CWG v. MH AND OTHERS

HCMP643/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 643 OF 2012

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J U D G M E N T

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Introduction

1.  Before this court is the husband’s application for a stay of execution of my order of 26 March 2013 (“Order”) pending the result of his appeal in CACV 80 of 2013 (“Stay Application”).  R2 wants to be heard to support the Stay Application.

2.  I will adopt in this ruling the same abbreviations in my judgment handed down on 26 March 2013 (“Judgment”) and my Reasons referred to below.

3.  Prior to dealing with the husband’s Stay Application, there was a preliminary point raised by the wife on whether the husband and R2 should be heard at all. In relation to the husband, after hearing submissions from Ms Eu, Senior Counsel for the wife, and Mr Pilbrow, Senior Counsel for the husband, I formed the view that the husband was in contempt of the MPS Order and further the periodical payments part of the Order, namely paragraph 1 of the Order.  I then made an order following the principles set out in Hadkinson v Hadkinson[1] that the husband should not be heard on the Stay Application until the conditions laid down by this court have been met.  Since then, the husband had met those conditions.  The reasons for making the Hadkinson Order against the husband were set out in my Reasons handed down on 10 July 2013 (“Reasons”).  As mentioned in the Reasons, the application in relation to R2 was adjourned and this is the judgment on this application.

4.  The order sought against R2 was based on two grounds, firstly that she should not be heard at all as the Order was not made against her and she was not an interested party in the Stay Application, and secondly, a Hadkinson Order was sought against her on the ground that R2 had not complied with a disclosure order made on 10 August 2012 by Poon J against her (“Disclosure Order”).

5.  It is R2’s case that :

(i)   She has a right to be heard on the Stay Application being a party to the wife’s Part IIA Application, in that she has an interest in the outcome of the Stay Application;

(ii)   She had already complied with the Discovery Order and/or the wife had waived compliance of the same, and therefore R2 was not in contempt of any court order.

Whether R2 has the right to be heard

6.  Mr Li, Senior Counsel for R2, submitted that R2 had a legal interest in the Stay Application as she is a party to the proceedings, and that she is interested in the outcome as there is a legal dispute whether the Order should be enforced.

7.  Regarding the first part of his submissions, by way of analogy, Mr Li relied on those principles in relation to joinder of parties, and he had referred to Order 15 rule 6, which reads as follows:

“6 (1) No cause or matter shall be defeated by reason of the misjoinder or nonjoinder of any party; and the Court may in any cause or matter determine the issues or questions in dispute so far as they affect the rights and interests of the persons who are parties to the cause or matter.

(2) Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application-

(a) order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b) order any of the following persons to be added as a party, namely-

(i) any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, or

(ii)   any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.”

8.  In particular, Mr Li referred to the case of Man Whi Chung v Man Ping Nam[2] in which O 15 r (6)(2)(b)(i) was referred to as “limb (i)” and O 15 r (6)(2)(b)(ii) was referred to as “limb (ii)”.  It was held in that case that it was essential for an intending defendant to show that he was sufficiently interested in the proceedings to be joined as an additional party under limb (i) and that for the alternative basis under limb, (ii) the court had a wider jurisdiction to allow joinder.  There must exist as between the person seeking to intervene and any party to the cause or matter ‘a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter’ which, in the opinion of the court, ‘it would be just and convenient to determine as between him and that party, as well as between the parties to the cause or matter’[3].

9.  It was, however, pointed out in the Man Whi Chung case that a distinction should be drawn between an intervenor who had a legal interest in the subject matter of the litigation and one who merely had an indirect and commercial interest in the litigation.  On the other hand, the court may allow a person with a doubtful interest in the subject matter of the litigation to be joined so that the doubt over his interest could be resolved at trial, together with the relevant issues between the original parties.

10.  It was further held in that case that the fact that a case fell within either limb was by itself a strong reason for allowing the joinder, that the rules of natural justice required that a person who was ‘affected’ (in the sense of either limb), or was potentially affected, by a decision of the court be given a proper change to be heard, and multiplicity of proceedings should also be avoided[4].

