MKKWH (also known as MKGWH) v. RKSH

CACV 271 /2015

[2018] HKCA 395

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 271 OF 2015

(ON APPEAL FROM HCMC NO 9 OF 2010)

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J U D G M E N T

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Hon Lam VP (giving the Judgment of the Court):

1.  This is the second time the ancillary relief in matrimonial proceedings between these parties have come before this Court. The decree absolute dissolving the marriage was granted on 18 March 2010 although the parties had actually been separated since 1999. Regrettably, the parties are still engaged in legal battles concerning their financial affairs. In this judgment, we shall refer to them as H and W though they have not been husband and wife for a long time ago.

2.  Previously, there was an appeal (CACV 197/2012) against the judgment of the late Deputy High Court Judge Carlson [“the Judge”] of 10 August 2012.  This Court (Lam VP, Cheung and Fok JJA) heard the appeal in June and August 2013 and judgment was delivered on 24 September 2013.  The case went further to the Court of Final Appeal which culminated in the judgment of the Court of Final Appeal of 18 May 2015 (reported at (2015) 18 HKCFAR 210).  The Court of Final Appeal allowed H’s appeal, setting aside the clawback order made by this Court, and dismissed W’s appeal.

3.  The background to the matrimonial proceedings was set out by the Chief Justice in the judgment of the Court of Final Appeal and we shall not repeat the same here.  Unfortunately, the judgment of the Court of Final Appeal did not bring finality to the litigation between this couple.

The reasoned judgment and the Sealed Judgment of 10 August 2012: equal division

4.  The present appeal arose from the wife’s application for amendment of the order of 23 November 2012 as amended on 4 January 2013 [“the Amended Order”].  That order was made for the implementation of the judgment of 10 August 2012.  Ms Eu SC (appearing with Mr D Chen for the wife in this appeal) confirmed she had no problem with the terms of the formal judgment.  The formal judgment of 10 August 2012 as sealed [“the Sealed Judgment”] is as follows:

“ 1. The parties antique furniture collection known as the Hung Collection be divided between the parties on the basis of the average valuations of Sotheby’s, Christie’s and Beijing Poly International Limited as follows:

(1) The Respondent do have first pick of the remaining items in the Hung Collection up to the value of HK$78,997,702.50;

(2) Thereafter each party will in turn select 3 items from the remaining pieces in the Hung Collection until the Collection is exhausted. The Petitioner will have the first pick of 3 items after the Respondent has selected up to the value of HK$78,997,702.50;

2. In respect of the parties jewellery collection:

(1) The Respondent be given credit in the sum of HK$2 million for the missing jade ring;

(2) The Petitioner do give credit in the sum of HK$5,014,000 being the net proceeds of sale of the diamond necklace auctioned by Christies to be divided, the Petitioner having already received from Christie’s HK$1.2 million by way of loan;

(3) The remaining jewellery collection be divided equally between the parties either by each of the parties picking items in turn failing which the collection will be sold and the proceeds of sale divided equally between them;

3. The Schedule 2 paintings, artefacts and other antique items be divided between the parties as follows:

(1) The Respondent be given credit in the sum of HK$30 million

(2) The remaining items in the Schedule be valued by China Guardian who will divide the items into two batches of equal value and the Petitioner and the Respondent will try to agree who will take which batch. Failing agreement lots will be drawn;

4. In respect of the shares in Applied Development Holdings Limited (“ADHL”):

(1) The Petitioner’s 50% interest in the shares of ADHL jointly owned by the Petitioner and the Respondent be retained by the Respondent for a consideration of HK$161,120,620.09

(2) The Respondent do pay the sum of HK$161,120,620.09 within 8 months from the date hereof;

(3) The Petitioner do transfer the remaining 10,010,056 shares which stand in her name upon payment of this lump sum;

5. Upon full compliance with paragraphs 1 to 4 herein above, any claims which the parties may have against each other or their estates for capital, income, or other property adjustment including periodical payments, secured periodical payments, lump sum or sums, transfer and/or settlement of property and order for sale whether under the Matrimonial Causes Ordinance, Matrimonial Persons Status Ordinance, Inheritance (Provisions of Family and Dependents) Ordinance or any other relevant Ordinance be dismissed;

6. Liberty to apply; and

7. Costs be adjourned for argument to a date to be fixed.”

5.  As explained below, the Sealed Judgment reflected accurately the 50:50 division of the matrimonial assets as discussed in the reasoned judgment of the Judge of 10 August 2012.  At the ancillary relief trial before the Judge, W sought a greater share than 50:50 whilst H contended that there was no justification for departure from 50:50, see [5] and [28] of the reasoned judgment.  The Judge rejected the arguments of W at [29] to [36] of the reasoned judgment.  At [36] and [37], the Judge concluded:

“ 36. … There is simply no valid reason to depart from a 50:50 split …

37. Now that I have ruled that there should be an equal division …”

6.  At [69] of the judgment, the Judge proposed to reflect his findings against W in respect of certain missing items when he distributed the assets. In so doing, there was no suggestion (and no reason was given by the Judge to suggest) that he would depart from his earlier conclusion that overall there should be a 50:50 split.  The subsequent paragraphs in the judgment provided for the giving of credit to H at [75], [88], [89] and giving compensation to H at [86] should be so understood.  This is reinforced by the Judge at [87] of the judgment where he said:

“ … My intention is that there should be, as nearly as possible, an equal division of the value of this collection.”

