LWFT v. NLC formerly known as YM

FCMC 8066/2021

[2025] HKFC 16

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 8066 OF 2021

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J U D G M E N T

(Master’s Appeal: Charging Order Absolute)

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1.  This is a hearing of the Petitioner Husband (“H”)’s appeal against the Charging Order Absolute (COA)  granted by Master Yeung of the Family Court on 13 November 2023 in respect of H’s two properties known as (i)  Unit 09 on 3^rd Floor, Yau Lee Centre, No. 45 Hoi Yuen Road, Kowloon; and (ii)  Unit 82 on 3^rd Floor, Yau Lee Centre, No.45 Hoi Yuen Road, Kowloon.

2.  On 1 December 2022, HH Judge Own granted an order on ancillary relief (“AR Order”)  based on the parties’ consent in which H was required to pay the Respondent Wife (“W”)  2 lump sums of (i)  RMB1,000,000 within 5 days of signing of the consent summons and (ii)  RMB1,100,000 within 5 days of decree absolute of divorce (“DA”), in addition to the sum of RMB1,000,000 that he had previously paid on 4 October 2021.  There was an additional term that should H be late in paying the last lump sum of RMB1,100,000, he was required to pay an extra RMB1,000,000 to W (“the penalty sum”). 

3.  It was W’s case that H was late in paying the last lump sum of RMB1,100,000 and therefore, W was entitled to be paid the penalty sum of RMB1,000,000.  She said that such penalty sum has become a judgment debt due from H, based on which she applied for a Charging Order against H’s 2 properties. Charging Order Nisi (“CON”)  was granted by Judge Own, which later came before Master Yeung on 13 November 2023, who granted a COA on the same day.

4.  H disputes that he owes a judgment debt and so he lodged the present appeal against the learned Master’s COA.  The main issue in this appeal is whether there was such a judgment debt of RMB1,000,000 due from H.

5.  After considering the parties’ submissions, I allow the appeal and make the following orders:

(1)  The CON and COA are to be discharged.

(2)  The registration of the CON and COA at the Land Registry are to be vacated forthwith.

6.  These are my reasons.

Master’s Appeal

7.  Appeal from decisions of a Master to a judge in chambers is as of right under s.63 (1A)  of the District Court Ordinance, Cap.336:

“63…

(1A)  Subject to subsection (1B), an appeal lies as of right to a judge in chambers from a judgment, order or decision of a master in any civil cause or matter.

…”

8.  When the appeal comes before the judge in chambers, it is to be dealt with by way of actual rehearing of the application and the judge treats the matter as though it came before him for the first time: Hong Kong Civil Procedure 2025 §58/1/2.

Background

9.  In order to put the following discussion in proper context, it may be necessary to recite the history of the case in some details.

10.  The parties were married in 2003, but separated in the year of 2019.  They had no children from this marriage.  On 12 August 2021, H issued a petition for divorce based on 2-year separation, which was not defended by W.

11.  For ancillary relief (“AR”), the parties signed a consent summons which was filed by H on 29 September 2021 (“1^st Consent Summons”)  with inter alia the following important terms:

(1)  H to pay HK$12,000 per month as W’s living expenses until DA being granted;

(2)  The jointly owned former matrimonial (“FMH”)  at Tseung Kwan O is to be sold within 3 months of DA at a price to be agreed;

(3)  After the deduction of all reasonable expenses, the parties will share the net proceeds of sale equally;

(4)  H to pay a lump sum of RMB2,100,000 to W, with RMB1,000,000 to be paid within 7 days of the 1^st Consent Summons being signed by W and returned to the solicitors for H; 

(5)  Upon receipt of the above RMB1,000,000, W agreed not to vary the terms of AR;

(6)  H shall pay the balance of RMB1,100,000 upon sale of the FMH; and

(7)  Upon completion of the above terms, both parties will abandon any kind of AR and maintenance applications.