11.  There were other cases referred to in the Man Whi Chung case, one of which was Yu Cho Wah v Ho Chi Kwong Michael[5] in which the court allowed the joinder application although the four daughters who applied to be joined had a doubtful interest in the subject matter of the litigation, on the basis that the doubt over their interest could be resolved at trial together with the relevant issues between the original parties[6].

12.  On the other hand, there was a case referred to in the Man case, Kwan Chi On v Hong Kong Baptist University[7] where the court did not allow joinder by an intervenor, a party in a pending probate action, in a discovery action commenced by the plaintiff, an opposing party in the probate action, for discovery of documents from the defendant university that could be used as evidence in the probate action.  The court held that the admissibility of the documents as evidence in the probate action could and should be fought in the pending probate action, not the discovery action which was not concerned with any such issue.

13.  R2 is no stranger in the present case.  She was joined in the wife’s main Part IIA Application, although much to her resistance at the time, and then subsequently she simply failed to attend trial for cross examination.  Throughout the proceedings, it was R2’s case that she was the sole beneficial owner of all the companies, in particular the Offshore Companies of which this court found that the husband held at least 50% beneficial interest.  R2 is now appealing against my findings in the Judgment.

14.  R2’s case was that she ought to be heard on the Stay Application because her interest could be affected by the outcome of the Stay Application.

15.  None of the terms in the Order are actually directed against R2 personally or any of the Offshore Companies, save the order nisi on costs, for which a hearing for argument is now fixed before this court on 22 August.  R2 had not sought a stay of the Order, and indeed there was nothing to be stayed so far as she was concerned.  She only wants to be heard to “support” the husband’s application.

16.  R2’s beneficial interest is not affected until such time as the wife seeks to enforce any order against the husband’s beneficial interest in the Offshore Companies or other companies as found by this Court.  As Mr Li has at pains been pointing out that those companies have not been joined, nor have they applied to intervene.

17.  So far as those Offshore Companies were concerned, it would seem any enforcement against the husband’s beneficial interest will have to be by way of fresh action in the respective offshore jurisdictions.  No doubt if and when that was to happen, R2’s interest could be said to be affected and she could intervene or be heard at that stage. Thus, Ms Eu submitted that it was premature or “jumping the gun” for R2 to be heard on the Stay Application.

18.  At present, the only enforcement proceeding taken out by the wife is by way of a judgment summons against the husband.

19.  Mr Li submitted that R2 should be heard on the Stay Application to avoid multiplicity of litigations, but it is quite clear to this court, whether R2 is allowed to be heard on the Stay Application, she will be contesting any enforcement proceedings which seek to ‘charge’ her claimed beneficial interest in the relevant companies.  Thus, whether R2 is allowed to be heard or not will not avoid multiplicity of litigations, and it will only lengthen the hearing of the Stay Application, which has already been delayed and adjourned twice to the first week of September.

20.  As pointed out by Ms Eu, if R2 wants to support the husband’s Stay Application, she could herself have filed an affirmation to do so, but R2 has chosen not to.  So far, there was only one affirmation filed by Ms Lo on R2’s behalf, but there seemed to be no objection for the husband to rely on that affirmation without the need for Ms Lo to re-file it on the husband’s behalf.

21.  Mr Li had argued that although the Order was not made against R2, R2’s interest would be affected if R1 were to take steps to realize the value from the shares of the Offshore Companies in order to satisfy the Order by seeking to have shares in the Offshore Companies to be allotted to him.  However, it is clear from the letters of legal advice produced by the husband he had received from lawyers respectively in relation to laws in BVI and Bahamas, that the husband would have to issue separate proceedings in BVI and Bahamas to seek a declaration from the courts in those respective jurisdiction as to his beneficial interest in the Offshore Companies, and if such action is based on the Judgment, the Judgment has to be “final and conclusive”.

22.  Further, all along it was the husband’s case that all his legal costs were funded by R2.  So long as R2 were to cease providing such funds, it would seem that the husband, on his own case, would not be able to fund any new actions in BVI and Bahamas.  It would therefore seem that R2’s own interests could be protected by not providing legal funding to the husband.