7.  On a proper reading of the judgment, the Judge had dealt with each category of assets separately.  In respect of the missing items, the methodology adopted was to evaluate those assets and give credit to H for the values of the same.

8.  As the matter stood at the time of trial, there was nothing wrong in giving credit to H for the full value of the missing items under the mechanism set out in the Sealed Judgment.  The Judge found that W had already taken the jade ring and some missing Schedule 2 Items.  She had also pledged the necklace to Christie’s to pay for her legal fees.  In other words, these were regarded as assets that W kept for herself.  As such, the notion of equal division means that H should be credited with the full values of the same.

9.  In respect of the Judge’s intention at the time of the reasoned judgment regarding these missing items, it is instructive to have regard to the Judge’s treatment of the Hung Collection (which also had some missing items that the Judge found had been taken by W) at [86] and [87].  His Lordship directed that H shall first have his pick of the collection up to the present value of what is missing.  Thereafter, there would be equal distribution, each party selecting 3 items from the remaining collection.

10.  Thus, it is reasonable for the Judge to expect a similar approach to be adopted for the other missing items.  Though the Judge had not explicitly so prescribed, it was clearly his intention that such credits could be satisfied by some assets from the pot of matrimonial assets before equal division.  Thereafter, what remained (after deducting the satisfaction for such credits) would be divided between H and W equally.

11.  The Sealed Judgment did not identify any specific assets to satisfy the credits given to H under paragraphs 2 and 3.  This is because the Judge wished to give the parties some flexibility to work on the implementation of his judgment and unlike the Hung Collection, it may not be wise to restrict their choices of the assets to be resorted to for satisfaction of the credits.  Thus, he said at [95]:

“ As I have already indicated, I propose to give the parties liberty to apply as to the precise terms and implementation of these orders. I have left sufficient scope within the judgment for the parties, who now know how I have ruled in respect of the various elements of the application, to agree between themselves how the final terms of the order itself should read which will need to conform with the terms of the judgment, otherwise I will need to draft it myself.”

12.  Such a course was adopted by the Judge in light of the cash flow position of the parties.  As noted by him at [18]:

“ … Whilst the parties are asset rich their income stream is irregular and jointly they have had to resort to selling valuable pieces of antiques to pay for legal fees and to fund their living expenses …”

13.  And at [26]:

“ … The orders in this case, and this is agreed between learned counsel, will entail substantial transfers of property ‘in specie’ in the form of antiques, paintings and shares, although there may also have to be an element of payment in cash for the shares if I were to order a transfer of the shareholdings in ADHL from one party to the other …”

14.  Given the illiquid state of most of the assets in the matrimonial pot, it is perfectly understandable that the Judge first gave the parties the chance to work out for themselves the mechanism for implementation in light of his rulings.

15.  But it is clear that the Judge did not order W to pay H sums of money in the same amount as those credits.

16.  We cannot find anything in the reasoned judgment or the Sealed Judgment to suggest that the Judge intended to order anything other than equal division in respect of the jewellery and Schedule 2 items.  He certainly did not do so in respect of the Hung Collection.  To read into his ruling that credits should be given to H for the full values of the other missing items an implication that W had to be penalized further than giving equal division for such missing assets is not warranted in light of the proper reading of the reasoned judgment as explained above.

17.  That was also the understanding of H and those advising him when they sought costs on a higher basis and opposed the application for stay of execution pending appeal by W.  In the written skeleton submissions of 17 October 2012, counsel for H reiterated that they had all along been content with equal division, see para 17 and that the Judge ordered equal division, see para 28.

18.  In the first appeal, CACV 197/2012, W challenged the judgment of 10 August 2012 by advancing six grounds of appeal set out at [45] of the judgment of the Court of Appeal (Lam VP, Cheung and Fok JJA)of 24 September 2013.  Most of the grounds failed and W only succeeded in respect of the clawback relating to the redevelopment value of Severn Villa. As said at the beginning of this judgment, the provision of clawbackwas subsequently reversed in the further appeal to the Court of Final Appeal.  Throughout the appeal, there was no suggestion that the Judge did not intend to achieve equal division in the judgment of 10 August 2012.  What was said at [9] of the judgment in CACV 197/2012 clearly showed that the Court proceeded on the basis that the Judge had refused to depart from equal distribution:

“ 9. In my judgment, we cannot say the Judge erred in his overall assessment on fairness, thus refusing to depart from equal distribution. In such circumstances, I doubt if there could be room for considering adding-back specific sums through the Norris route which was not argued below.” (my emphasis)

19.  This was also the understanding of the Court of Final Appeal in FACV 10 and 11 of 2014, see [28] of the judgment of 18 May 2015 where the Chief Justice had this to say:

“ In the present case, the Court was concerned with an equal division of the assets …”

The Amended Order of 21 December 2012 and its flaws

20.  Unfortunately, in the fine-tuning under the Amended Order, there are provisions for payments to H which have the effect of increasing H’s share of the matrimonial assets.  It is fair to say that such effect is not apparent unless one works out the mathematics with some care.