12.  Pursuant to the 1^st Consent Summons, H paid the first lump sum of RMB 1,000,000 on 29 September 2021.

13.  The court has no power to grant lump sum orders until decree nisi of divorce (“DN”)  having been granted and no such order would take effect until DA: Section 25 (1)  (a)  and (b)  of Matrimonial Proceedings and Property Ordinance, Cap. 192 (“MPPO”).

14.  As DN was not yet granted (which was only granted on 5 July 2022), requisitions from the court were raised as the terms of the 1^st Consent Summons could not be made an order of the court.

15.  The parties then went on with another round of negotiation resulting in the 2^nd Consent Summons being signed (which was later turned into the AR Order on 1 December 2022)  with inter alia the following important preambles and terms:

(1)  W acknowledged that H had already paid RMB1,000,000 to her on 29 September 2021 (“the 1^st sum”)  (preamble 丙);

(2)  Within 5 days of the signing and filing of the 2^nd Consent Summons, H shall pay a second sum of RMB1,000,000  to W (“the 2^nd sum”), and within 5 days of the granting of DA, H shall pay the last sum of RMB1,100,000 to W (“the last sum”), failing which H shall pay an extra RMB1,000,000 to W, i.e. the penalty sum (paragraph 4 of the AR Order);

(3)  Upon the signing of the 2^nd Consent Summons and the payment of the second sum of RMB1,000,000, W agreed not to ask for any variation of the consent summons, failing which she shall return the RMB2,000,000 already paid by H within 5 days (paragraph 5 of the AR Order);

(4)  Upon the granting of DA and receipt of the last sum of RMB1,100,000 from H, W agreed not to ask for variation of the consent summons, failing which she shall return a total sum of RMB3,100,000 to H within 5 days (paragraph 6 of the AR Order);

(5)  Upon the signing of the 2^nd Consent Summons and the payment of the second sum of RMB1,000,000 by H, the parties shall use their best endeavours to put the FMH on the market for sale at a minimum price of HK$16,600,000 (paragraph 2 of the AR Order); and

(6)  Upon the sale of the FMH and after deduction of necessary outgoings, W will be paid 50% of the net sale proceeds (paragraph 3 of the AR Order).

16.  One would see that the terms of the 2^nd Consent Summons (later the AR Order)  were in fact similar to those of the 1^st Consent Summons except that H agreed to pay an extra RMB1,000,000, increasing his total payment to W from RMB2,100,000 to RMB3,100,000.  

17.  H did pay the second sum of RMB1,000,000 on 20 May 2022 pursuant to the 2^nd Consent Summons.  Therefore, by 20 May 2022 but before DN, H had already paid RMB2,000,000 leaving the last lump sum of RMB1,100,000 to be paid within 5 days of DA.

18.  DN was granted on 5 July 2022 with a 1^st Appointment being fixed to be heard before Judge Own on 1 September 2022.

19.  But on 11 August 2022, W reneged on her agreement and wrote to court saying that she would set aside the 2^nd Consent Summons filed on 18 May 2022.  As W tried to renege on the 2^nd Consent Summons, on 15 August 2022, H requested W to refund the RMB2,000,000 which was previously paid by him.  No refund was made by W in breach of paragraph 5 of the 2^nd Consent Summons.

20.  DA was granted on 22 August 2022.

21.  When the case came before Judge Own for 1^st Appointment on 1 September 2022 and upon clarification, W (with representation from her present solicitors)  changed her position and undertook not to set aside the 2^nd Consent Summons. The 1^st appointment was adjourned to 1 December 2022.

22.  H paid the last lump sum of RMB1,100,000 on 16-17 September 2022, after which the parties continued with their negotiation mainly to deal with the sale of the FMH.  At one stage, W even offered her 50% share in FMH to be sold to H at HK$8,185,000.  No agreement was reached during this round of negotiation. 

23.  The adjourned 1^st Appointment was heard by Judge Own on 1 December 2022.  As the parties failed to reach any further agreement on AR, they informed the court that the 2^nd Consent Summons was still valid.  Therefore, Judge Own made the AR Order based on the terms of the 2^nd Consent Summons. 

