(“the 2007 Agreement”)

17.  Pursuant to the 2007 Agreement, A would beneficially own 3 properties namely 3H Unit, 10B Unit and 10E Unit while R was to have the other 2 properties namely 27B Unit and 13B Unit.

18.  The parties proceeded with their divorce in the PRC in October 2007, but reinstated their marriage in February 2008.  In November 2012, R filed for divorce in the PRC but it was withdrawn in December 2012. In 2013, A filed for divorce in the PRC and eventually a divorce was decreed.

19.  Despite the recurrence of divorce proceedings as aforesaid, the parties still regarded the 2007 Agreement as valid and binding. As requested by A, the PRC court has affirmed the 2007 Agreement.

20.  The issue in serious dispute is A’s allegation of R’s breach of an oral agreement made subsequently in 2011 (“the alleged 2011 Oral Agreement”).

21.  A’s assertions are as follows:

(a)  In around April 2011, the parties orally agreed to sell A’s 3 properties (3H Unit, 10B Unit and 10E Unit) and R’s 27B Unit, and to apply sale proceeds of the 4 properties to purchase a bigger apartment in Hong Kong at 九龍大角咀海泓道帝峰皇殿 (“帝峰皇殿 Unit”) as their matrimonial home.

(b)  She entered into the alleged 2011 Oral Agreement in reliance of R’s representation that the total value of A’s 3 properties was equivalent to that of R’s 27B Unit. Hence, using sale proceeds of the 4 properties to purchase the 帝峰皇殿 Unit would mean each party was contributing to half of the purchase.

(c)  he sale and purchase of the A’s 3 properties was handled by R; sale proceeds thereof were deposited into R’s bank account with the Bank of China in Hong Kong. With the said sale proceeds and a mortgage loan, 帝峰皇殿 Unit was purchased in the joint names of the parties on 15 April 2011.

When  帝峰皇殿 Unit was subsequently sold in March 2014, R wrongfully kept half of the net sale proceeds to himself although he has not contributed to the purchase.

(e)  R has applied family funds to purchase three other properties in Hong Kong under his sole name, namely a residential property at 九龍尖沙咀君臨天下in September 2014 (“君臨天下Unit”) and 2 properties at九龍將軍澳峻瀅in July 2012 (“the two 峻瀅Units”).

22.  R disputed the existence and breach of the alleged 2011 Oral Agreement. He said the parties by the 2007 Agreement have long reached agreement on the distribution of properties in Hong Kong. He asserted that

(a)  帝峰皇殿 Unit as well as a commercial premises at 九龍尖沙咀廣東道力寶太陽廣場 (“力寶太陽廣場Unit”) were purchased using the parties’ joint funds from their business. When they were subsequently sold, sale proceeds after deducting outstanding mortgage and necessary expenses, has already been shared equally between the parties. 

(b)  君臨天下Unit was purchased using funds from his half share of the said sale proceeds of 帝峰皇殿 Unit and力寶太陽廣場Unit.

(c)  The two 峻瀅Units were purchased with funds from the sale proceeds of 27B Unit of his own.

23.  By the Judgment dated 28 November 2016, the PRC first instance court among other matters adjudicated on financial reliefs (“the Judgment”). A was ordered to pay R the sum of RMB 26,034,552.37.

24.  A lodged an appeal to the PRC Intermediate Court against the said decision on financial reliefs. Pursuant to the mediation conducted by the PRC Intermediate Court, the parties entered into a settlement agreement dated 23 May 2017 to settle the appeal. Under the settlement agreement, R agreed to receive about RMB 4,500,000 less than what he was awarded under the Judgment (“the 2017 Settlement Agreement”).

Are there material non-disclosure and/or misrepresentations which have misled the Court in granting the ex-parte leave?

25.  It is necessary to refer to A’s affirmation in support of her ex-parte application. The following paragraphs are of particular relevance.

(a)  Under §19(4), while A acknowledged that the PRC court found that she failed to prove the alleged 2011 Oral Agreement, she deposed to the fact that the PRC court in fact did not deal with the disputes over 3H Unit, 10B Unit, 10E Unit and 27B Unit. A relied on what the PRC court had said at the first court hearing on 4 November 2013 that it had no jurisdiction to deal with foreign properties.