21.  The Amended Order is in the following terms:

“ 1. The Petitioner do provide access to representatives of China Guardian and the Respondent’s solicitors to the jewellery collection in Schedule 1 and the paintings, artifacts and antiques in Schedule 2 access upon being given not less than 48 hours’ notice by the Respondent’s solicitors for the purpose of conducting valuation as directed by the Order of Deputy High Court Judge Carlson dated 8 October 2012.

2. The Petitioner do forthwith permit the Respondent or his agent to take possession of the items of furniture highlighted in yellow in the Schedule attached hereto (‘Schedule’).

3. The Petition do forthwith comply with paragraph 1(2) of the Judgment dated 10 August 2012 by:

(1) Selecting the remaining items in the Schedule (i.e. those not highlighted in yellow) as directed in paragraph 1(2) of the Judgment; and

(2) Permitting the Respondent or his agent to take possession of the items of furniture selected by him; and

(3) In the event that the Petitioner fails to comply with paragraph 3(1) herein within 7 days from the date of the Order:

(a) The Respondent shall be entitled to select up to approximately 50% of the agreed value of the items in the Schedule after the Respondent’s first pick pursuant to paragraph 1(1) of the Judgment;

(b) The Petitioner shall permit the Respondent or his agent to take possession of such items as the Respondent may so select.

4 Pursuant to paragraph 2(1) and (2) of the Judgment, the Petitioner do forthwith instruct Christies’ to pay the Respondent the remaining sale proceeds of the diamond necklace i.e. HK$3,814,000 (being HK$5,014,000 - HK$1,200,000) to the Respondent. For the avoidance of doubt, upon the Respondent receiving this sum of HK$3,814,000 from Christies’, the Petitioner shall be taken to have given credit of a sum of HK$1,307,000 under paragraph 2(1) of the Judgment, and shall give credit of the remaining amount of HK$693,000 to the Respondent.

5. The Petitioner do forthwith comply with paragraph 2(3) of the Judgment by:

(1) Selecting the items of jewellery as directed. In selecting the items, the Petitioner should give credit to the Respondent in the sum of HK$693,000; and

(2) Permitting the Respondent or his agent to take possession of the items selected by him; and

(3) In the event that the Petitioner fails to comply with paragraph 6(1) herein within 7 days from the date of the Order:

(a) there be an order for the sale of the items of jewellery as per Schedule 1;

(b) the Respondent shall have the conduct of the sale; and

(c) the Petitioner do within 10 days from the date of the Order, deliver possession of the items of jewellery in Schedule 1 to Respondent.

6. The Petitioner do forthwith comply with paragraph 3 of the Judgment by:

(1) Indicating which of the two batches divided by China Guardian she intends to select once the division is carried out by China Guardian;

(2) participating in the drawing of lots in the event that no agreement is reached; and

(3) permitting the Respondent or his agent to take possession of the items that he is entitled to as a result of the aforesaid process.

7. There be an extension of time for payment of the HK$131,120,620.09 (i.e. $161,120,620.09 - HK$30,000,000) from the Respondent to the Petitioner until 8 months after the Respondent has possession of all items of the Hung Collection that he is entitled to pursuant to paragraph 1 of the Judgment.

8. There be liberty to apply.

9. The Petitioner’s Summons filed on 27 September 2012 be dismissed.

10.   The costs of the application be to the Respondent with Certificate for 2 Counsel.”

22.  Mr Yu SC (appearing with Ms Cheng for H) did not dispute that the mechanism under the Amended Order gave him more than an equal share in the matrimonial assets.  In light of that, we can use the example of the jade ring and the proceeds of sale of the diamond necklace to illustrate the increase of H’s share under the Amended Order.

23.  The jade ring was kept by W, valued at $2 million.  The diamond necklace was auctioned for $5,014,000.  Equal division would mean that each of W and H should have half of the total value of these two items, viz ($2 million + $5,014,000) ÷ 2 = $3,507,000.  To recap, the Sealed Judgment paragraph 2(1) and (2) provided as follows:

“ (1) The Respondent be given credit in the sum of HK$2 million for the missing jade ring;

(2) The Petitioner do give credit in the sum of HK$5,014,000 being the net proceeds of sale of the diamond necklace auctioned by Christies to be divided, the Petitioner having already received from Christie’s HK$1.2 million by way of loan”.

24.  In our judgment, bearing in mind the Judge’s determination of equal division of all the assets, the expressions of “given credit” and “give credit” at paragraph 2(1) and (2) must have been intended by the Judge to mean that the full values of the jade ring and the necklace should be credited and then satisfied by assets from the matrimonial pot before division of the remaining assets.

25.  As we have seen, in the Sealed Judgment, provision was made for each category of assets separately.  In the Amended Order, the jade ring and the proceeds for the necklace were dealt with together.    