24.  It has to be noted that by reference to the terms of the 2^nd Consent Summons (which has now become the AR Order), H was required to pay the last lump sum of RMB1,100,000 within 5 days of DA (which was granted on 22 August 2022), failing which he was required to pay the penalty sum of RMB1,000,000.  So strictly speaking, H was 19 days late when he paid the last lump sum on 15-16 September 2022.  When Judge Own made the AR Order, there were doubts on whether H would automatically be in breach thereof.  W said H was in breach because he only paid on 15-16 September 2022, instead of 27 August 2022.  H said he was not because it was W who first breached the terms of the 2^nd Consent Summons (and thus the AR Order)  by trying to withdraw the 2^nd Consent Summons before DA.  Despite such divergence of views, the learned Judge still made the AR Order leaving the argument on whose was in breach, if any, to a later date when it comes to enforcement.

25.  W obviously maintained that it was H who was in breach and said she was entitled to the penalty sum of RMB1,000,000.  She viewed this as a judgment debt due from H and so she issued an application and obtained a CON on H’s 2 properties.  The CON was heard before Master Yeung on 13 November 2023 who turned it into a COA.

26.  H was not satisfied with the COA and lodged the present appeal.

Issues

27.  As stated in paragraph 4 above, the main issue in this appeal is whether there is a judgment debt of RMB1,000,000 due from H.  In considering this issue, the court has to determine whether H was in breach of paragraph 4 of the AR Order for being late (for 19 days)  in paying the last lump sum of RMB1,100,000.

H’s Submissions

28.  H was represented by Ms. Mathilda Kwong of counsel.

29.  Ms. Kwong submitted that the general approach in construing a contract which is in the form of a signed consent summons can be found in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, in which Lord Hoffman has helpfully summarised as follows:

“(1)  Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2)  The background was famously referred to by Lord Wilberforce as the “matrix of fact,” but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3)  The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4)  The meaning which a document (or any other utterance)  would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life)  to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] A.C.749 .

(5)  The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201:

“if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.””

(emphasised words being bolded by Ms. Kwong).

30.  Accordingly, the interpretation of the AR Order which was based on the 2^nd Consent Summons must be read in light of the circumstances giving rise to the AR Order. Ms. Kwong submitted that by construing all the circumstances, any reasonable man would conclude that there was no breach by H.  She also submitted that R did not come with clean hands and was dishonest by not providing full and frank disclosure before the court, including the special circumstances surrounding the arguments on whether H was liable to pay the penalty sum of RMB1,000,000.

My views

Full and Frank Disclosure

31.  There can be no dispute that in an ex-parte application for CON, the applicant (i.e. W in the present case)  has a duty to give the court full and frank disclosure of all relevant facts, including the parties’ dispute on whether W was entitled to the penalty sum of RMB1,000,000 under paragraph 4 of the AR Order.

32.  It is true to say that in W’s application for CON, no reference to the disagreement on who was in breach was made in the supporting affirmation.  However, it has to be noted that such application was made before Judge Own who was fully aware of the parties’ disagreement, but still granted the CON.  Therefore, I am not convinced that the court was being misled into granting the CON.

Was H in breach of paragraph 4 of the AR Order?

33.  If one considers paragraph 4 of the AR Order in isolation, arguably H was in breach because he only paid the last sum of RMB1,100,000 on 15-16 September 2022, instead of before 27 August 2022.  However, I accept Ms. Kwong’s submission that one has to construe the AR Order as a whole, and by reference to the context in which it was made, to ascertain whether there was such a breach.

34.  It is important to note that in paragraph 5 of the AR Order, W agreed not to vary the 2^nd Consent Summons after her receipt of the 2^nd sum of RMB1,000,000, failing which she has to repay the RMB2,000,000 previously paid by H. 