(b)  Under §34, A deposed that being advised by her PRC lawyer that the PRC Intermediate Court was inclined not to deal with foreign properties for lack of jurisdiction, she therefore resorted to mediation to only deal with properties in PRC.

(c)  Under §47, A again deposed that she has repeatedly asked the first instance court and the intermediate court to adjudicate on properties in Hong Kong; but was unable to seek any redress due to the lack of jurisdiction.

26.  On A’s alleged lack of jurisdiction, although the PRC court at the hearing on 4 November 2013 has denied jurisdiction to adjudicate on assets in Hong Kong, it could and in fact has affirmed parties’ agreement over foreign properties. As seen at page 6 of the Judgment, the PRC court has affirmed the 2007 Agreement as requested by A. Hence, insofar as 3H Unit, 10B Unit, 10E Unit and 27B Unit under the 2007 Agreement is concerned, the PRC court has dealt with properties in Hong Kong. This is undisputed.

27.  However, A’s concern is on matters which have moved on since the 2007 Agreement. She complained that the PRC court did not deal with the parties’ dispute over3H Unit, 10B Unit, 10E Unit and 27B Unit. Obviously it is the alleged 2011 Oral Agreement which A said the PRC court did not deal with.

28.  In ascertaining whether or not the PRC court has dealt with the alleged 2011 Oral Agreement, it is necessary to read page 31 of the Judgment where the PRC court was dealing with bank savings, item 16 of the parties’ matrimonial assets.

“ (十六) 銀行存款 : 1. 對於原告 [A] 在中國銀行存摺尾號為 8038 的賬戶中支取的 12827662 元的問題 : 原告主張被告 [R] 未按雙方的約定將出售 [27B Unit] 及 [廣州市天河區物業] 的收入投入公司, 故原告支取上述財產所對應的款項 12827662元應視為取得公司的投資分紅。被告對此予以否認。鑒於原、被告雙方在 [2007 Agreement] 中約定 [27B Unit] 歸被告個人所有, 原告並未提供證據證實雙方約定被告將該財產出售后所得款項投資入公司, 應由原告承擔舉證不能的法律後果, 本院對原告的主張不予採信...... 被告出售夫妻共同財產 [廣州市天河區物業] 所得價款應用於抵償被告應當分得的公司利潤, 經折抵, 原告還應補償被告 5763831元..... (emphasis added)

29.  Based on the above, it is plainly inaccurate to represent that the PRC court has no jurisdiction to deal with the alleged 2011 Oral Agreement. It should be noted that the alleged 2011 Oral Agreement did not concern disputes over properties in Hong Kong, but over the sale proceeds of the properties. The PRC court did not deny jurisdiction and in fact has dealt with it.

30.  A seeks to argue that since the PRC court was dealing with the disputes only in the context of considering W’s act of deducting from the dividend payment of a PRC company jointly owned with H, it has not actually dealt with the disputes over the alleged 2011 Oral Agreement. I rejected this argument; it is twisted reasoning and cannot bend the truth. It is clear from the Judgment that the said deduction represented A’s entitlement to the sale proceeds of 27B pursuant to the alleged 2011 Oral Agreement of which the PRC court found that she failed to prove.

31.  In rejecting A’s allegation relating to R’s breach of the alleged 2011 Oral Agreement, the words of the Judgment as cited above are plain and unambiguous. A’s representation that the PRC court did not deal with the alleged 2011 Oral Agreement is blatantly untrue. A’s alleged agreement of selling 27B was rejected by the PRC court because she failed to discharge her burden of proof. It is evident from the transcript for the hearing on 19 June 2014 that the PRC court has considered oral and documentary evidence before finding against A.  

32.  In A’s Notice of Appeal (民事上訴狀), she has appealed against this very point on the grounds that the first instance court has omitted to adjudicate on the alleged 2011 Oral Agreement, failed to properly examine or consider available evidence, and erred in the finding of facts. The relevant pages are as follows.