26.  Based on the above calculation, if one faithfully implemented the judgment, H should get $3,507,000 in this manner.  Out of the remaining sale proceeds, H should first get $2,000,000 in respect of the jade ring.  Then in respect of the sale proceeds of $5,014,000, it should be treated as being ploughed back into the matrimonial pot.  After deducting what had been utilized for the payment of $2,000,000 (for the ring) to H, the balance was reduced to $3,014,000.  Dividing that balance between W and H, H should get a further sum of $1,507,000.  Thus, the total H would get would be $3,507,000.

27.  W would also get $3,507,000 for these two items.  She already got $1,200,000 from Christie’s.  As for the balance of proceeds with Christie’s ($3,814,000), after deducting the payment of $3,507,000 to H as calculated above, the balance of $307,000 should go to her.  Thus, the total W would obtain by way of cash would be $1,507,000 ($1,200,000 + $307,000).  In addition, she would keep the jade ring ($2 million).  Hence, the overall share for her would also be $3,507,000.  Equal division would be duly achieved.     

28.  However, under the Amended Order, paragraph 4 reads:

“ Pursuant to paragraph 2(1) and (2) of the Judgment, the Petitioner do forthwith instruct Christies’ to pay the Respondent the remaining sale proceeds of the diamond necklace i.e. HK$3,814,000 (being HK$5,014,000 - HK$1,200,000) to the Respondent. For the avoidance of doubt, upon the Respondent receiving this sum of HK$3,814,000 from Christies’, the Petitioner shall be taken to have given credit of a sum of HK$1,307,000 under paragraph 2(1) of the Judgment, and shall give credit of the remaining amount of HK$693,000 to the Respondent.”

29.  Thus, H would receive $3,814,000 and on top of it W should still need to give H another $693,000.  In other words, H would get a total of $4,507,000 which is more than half of the total value of these two items.

30.  On W’s side of equation, she would keep the jade ring ($2 million), and the $1.2 million out of the proceeds for the necklace, but she would need to pay H $693,000.  Thus, in effect, W would only get $2,507,000 out of these two items.

31.  Hence, paragraph 4 of the Amended Order gives rise to unequal distribution, which as explained earlier could not have been the intention of the Judge.

32.  To identify the flaw in the formula in paragraph 4, it is necessary to understand the arithmetic behind the figure of $1,307,000.  The underlying rationale was that since each of H and W should be entitled to half of the total proceeds of $5,014,000, out of the balance held by Christie’s, H should first get half of that total, viz $2,507,000 as his share in the necklace.  After deducting that from the $3,814,000 held by Christie’s, the balance was $1,307,000 which would then be utilized to partially satisfy the $2 million for the jade ring.

33.  This mechanism is wrong because if the proceeds of the necklace were to be utilized as part of the matrimonial pot (that being the underlying premise for the mechanism in paragraph 4), $2 million should first be deducted from it (in satisfaction of the credit for the jade ring).  After that, the remaining sum would no longer be $5,014,000, but becomes $3,014,000. And the splitting of the balance should be $1,507,000 for each, of which W had already got $1,200,000 in advance.  The mistake lies in making the deduction of $2 million after the division of an asset in the matrimonial pot. The proper way to do it was to make the deduction before the division because after the deduction, the matrimonial pot would be reduced and each one’s share would correspondingly be smaller.

34.  On the correct reckoning, instead of H receiving the full sum of $3,814,000, he should only receive $3,507,000, and the balance of $307,000 should be distributed to W.  There should not be any outstanding credit due to H in the sum of $693,000.  In this connection, paragraph 5(1) of the Amended Order should not have been made.

35.  In respect of the credit of $30 million under paragraph 3(1) of the Sealed Judgment, it was pegged to the money payable to W for the transfer of the ADHL shares under paragraph 7 of the Amended Order.

36.  Thus, instead of H being given a first pick of the Schedule 2 assets to the total value of $30 million (to compensate for W having already taken $30 million out of this category of matrimonial assets) before the remaining assets in this category were to be divided, paragraph 7 of the Amended Order in effect utilizes the divided value of ADHL shares attributable to W to satisfy this $30 million.

37.  This formula suffers from the same problem as explained at [33] above.  If the ADHL shares and the Schedule 2 assets are to be grouped together as one pot for division (as paragraph 7 did), the correct way to do it was to deduct the $30 million from the full value of the ADHL shares first before dividing the balance between H and W.  However, the figure in paragraph 7 for ADHL shares $161,120,620.09, derived from paragraph 4(1) and (2) of the Sealed Judgment, is the figure arrived at after division.  Like the case of the jade ring, paragraph 7 of the Amended Order has the effect of increasing H’s shares in the pot of ADHL shares and Schedule 2 assets.

38.  Unfortunately, these arithmetical errors were not noticed by the Judge and the learned counsel appearing before him when he was invited to make the Amended Order.

39.  Initially when this appeal was argued before us on 10 November 2017, despite counsel’s sustained efforts, Ms Eu SC (appearing with Mr D Chen for W) did not manage to persuade us that the Amended Order led to a result other than equal division.      