23.  In the Man case, it was the case of the applicant for joinder that he had reasonable grounds to believe that the defendant had not been defending the action ‘wholeheartedly’ and he therefore had to join in as a defendant to protect his own interest. The joinder application was opposed by both the plaintiff and the defendant, but the court allowed the joinder.

24.  There was no evidence so far to indicate that the husband would not proceed with the Stay Application ‘wholeheartedly’ since he did comply with the Conditions in the Hadkinson Order made against him on 4 July 2013.

25.  Mr Li also submitted that the wife could take steps to enforce against the purported assets of the husband including his 50% beneficial interest in the Offshore Companies.

26.  As mentioned earlier, the legal opinions produced by the husband himself seemed to indicate that any fresh action for enforcement and/declaration in BVI and Bahamas based on the Judgment would have to on the basis that the Judgment was “final and conclusive”. In reality, while R2’s appeal and the husband’s appeal are continuing, it seems unlikely that the wife will be able to take any steps to enforce against the husband’s beneficial interest in the Offshore Companies.

27.  Having considered all the circumstances, I have come to the view that there is no sufficient evidence that it is necessary for R2 to be heard on the Stay Application under Limb (i), or there exists a question or issue in the Stay Application which it would be just and convenient to determine between R2 and the husband or the wife under Limb (ii), if the principles of Order 15 rule 6 are to apply by way of analogy, and in any event, I see no other reason for R2 to be heard on the Stay Application.

Hadkinson Order

28.  In the event I am wrong on my above conclusion, I am also of the view that R2 should not be allowed to be heard on the Stay Application until she has complied in full with the order dated 10 August 2012 made by Poon J (“Discovery Order”).

29.  I have set out the legal principles in Hadkinson v Hadkinson[8] in the Reasons, and will not repeat them in the present Judgment.

30.  As set out in the Reasons, there were 6 questions framed by Ryder J (as he then was) in the 2004 judgment in Mubarak v Mubarak[9](“6 Questions”) and applying those to the present application, they are as follows:

(i)   Is R2 in contempt?

(ii)   Is there an impediment to the course of justice?

(iii)   Is there any other effective means of securing compliance with the court’s orders?

(iv)   Should the court exercise its discretion to impose jurisdictions having regard to the question?

(v)   Is the contempt wilful, ie is it contumacious and continuing?

(vi)   If so what conditions would be proportionate?

Is R2 in contempt?

31.  Ms Eu’s submission in this respect was that R2 was in breach of paragraphs 1 and 2 of the Discovery Order, in relation to items 6, 8, 9, 12(1)-(17) of Schedule 1 annexed to the Order (“Schedule 1”).

32.  Briefly, R2 was ordered to file an affirmation to:

•   provide answers to questions in Schedule 1,

•   state whether she has or had any time in her possession, custody or power the documents in Schedule 1, and if those documents were no longer in her possession, custody or power,

•   state when she parted with them and what became of them.

33.  The relevant items of documents in Schedule 1 which R2 was said to have not provided and/or not stated as above were:

•   Item 6 – in relation to assets/properties charged by AC Oversea (BVI), 5 Security Agreements;

•   Item 8 – in relation to 31 Cars, R2 was to provide (a) present value (b) the present whereabouts (c) if sold, the sale price and documents evidencing sale and (d) if still in R2’s possession, to provide title deeds;

•   Item 9 – in relation to 165 Timepieces, R2 was to provide (a), (b) (c) above, and (d) if still in R2’s possession, documents evidencing her possession;

•   Item 12 – in relation to the 3 Offshore Companies and MVI (Panama), and 13 Hong Kong companies, to provide (a) last 3 sets of audited and/or management accounts and unless provided (b) any power of attorney and (c) all board minutes/resolutions.

34.  R2’s affirmation filed purportedly to comply with the Disclosure Order was filed on 9 October 2012[10] (“2^nd Affirmation”), almost 2 months after the Disclosure Order.