Page 3 :

“一審法院沒有查明 : 被上訴人 (R) 擅自處分屬於上訴人(A) 個人所有的三處香港房產, 沒有將出售房產所得財產收入共計 10550000港幣交給上訴人, 故一審法院漏判。”

Page 4 :

“上訴人在一審過程中已向法院提交了被上訴人擅自售賣前述三處房產並獲得售房款項的相關證據資料, 但一審法院未予理會, 未對被上訴人擅自售賣前述三處房產予以審查...”

Page 5 :

“同時, 上訴人通過多方搜集, 找到了前述轉賬中的部分銀行轉賬原始憑證.........前述材料均為一審在案證, 但一審法院對上訴人提交的......原始憑證置之不理。”

Page 6 :

“一審判決載明 ................., 完全忽略了上訴人提交的證據, 事實認定錯誤。”

33.  Various hearings were held upon A’s appeal. Contrary to what A represented, the PRC Intermediate Court did not refuse to deal with her appeal on the ground of the properties being in Hong Kong. It can be seen from the transcript of hearing on 23 May 2017 that in relation to A’s failure to come up to proof, the Intermediate Court readily conducted enquiry on whether A had applied to investigate the various bank accounts to find evidence of the alleged transfer out of funds by R. Further, A was actually given an opportunity to provide documentary evidence to prove that the first instance court had rejected her application to investigate the relevant accounts. It was A who, instead of coming up with the necessary evidence, subsequently agreed to mediation and eventually settled the appeal.

34.  A represented that the 2017 Settlement Agreement did not cover properties in Hong Kong; R denied. Although the scope and nature of the 2017 Settlement Agreement remain as matters in dispute, it is still not up to A to represent that the 2017 Settlement Agreement did not cover properties in Hong Kong because the PRC Intermediate Court had no jurisdiction to deal with them. This is grossly misleading.

35.  As discussed above, with R’ earnest efforts in analyzing and elaborating various court documents and records of the PRC proceedings, it transpires that A’s evidence as set out in paragraph 25 above do not accord with facts. It is not permissible to interpret documents out of context to suit her purpose, nor to quote a remark out of its context leaving out the main point. I find that there are misrepresentations; and it is obvious that the Court would not have granted the ex-parte leave had it been addressed on the truth. It is because the main reason for granting the leave is that the PRC court did not deal with the properties in Hong Kong for lack of jurisdiction.

36.  R also complained of material non-disclosure. Although A has disclosed and exhibited all relevant documents in her ex-parte application, she failed to unearth the whole truth by addressing the Court on material matters, e.g. she did not draw the Court’s attention to the fact that the Intermediate Court has actually given her an opportunity to provide documentary evidence on appeal.

Should the ex-parte leave be set aside?

37.  A resisted setting aside and stated a number of reasons why her Part IIA proceedings should be determined substantively by the Court with proper financial disclosure by R.

(1)  Factual dispute of the alleged 2011 Oral Agreement are seriously contested issues that need to be tried by the Court.

(2)  The application for financial relief involves other properties which are purchased with family funds, i.e. the 君臨天下Unit and the two 峻瀅 Units. They call for adjudication by this Court with the benefit of proper financial disclosure and viva voce evidence.

(3)  the scope and effect of the statements at hearings or in judgments of the PRC courts to the effect that W failed to come up to proof have to be properly canvassed by this Court with the benefit of expert evidence.

38.  However, the central issue of this hearing is neither on merits nor A’s right to a fair share of matrimonial assets. The focal point is on whether the Court was misled. When it is demonstrated that the Court was being misled by material non-disclosure and/or misrepresentations in granting the ex-parte leave, the Court has a serious duty to protect the court’s process from abuse. The question to ask is: Why should A not be deprived of the fruits of the advantage wrongfully obtained?

39.  Actually the parties during this hearing did endeavor to argue on the overall merits of the alleged 2011 Oral Agreement; but I do not think this is necessary for the purpose of the Setting-aside Summons.