40.  We had actually dismissed the appeal orally on 10 November 2017 after hearing Ms Eu.  However, before the sealing of the order for the dismissal of the appeal, it dawned on us that we might have fallen into error in so concluding.  We therefore ordered the withholding of the perfecting of the order in the appeal and invited further submissions from counsel by listing the appeal for further hearing on 16 May 2018.

The Judge did not intend unequal division

41.  At the resumed hearing, Mr Yu did not dispute that overall speaking the Amended Order did not produce equal division.  Instead, Mr Yu submitted that the Judge intended to give H the benefit of more than equal division though no reason for so doing had been spelt out in the judgment of 10 August 2012.

42.  Counsel relied on [75], [86], [88], [89] of the judgment to contend that the Judge’s intention had always been to give H more.  With respect, those paragraphs have to be read in the context of the whole judgment.  As explained above, having proper regard to the judgment as a whole, we are unable to accept Mr Yu’s submission in this regard.

43.  We are satisfied that the Judge did not intend to alter his ruling that there should be equal division when he made the Amended Order.  The Judge was asked by H’s counsel to make that order at a hearing on 21 December 2012.  The hearing only lasted for slightly more than one hour and W was represented by a former counsel instructed by her former solicitors.

44.  That hearing came about in the following circumstances.  On 23 November 2012, the Judge dismissed W’s application for stay of execution.  Further, at [16] of that decision, the Judge said this:

“ Finally, Mr Yu has asked for directions to be given so that the judgment can be complied with and enforced. I am content to make orders in terms of paras 62 – 65 of his skeleton dated 17 October 2012.”

45.  Paragraphs 62 to 65 of counsel’s submissions read:

“ 62. In respect of the Jewellery Collection and the Schedule 2 Assets,the Court has already ordered on the last occasion that they be valued by China Guardian. For the reasons stated in §[49], it is submitted that division of these assets should proceed once valuation is completed and that RH should be at liberty to select up to at least 40% of the assets by the mechanism set out in §1(2) – (3) of RH’s Summons.

63. There is also no reason why the parties should not forthwith jointly instruct Christie’s to release the proceeds of the diamond necklace auctioned, and for MW to give credit to the sum she had received by way of a loan: RH’s 22^nd §§12 – 13.

64. Finally, for reasons set out in §54 above, it is submitted that the directions in terms of §§1(4) and 2 of RH’s Summons in relation to ADHL should be granted.

65. MW has refused to comply with the Judgment of the Court.  RH would respectfully ask for an order that his obligation to make payment under paragraph 4(2) of the judgment should only commence to run after MW has taken all necessary steps to comply with paragraphs 1, 2 and 3 of the Judgment.”

46.  Those submissions were in the same set of submissions on costs.  As mentioned, the submissions proceeded on the basis of equal division.

47.  There was nothing in those paragraphs 62 to 65 suggesting that equal division should be departed from in respect of the missing items.  Nor was there anything to suggest that the rendering of credit should be applied to assets distributed to W after division.

48.  After the decision of 23 November 2012, solicitors for W wrote to the Judge on 29 November 2012 seeking clarification on the correct manner of division of the jewellery collection and Schedule 2 assets.  On 30 November 2012, the solicitors wrote another letter seeking an interim stay of execution pending the hearing of the stay application by the Court of Appeal. These applications were opposed by solicitors for H.  At the direction of the Judge, a hearing was held on 21 December 2012. 

49.  At that hearing, counsel for H (not Mr Yu) told the Judge that the directions were to transform the reasoned judgment to something that was workable [1]. The Judge sought assurance from counsel that these directions did not deviate in any way that is material and counsel confirmed that there was no deviation [2]. Though the mechanism was explained to the Judge at some length, neither counsel for H nor counsel for W alerted the Judge to the problems stemming from making division first before the deduction for the $2 million on account of the jade ring and the $30 million for the missing Schedule 2 assets.  Given that counsel for H gave the assurance that there was no material deviation, we consider it probable that counsel also failed to note the problems.  Arguments before the Judge focused on whether the deduction for the $2 million should be made later.  

50.  It is quite clear to us that the Judge did not intend to change his rulings in the reasoned judgment of 10 August 2012 when he acceded to counsel’s request to make the Amended Order.  All along, the Judge intended to make an order implementing equal division.  The Amended Order failed to reflect that intention.

Developments subsequent to the Amended Order

51.  As said, the problems with the Amended Order had not been noted by W or those advising her and that remained so up to the determination of CACV 197/2012.  She only came to realize that the Amended Order did not reflect equal division after she changed her solicitors.

52.  In the course of seeking leave to appeal to the Court of Final Appeal in respect of CACV 197/2012, W sought to raise a new point that there was an arithmetical error in the Amended Order and an attempt was made to run this as a ground of appeal in the intended appeal to the Court of Final Appeal.  On 21 March 2014, this Court refused to allow that new point to be run, see the judgment on the leave application reported at [2014] 2 HKLRD 704, [5(5)] and [6.4].  It does not appear that the point was canvassed when W sought leave before the Appeal Committee of the Court of Final Appeal, see (2014) 17 HKCFAR 585.