35.  R2 said in the 2^nd Affirmation that she had entrusted Mr Seeger as her attorney and trustee to handle and manage all her assets and businesses.  In particular, so far as the Offshore Companies were concerned, she said as she had entrusted all her assets, investments and management of businesses to Mr Seeger and she did not have possession personally any of the information and documents required to be answered and produced under the Disclosure Order, and that she had contacted Mr Seeger for his assistance.  She then tried to explain why she was late in providing the information by saying that Mr Seeger was reluctant to provide any information and it was only upon her personal instruction that he eventually arranged for delivery of information and documents he had, and then Mr Seeger went on a business trip.  As for the Hong Kong companies, she said she had since long time ago entrusted Ms Lo to handle the same and that R2 did not have possession personally of the information and documents required under the Disclosure Order.

36.  As pointed out by Ms Eu, since it was R2’s case that she was the sole beneficial owner of all the relevant companies, to say that those documents were not in her personal possession would not be good enough, since they should be within her power and/or control to obtain and produce.

37.  R2 had produced a letter dated 4 October 2012 from Mr Seeger (“Mr Seeger’s Letter”)[11].  As for items 8 and 9, R2 said the Cars and Timepieces under items 8 and 9 were all sold through arrangement of Ms Seeger over the years and the proceeds were handled and managed as detailed in Mr Seeger’s Letter.  However, the details of the sale price and documents evidencing the sale had not been produced by Mr Seeger. 

38.  As for item 6, it was stated in Mr Seeger’s Letter that in 2003, AC Oversea (BVI) entered into a series of financial transactions to secure loan proceeds, and the “financier” required collateral, and AC Oversea (BVI) then offered as collateral “certain automobile and collectables” and the 5 Security Agreements were referred to.  According to Mr Seeger’s Letter, AC Oversea (BVI) then paid off the debts.  With the exception of one security agreement, AC Oversea (BVI) only filed its discharge for all the other security agreements as recent as 12 October 2011, although the specified date of discharge was claimed to be 15 October 2004.

39.  It was then stated in Mr Seeger’s Letter that no records had been located on the disposition of those assets of AC Oversea (BVI), as the archives due to the ‘Record Retention Policy’ of Mr Seeger’s firm being 5 years.

40.  As Ms Eu had pointed out, the filing of discharge was only as recent as October 2011, less than a year prior to the Discovery Order.

41.  As for the audited and/or management accounts of all the 17 companies listed under item 12 of the Schedule, none was produced by R2, or Mr Seeger, or Ms Lo.

42.  Further, in relation to item 12, it was stated in Mr Seeger’s Letter that with respect to the 3 Offshore Companies, AC Oversea (BVI), WS (BVI), SBI (Bahamas), none of these corporate clients had charged him or Seeger and Seeger with the duty of maintaining the financial books and records of these companies, and that over the past decade, the principal activity of these corporation had been to divest assets that were preponderantly acquired in the 1990s.

43.  Ms Eu had described R2 “kicking the ball” to Mr Seeger, in so far as the Offshore Companies were concerned, and Mr Seeger then said he and/or his firm was not responsible for maintaining the financial books and records of those Offshore Companies.  So far as the Hong Kong Companies, again, the ball seemed to be kicked to Ms Lo, but again no audited and/or management accounts were produced by Ms Lo.  At the end of such “ball-kicking” game, the Court was none the wiser and it was simply not possible for the wife to instruct any valuer to value those companies without such information.  The Court in the end made findings in the Judgment by drawing adverse inferences.

44.  Ms Eu had referred this court to the importance of disclosure in financial relief applications in matrimonial proceedings, and in particular what Lord Sumption said in the recent UK Supreme Court case of Prest v Petrodel Resources Limited and others[12] in that he had expressed surprise that the companies in that case were given leave to appeal on undemanding terms in that they were not required to purge their contempt in failing to disclose document or information[13].

45.  In my view, R2 was/is clearly in contempt of the Disclosure Order by not having complied with providing the information required under Items 6, 8, 9 and 12 of Schedule 1.

Was the contempt waived by the wife?

46.  Mr Li had submitted that if there had been any non-compliance or contempt of the Discovery Order by R2, such had been waived by the wife.

47.  At the commencement of the trial, R2 had made an application for leave for her to adduce 3 affirmations and a witness statement for use in the trial without attending the trial for cross-examination.  This was strongly opposed by the wife, and in the end, this court dismissed R2’s application and ordered that her witness statement and all R2’s affirmations to be excluded and could only be read at trial on condition that R2 attended court for cross-examination through video-link. This would include R2’s 2^nd Affirmation.  Reasons for my ruling were handed down on 16 October 2012.  As R2 failed to attend trial either in person or by way of video-link, none of her affirmations were read at trial.