35.  There was no dispute that W’s present solicitors did write to the court on 11 August 2022 (A/227)  to withdraw her consent to the 2^nd Consent Summons, saying that their client entered into the 2^nd Consent Summons without proper legal representation.  They also wrote to the solicitors for H on the same date enclosing a draft consent summons for the withdrawal of the 2^nd Consent Summons.  By these conducts, it was abundantly clear that W wanted not only to vary the contents of the 2^nd Consent Summons, but to withdraw from the whole agreement altogether.

36.  In my view, R’s attempt to renege on the 2^nd Consent Summons was a clear breach of paragraph 5 of the 2^nd Consent Summons, and thus paragraph 5 of the AR Order. Under such circumstances, H was perfectly entitled to exercise his right to claim back the RMB 2,000,000 he had previously paid.  That was exactly what he did by his solicitors’ letter dated 15 August 2022, but was ignored by W.

37.  It is noted that on 27 August 2022 (i.e. the last day on which H was supposed to pay the last sum of RMB1,100,000), W’s position was still that she would withdraw from the 2^nd Consent Summons in breach of paragraph 5 thereof (she only agreed not to withdraw on 1 September 2022).  It would be totally unreasonable to expect H to comply with the payment on 27 August 2022.  Any reasonable observer, with full knowledge of this background, would come to the view that H was no longer bound by such term of payment on 27 August 2022.

38.  When the 1^st Appointment came before Judge Own on 1 September 2022, W initially still insisted to withdraw the 2^nd Consent Summons and even proposed to return the RMB2,000,000 within 7 days.  But after further consideration, she changed her mind and agreed not to withdraw and signed a note to that effect.  One would have thought that the settlement could now be concluded. But presumably due to the lapse of time, Judge Own raised concerns mainly on whether the agreement terms for the sale of FMH (e.g. timing and sale price, etc.)  were still feasible.  There was also concern on whether the payment of the penalty sum of RMB1,000,000 was a penalty clause and the learned Judge expressed his view that such a clause might not be necessary.  According to the transcripts, Judge Own said:

「官: 係喇，咁換句話講呢個都唔需要喇，因為我其中一個原因 (for not approving the 2^nd Consent Summons previously)  ，就係會唔會係一個 penalty [clause] 呀。(B/424 at I)

…

…

…

官:  係喇，所以呢個唔需要，okay，fair enough，搞掂得喇。(B/424 at L)」

39.  It is important to note that both parties raised no objection to the above (i.e. Judge Own’s view that such penalty clause was not necessary)  but they would need further time to re-draft the consent summons.  Therefore, Judge Own adjourned the 1^st Appointment to 1 December 2022, giving directions that if the parties could finalise the new consent summons before that date, the adjourned 1^st Appointment could be vacated by consent.

40.  In my view, on 1 September 2022, the date for payment of the last sum of RMB1,100,000 by H has already passed and could not be complied with. It would only be reasonable to infer that the parties no longer insisted on the payment date and by their conduct, they must have varied the deadline of 27 August 2022.  A reasonable person after knowing the full background of the case, including the prior breach of paragraph 5 of the 2^nd Consent Summons by W and the parties’ conduct during the 1^st Appointment hearing on 1 September 2022, would assume that the last sum of RMB1,100,000 needs not be paid on 27 August 2022.  In its place, a reasonable time must be given for H to make such payment.   

41.  H paid the last sum of RMB1,100,000 on 2 different days, i.e. on 15 and 16 September 2022, which was about 2 weeks after the hearing on 1 September 2022.  In my view, such payments were made within a reasonable period of time and therefore I am not convinced that H was in breach of the term on payment of the last sum of RMB1,100,000.

42.  After 1 September 2022, the parties continued with their negotiation mainly on the terms of the sale of FMH.  Regrettably, W resurrected her claim for the penalty sum of RMB1,000,000, and no new consent summons was signed.

43.  The adjourned 1^st Appointment came before Judge Own again on 1 December 2022.  Both parties submitted that they would abide by the 2^nd Consent Summons and asked it to be turned into a court order.  However, they had quite different views on whether H was in breach of paragraph 4 of the 2^nd Consent Summons.  W said H was in breach and so she was entitled to the penalty sum of RMB1,000,000.  H said he was not because it was W who breached first in trying to withdraw the 2^nd Consent Summons, making the deadline of 27 August impossible to be complied with.  Despite all these arguments, Judge Own still turned the 2^nd Consent Summons into the AR Order, warning the parties that they might have to continue with the litigation when it comes to implementation of the AR Order.