53.  Instead, W took out a summons on 21 February 2014 in the Court of First Instance asking for the following relief under the slip rule (Order 20 Rule 11) and inherent jurisdiction of the court:

“ 1. The Amended Order dated 23 November 2012 made by Deputy High Court Judge Carlson be corrected in the following manner:-

(1) Paragraph 4 therein be corrected to read as follows:

‘Pursuant to paragraph 2(1) and (2) of the Judgment, the Petitioner do forthwith instruct Christies to pay the Respondent HK$3,507,000 out of the sale proceeds of the diamond necklace. For the avoidance of doubt, upon the Respondent receiving this sum of HK$3,507,000 from Christies, the Petitioner shall be taken to have given credit of a sum of HK$2,000,000 under paragraph 2(1) of the Judgment.’

(2) Under paragraph 5(1) therein, the sentence ‘In selecting the items, the Petitioner should give credit to the Respondent in the sum of HK$693,000’ be deleted.

(3) Paragraph 7 therein be corrected to read as follows:

‘There be an extension of time for payment of the HK$146,120,620.09 (i.e. HK$161,120,620.09 – HK$15,000,000) from the Respondent to the Petitioner until 8 months after the Respondent has possession of all items of the Hung Collection that he is entitled to pursuant to paragraph 1 of the Judgment.’

2.   Costs of the application be to the Petitioner.”

54.  Sadly, by then the Judge had passed away.  The summons was heard by Lok J on 2 November 2015.  On 16 November 2015, Lok J handed down his Decision dismissing the summons.  The learned judge refused to apply the slip rule on two grounds:

(a)  Even assuming that the Judge made a mistake, it is not one that can be cured under the slip rule;

(b)  Taking into account the substantial changes of circumstances since the making of the Amended Order, it would be inequitable for the court to correct the Amended Order.

55.  W appealed against that decision, hence coming before this Court a second time.

The errors in the judgment of Lok J regarding the true mistakes and their nature

56.  After reciting the submissions of counsel for W at [22], Lok J held that it was not a case for the application of the slip rule.  He held at [30]:

“ In my judgment, whether the Judge had made a mistake in failing to take into account the Wife’s interest in the missing items is quite irrelevant. Even if there was a mistake, such kind of error cannot be corrected under the slip rule and the only way to rectify the mistake is through the appellate process.”

57.  With respect, and it was probably due to the manner in which the case of W on rectification was presented at the hearing of the slip rule application (apparently focusing as it were on the amounts of the credits to be given to H, see [22] and [29] where the submissions of counsel for H was summarized), Lok J failed to appreciate the true nature and character of the mistake in question. Thus, much reliance was placed at [24] to [27] in Lok J’s judgment on the clear statements in the reasoned judgment on the amounts to be credited to H and that parties’ arguments referred to such amounts in arguments before the Judge at subsequent hearings.  At [28], Lok J regarded the application as “a belated attempt to challenge the Judge’s findings out of time and after the appeal has been heard”.  At [31], Lok J further said:

“ The ‘mistake’ allegedly made by the Judge is certainly not a clerical mistake involving mathematical calculation only … If this court has to investigate whether the Judge had made an inadvertent mistake, such exercise involves consideration of matters which go beyond mathematical calculation or obvious omission.”

58.  As we have explained at the earlier part of this judgment, the mistakes in the Amended Order are not about the amounts of credit, but as to the stage at which the deductions are to be made on account of the credits.  Thus, as we have demonstrated, there was no error in the Judge stipulating the credits in those amounts in the reasoned judgment and the Sealed Judgment.  And there would be no error if those credits were to be applied to the assets in the matrimonial pot before division.  So understood, the mistakes in the Amended Order are errors in mathematical calculations, the resolution of which would not require further investigations.

59.  To be fair to W, her case on mistakes due to the arithmetical errors (deductions for credits should be made before division of the balance) had been raised at paragraphs 19 to 27 of her 26^th affirmation.  In particular, she explained at paragraph 24 how the giving of credits to H in the full value of the missing items were consistent with equal division if the deductions (or first picks) were made by H out of the matrimonial pot before dividing up the rest.

60.  Lok J was aware of the argument and alluded to it at [42] of his judgment.  However, he declined to entertain it as he regarded it as a new argument and a new basis of the application, see [43] and [44].  He also took the view that the reasoned judgment did not support W’s contention in that regard, see [45] to [47].

61.  With respect, Lok J erred in treating it as a new argument.  It was in fact the only true basis for the application.  There were mistakes in the mechanism adopted in the Amended Order by reason of the division of assets before the application of the credits in favour of H.  Given the circumstances under which the reasoned judgment was handed down with liberty to the parties to work out the precise mechanism as set out at the early part of this judgment, we respectfully take the view that Lok J had failed to fully reflect the purport and effect of the judgment of 10 August 2012.