40.  A submitted that R failed to deliver a knock-out blow. She argued that the fact it has taken a one-day hearing involving a prolonged argument with a minute and protracted examination of the documents and facts of the case has betrayed the misconception that this is a knock-out challenge to A’s case. I regard this a fair comment in the context of striking out to see whether a party really has a reasonable cause of action or defence; but it bears emphasis that this is not an application to challenge A’s case on merits. In throwing a punch to knock A out, it is necessary for R to identify all the material non-disclosure and/or misrepresentations which have misled the Court. This exercise justifiably took time. 

41.  A submitted that the Setting-aside Summons if not dismissed, should be adjourned to be heard together with the substantive claim. She relied on Abuchian v Khojah [2014] EWHC 3411 (Fam) where Mostyn J took heed of the Court of Appeal’s criticisms in Traversa v Freddi of his earlier decision and made the following observations in dismissing the husband’s application to set aside leave granted to the wife under the equivalent English provisions:

“12. In determining the issue before me I, of course, do not stray back into my previous mind-set as articulated in CF v IF, and I take as authoritative, without any question, what the Court of Appeal has said in Traversa v Freddi. The case to set aside can only succeed if, in the words of Thorpe LJ, the claim can be demonstrated to be plainly unmeritorious and where it is obvious that this applicant will fall at one or more of the fences that she has to surmount at trial.”

42.  A also referred to L v W (FCMP 178/2013; 4 June 2015) where Deputy District Judge A. Tse (as she then was) held that, in determining whether the respondents had put forward a knock-out blow, the only issue was whether the wife’s case was “bound to fail”. The same approach is now commended by A to this Court.

43.  In L v W, the respondents only relied on their substantive defence to establish that the subject property which was beneficially owned by the husband’s mother should not form any part of the matrimonial pot. It is against this disputed issue over ownership the Judge held that it is ultimately a question of evidence and credibility which can only be determined at trial. The parties were reminded to consider TL v ML procedures to have third party interest determined as a preliminary issue of the ancillary relief proceedings.

44.  Both Abuchian v Khojah and L v W are distinguishable. As repeatedly stressed,this is not an application to challenge A’s case on merits.

45.  A reminded this Court that setting aside ex-parte leave for Part IIA proceedings is unprecedented in our jurisdiction; there is no successful application ever before the Hong Kong Court. Without hesitation I am dismissive of this statement. If the Court is misled, it does not require a precedent in order to perform its serious duty of protecting the court’s process from abuse.

46.  As a matter of fact, A has rightly identified one decided authority of England of M v W [2014] EWHC 925 (Fam) where leave was set aside because the court was misled. I adopt the same approach and agree that the court being misled amount to clear and stark circumstances for setting aside leave. In the present case, I see no reason why A should not be deprived of the fruits of the advantage wrongfully obtained. The ex-parte leave ought to be set aside.

Any re-grant?

47.  A seeks a re-grant if leave is set aside. It is submitted that even A had made any alleged non-disclosure or misrepresentation at the ex-parte stage, this is a case where the Court would still have granted leave given the presence of substantial ground as prescribed by Section 29AC(2). I reject this argument because A’s application being premised on a misrepresented ground of “lack of jurisdiction” is in the first place flaw; the Court will not fit together the separate component parts of relevant facts in order to legitimize a grant of leave for her.

48.  Notwithstanding the aforesaid, A should not be completely estopped from grant of leave based on legitimate ground and with all relevant facts in support; in particular when it appears that A is taking issue on whether there was a concluded binding settlement agreement covering properties in Hong Kong.  As long as A can demonstrate substantial ground for the making of an application for an order for financial relief, the Court may still consider granting leave.   

Conclusion

49.  The ex-parte leave granted on 27 September 2018 be set aside. The Applicant do bear her own costs of the ex-parte application.

50.  The Originating Summons filed on 4 October 2018 be dismissed.

51.  There be a costs order nisi that the Applicant do forthwith pay

(1)  the Respondent’s costs of the Originating Summons including all reserved costs, to be taxed if not agreed; and

(2)  the Respondent’s costs of the Summons dated 24 April 2019, with certificate for two counsel, to be taxed if not agreed.

52.  The nisi order shall become absolute unless an application to vary is made within 14 days hereof.