48.  Mr Li had referred to the transcript of the exchange between this court and Mr Chow, Counsel acting for the wife at the trial.  In particular, Mr Li referred to this court’s question put to Mr Chow whether he wanted R2 to be arrested for contempt of court order, to which Mr Chow indicated no.  Having re-read the transcript, as Ms Eu pointed out, the question was put to Mr Chow by this court in relation to any ‘contempt’ of her not complying with this court’s order to attend trial for cross-examination, and this court was not referring to any ‘contempt’ of the Discovery Order.

49.  Mr Li seemed to be arguing that by not admitting R2’s affirmations and witness statement, R2 was prevented from complying with the Disclosure Order.

50.  I had pointed out during the present hearing that first of all, R2’s affirmations were not expunged from the court’s record.  Secondly, it was clear that R2 did not intend to attend the trial to be cross examined, notwithstanding any court order, and the issue was then whether her affirmations should be admitted or used as evidence under Order 38 rule 2(3) of RHC, and I ruled not.

51.  As submitted by Ms Eu, it is trite that any “waiver” must be clear and unequivocal and secondly, the other party (in this case R2) must have altered her position in reliance or at least acted on it.[14]

52.  Mr Li had further argued that during the trial the wife had not pursued the matter of R2’s non compliance nor had the wife renewed her application for compliance with the Disclosure Order.

53.  However, in the Mr Chow’s Closing Submissions for the trial, the continued non-disclosure of documents on the part of R2 had been referred to.  Further, in the Judgement, there was also reference to R2’s non-compliance with the Discovery Order.

54.  Having considered the above, I am of the view that there was no “waiver” on the part of the wife to R2’s non compliance, or her contempt, of the Discovery Order.

55.  Even if there was an alleged “waiver” by the wife, I accept Ms Eu’s submission that this should not usurp or bar the court from making such further or other orders to enforce its own previous orders in such manner as the court sees fit, and that the court can at its own discretion pursue enforcement[15].

Was there an impediment to justice?

56.  As said in the case of Prest, one important distinctive feature of financial relief claims in matrimonial proceedings is its inquisitorial element, and as Ms Eu had submitted, the failure of R2 to comply with the Disclosure Order had indeed handicapped this court in exercising its powers in making orders in relation to the wife’s claims.  In particular, as mentioned earlier, without R2 producing any audited and/or management accounts of the relevant companies, the wife was deprived of any means to value the husband’s beneficial interest in these companies and the real net worth of the husband.

Any other effective means of enforcement?

57.  There seems to be no other effective means of enforcement of the Discovery Order against R2 since committal proceedings against R2 who is in advanced age and ill health may not be appropriate.

Was the contempt wilful, contumacious and continuing?

58.  R2 had until the date of hearing of the present application not complied with the relevant parts of the Discovery Order.  Although the main trial was over, R2 is appealing and seeking a re-trial, and yet she has failed to comply with the Discovery Order.  I am of the view her contempt was and is wilful, contumacious and continuing.

Should the court exercise its discretion?

59.  There has been no appeal by R2 against the Discovery Order.  I am fully aware that Hadkinson orders are draconian measures, but in light of the circumstances of this case, I am of the view that R2 should not be heard on the Stay Application until she has complied in full with paragraph 1 and paragraph 2 of the Discovery Order, in providing the information and documents under items 6, 8, 9 and 12 of Schedule 1.

Costs

60.  In relation to the Hadkinson Order against the husband, as stated in the Reasons, I summarily assessed the wife’s costs to be HK$300,000.  That hearing took half a day.  The hearing of the application against R2 took most part of the day, but bearing in mind, it was an adjourned hearing, I would summarily assess the wife’s costs to be HK$200,000.  As between the husband and R2, there will be no order as to costs.  This is a costs order nisi, which will be made final after 14 days.  If no objection thereto, the costs of HK$200,000 shall be paid by R2 to the wife within 7 days thereafter.