62.  Had Lok J been properly apprised of the true basis of the application and its nature, he would have appreciated that the mistakes concerned are in substance mathematical errors which can be properly rectified under the slip rule in accordance with the principles discussed at [19] of his judgment.

63.  Another difficulty stemming from Lok J’s focusing on the credit sums as opposed to the stage at which deduction should have been made is that His Lordship failed to have proper regard to the Judge’s manifest intention to make an order which would result in equal division.  In so doing, Lok J unwittingly proceeded on the basis that if there were any mistakes, they had already pervaded the reasoned judgment when the Judge held that credits in such sums should be given to H.  And this led Lok J astray in terms of finding that in the reasoned judgment the Judge only intended to have equal division for other assets (see [24] of Lok J’s judgment).  On that basis, Lok J did not find it necessary at [30] to adjudicate on Mr Yu’s submission that the Judge had good reasons to depart from equal division regarding the missing assets set out at [29].

64.  Such errors on the part of Lok J also mean that he had failed to appreciate that the manifest intention of the Judge was to make orders achieving equal division of all the assets.

65.  In the earlier part of this judgment, we have alluded to the stance of H in the ancillary relief trial and the clear manifestation of the Judge’s intention to order equal division and the common understanding of the parties in that regard.  In these circumstances, we have no hesitation in rejecting Mr Yu’s submissions that the Judge had intended to award to H the full values for the jade ring and the missing Schedule 2 items in the reasoned judgment.  As explained, the paragraphs in the reasoned judgment relied upon by Mr Yu did not support his speculations on the Judge’s purported departure from equal division as summarized in the latter part of [29] in Lok J’s judgment.

66.  For present purposes, we can take the law on the jurisdiction of the court to correct mistakes under the slip rule or its inherent jurisdiction from the judgment of Godfrey JA in Skink Ltd (in liquidation) v Comtowell Ltd [1998] 1 HKLRD 542 at p 543G:

“ The court has an inherent power to vary its own orders so as to carry out its own meaning and to make that meaning plain; and an express power (under R.H.C. O.20 r.11) to correct any error in any order resulting from an accidental slip or omission. But these powers extend only to the correction of errors in expressing the court’s intention. The court has no power to correct mistakes of its own; even where it is satisfied that it has indeed made such a mistake.”

67.  In our judgment, the mistakes in the Amended Order are arithmetical errors which come within the scope of “errors arising from accidental slip or omission” within the meaning of Order 20 Rule 11.  As has been held in Wo Hing Engineering Ltd v Tyco Engineering & Construction CACV 1120/2000, 28 October 2002, errors in the formula adopted by the court to give effect to its manifest intention in an award is rectifiable under the slip rule.

68.  We are also satisfied that the mistakes in the Amended Order are errors which failed to reflect the manifest intention of the Judge in the reasoned judgment in giving an award on the basis of equal division.

69.  Lok J was therefore in error in holding that these were not mistakes capable of being rectified under the slip rule.

Was it inequitable to permit rectification?

70.  Lok J found it would be inequitable to permit rectification primarily because the parties and the Court of Appeal and Court of Final Appeal had acted on the basis of the correctness of the Amended Order.  The distribution of the proceeds held by Christie’s had taken place.  His Lordship considered that there should be finality to legal proceedings.  He also held that W could have sought rectification in the appellate process.

71.  With respect, as stated above, the Court of Appeal and the Court of Final Appeal had all along proceeded on the basis that the award was made on the basis of equal division.  The problems as to the Amended Order were not the subject considered in any of these appeals.  The relevant chronology is that the mistakes were only spotted by W after her change of solicitors in November 2013.  The new solicitors wrote to solicitors for H on 18 November 2013 regarding the mistake in connection with the $30 million Schedule 2 assets.  By a summons of 22 November 2013, her lawyers tried to add an intended ground of appeal based on the mistakes in the application for leave to appeal to the Court of Final Appeal.  That application was unsuccessful as the point had not been canvassed in the substantive appeal.  Before that decision by the Court of Appeal, W’s solicitors had taken out a summons on 21 February 2014 seeking relief under the slip rule in the Court of First Instance.

72.  Thus, in terms of finality, even before the hearing of the appeal in the Court of Final Appeal, the parties were aware that the problems regarding the Amended Order would have to be addressed in another forum irrespective of the outcome of that appeal.

73.  Whilst we would hesitate to say that mistakes of this nature can never be rectified on appeal, in most cases coming within the scope of the slip rule it would be a better route for the parties to go back to the first instance judge to seek rectification when the basis of the application is that the order does not reflect the manifest intention of the court.

74.  The present case is unusual in that by the time the mistakes were spotted, the Judge had passed away.  Hence, the advantage of going back to the Court of First Instance would not be that significant.  However, in light of the late stage at which the mistakes were noticed and the unsuccessful attempt to bring the issue into the scope of the appeal to the Court of Final Appeal, we do not think W should be criticized for not raising the issue in the Court of Final Appeal.

75.  Notwithstanding that, there had been a considerable lapse of time between the making of the Amended Order (21 December 2012) and the discovery of the mistakes (November 2013).  The explanation of W for the time lapse was that her former solicitors failed to notice that the mechanism under the Amended Order resulted in unequal division.