Submissions on behalf of W

44.  W was represented by Ms. Annie Bu of counsel, who first argued that R was not in breach of paragraph 5 of the 2^nd Consent Summons (and later the AR Order)  because she had never taken out any summons to withdraw the 2^nd Consent Summons. She said without any formal application by W to revoke or vary, it is difficult for H to argue repudiation.

45.  I am of the firm view that there is no merit in this submission at all.  The conduct of W, through her present solicitors before the 1^st Appointment on 1 September 2022, evinced a clear intention to withdraw her consent in the 2^nd Consent Summons.  I have no doubt that such conduct was in breach of paragraph 5 of the 2^nd Consent Summons.

46.  Ms. Bu further submitted that the wordings of paragraph 4 of the 2^nd Consent Summons was very clear, i.e. H was required to pay the last sum of RMB1,100,000 by 27 August 2022 (i.e. within 5 days within DA).  As H confirmed the 2^nd Consent Summons on 1 December 2022 with full knowledge that W would hold him liable to pay the penalty sum of RMB1,000,000, he should be bound by such term and so the Master was right in holding that a judgment debt of RMB1,000,000 was due from H and proceeded to grant the COA.

47.  In my view, Ms. Bu’s submission fails to address an important issue and that is how H was able to comply with the AR Order which only became effective when Judge Own granted it on 1 December 2022.  By that time, the original deadline of 27 August 2022 had already been passed for over 3 months.  The last sum of RMB1,100,000 had also been paid by H for more than 2 months.  Ms. Bu seems to suggest that the terms of the AR Order, albeit only being effective on 1 December 2022, had retrospective effects and so H was in breach of paragraph 4 immediately upon it being granted by the court. 

48.  I am afraid Ms. Bu’s submission is fundamentally flawed in that if H was in breach of paragraph 4, W was equally in breach of paragraph 5 which even preceded H’s breach.  Arguably, W was required to pay back RMB2,000,000 to H by reference to paragraphs 5 of the AR Order.  This would create an absurd situation in which whilst H owed W a judgment debt of RMB1,000,000 (being the penalty sum)  but at the same time, W also owed H a judgment debt of RMB2,000,000 (for trying to cancel the 2^nd Consent Summons).  This cannot be the case and reinforces my conclusion that the payment term on 27 August 2022 must have been varied by the parties’ conduct or being overtaken by subsequent events.

Conclusions and Orders

49.  By way of summary, I am satisfied that:

(1)  The deadline for payment of the last sum of RMB1,100,000 by H on or before 27 August 2022 had been varied by the parties’ conduct or being overtaken by subsequent events.

(2)  H was only required to pay the last sum of RMB1,100,000 within a reasonable period of time after the 2^nd Consent Summons was confirmed on 1 September 2022.

(3)  H did pay the last sum of RMB1,100,000 within a reasonable period of time, namely on 15-16 September 2022.

(4)  H was not in breach of paragraph 4 of the AR Order and therefore not liable to pay the penalty sum of RMB1,000,000.

(5)  There is no judgment debt of RMB1,000,000 due from H.

50.  Based on the above rulings, I order that:

(1)  The CON and COA are to be discharged.

(2)  The registration of the CON and COA at the Land Registry are to be vacated forthwith.

Costs

51.  Costs to follow event. H succeeded in appealing against the CON and COA and should be given the costs of the CON and COA, including this appeal and all costs previously reserved, if any, with certificate for counsel and to be summarily assessed on paper.  I hereby direct H to lodge and serve a 1-page statement of costs within 14 days and W to lodge and serve a 1-page objections, if any, within 14 days thereafter for the court’s summary assessment.

52.  Last but not least, I thank counsel for their assistance.