76.  Whilst such failure on the part of W’s lawyers would not usually be a good ground for extension of time to appeal, as Mr Yu observed in his oral submissions, there is no time limit for an application under the slip rule.           

77.  Instead, the grant of relief under the slip rule, as in other cases for rectification, is discretionary.  Hence, if something has intervened which would render it inexpedient or inequitable to permit rectification, the court would refuse relief, see Hatton v Harris [1892] AC 547; Moore v Buchanan [1967] 1 WLR 1341.

78.  The mere lapse of time does not render rectification inequitable.  Lok J alluded to the performance of the obligations under the Amended Order.  In this connection, we believe the following commentary by Snell’s Equity 33^rd Edn, paragraph 16-025 is equally apposite in the context of the discretionary consideration for rectification of a court order:

“ … Impossibility of restoring the parties to the pre-contract position may also bar rectification, although not if: ‘it would not be difficult to adjust so as to place the parties in a position in which they would receive little or no prejudice from what had been done after the exchange.’

Performance of the contract will not always amount to a defence, however, at least where the performance was monetary and it is arguable that it (or part of it) is repayable on restitutionary grounds.”

79.  In the present case, the performance of the obligations under the Amended Order is basically monetary.  Though it is true that Christie’s was involved under paragraph 4 of the Amended Order and we were told that it had already released the proceeds in accordance with it, it is not a case of third parties’ right being involved as Christie’s had only held the proceeds as agent for the parties.

80.  On the evidence, in particular the 27^th affirmation of H in opposition to the application, there is nothing to show that H would suffer any prejudice if he is now deprived of the windfall he had obtained under the Amended Order.

81.  We respectfully take the view that the matters identified by Lok J did not support his finding that it would be inequitable to permit rectification.  The refusal of relief under this ground cannot be sustained.

82.  By a respondent’s notice filed in this appeal, H also relied on inexpediency in contending that relief should not be granted under the slip rule. In that respect, Mr Yu alluded to the release of the proceeds by Christie’s and submitted that it would now be futile to direct Christie’s to re-distribute the proceeds.

83.  Though it has been suggested that the Court may instead order repayment of the windfall from H to W, on reflection we agree with Mr Yu that this would not be within the power of the Court in the context of a slip rule application. Yet, as regards the amendment to paragraph 7 of the Amended Order, the revision of the amount payable by H to W from $131,120,620.09 to $146,120,620.09 would mean that H has yet to fully discharge his obligation under that paragraph.  There is still a shortfall of $15 million.

84.  We would readily accept that we should not do anything which would embarrass Christie’s in terms of imposing a new obligation on it to claw back money from H or to make further payment to W. If necessary, that concern can be addressed by imposing a condition on the grant of the relief: notwithstanding the rectification of the Amended Order, W cannot seek to obtain any payment from Christie’s.  

85.  Based on the relief presently sought in the summons of 21 February 2014, W did not seek to oblige Christie’s to do anything after the rectification.  Hence, it is not necessary to impose such condition in the present instance.

86.  As between H and W, the principles discussed in Snell cited above is applicable.  We cannot see any difficulties in working out the monetary implications flowing from the rectification of the Amended Order between them. Though for reasons explained above we should not make an order for repayment from H to W in this appeal, the rectified order can form an arguable basis of a restitutionary claim by W against H in respect of the $693,000 credit wrongly imposed under paragraph 5 of the Amended Order.  Having said so, we hope the parties, with the benefit of advice from their respective counsel, can resolve the matter sensibly instead of resorting to another round of expensive litigation.

87.  All in all, we find nothing inequitable or inexpedient to bar the Court from granting relief under the slip rule in the present case.

Disposition

88.  We shall allow the appeal and set aside the order of Lok J.

89.  Exercising the discretion afresh, we would grant the relief prayed for in the summons of 21 February 2014.  We do so on the basis that the amendments sought would reflect the manifest intention of the Judge in the reasoned judgment of 10 August 2012.

90.  We note that W had not asked for additional provision to reflect the fact that she should have got $307,000 from the balance of proceeds previously held by Christie’s.  It might have been a course deliberately chosen in light of the fact that Christie’s had released the proceeds a long time ago.  In any event, it is now too late for W to ask for any further amendment to that summons to seek such relief.

91.  In respect of the amendment to paragraph 7, the proposed relief in the summons will achieve the same practical result as making the deduction for $30 million prior to the division of the ADHL shares.

92.  We direct parties to lodge submissions on costs and on whether we should order interest payable on the $15 million shortfall consequential upon the amendment of paragraph 7 of the Amended Order as follows:

(a)  W shall lodge and serve her written submissions on costs and interest (not more than 10 pages) within 14 days after handing down of this judgment;

(b)  H shall lodge and serve his written submissions on costs and interest (not more than 10 pages) within 14 days thereafter;

(c)  W shall lodge and serve her reply submissions within 7 days thereafter.

93.  Lastly, we thank counsel for their assistance.