KHL v. ZWP also known as ZW

FCMC 10908/2012

[2022] HKFC 98

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 10908 OF 2012

----------------------------

----------------------------

---------------------------

J U D G M E N T

---------------------------

Applications

1.  The petitioner wife and the respondent husband will be hereinbelow referred to as “W” and “H” respectively.

2.  Before the Court are applications relating to the parties’ undertakings embodied in the Consent Order dated 21 February 2019 (“Consent Order”) setting out the terms of their agreement in full and final settlement of their respective claims on ancillary relief.

3.  H and W have 3 adult children: Ariel, Melissa and Davena. As at the date of the Consent Order, Davena was attending the first year of medical school in the USA and she is now 26 years old.

4.  The Summonses are:

i.  H’s Summons dated 7 January 2020 for W’s compliance of the undertakings and disclosure (“H’s January Summons”).

ii.  The adjourned hearing for argument of paragraphs (2) to (4) of H’s Summons dated 10 March 2020 (“H’s March Summons”) seeking interest and costs as a result of W’s breach of the undertaking embodied in the Consent Order. By my decision dated 29 April 2020 (“April Decision”), this Court has decided in favour of H on paragraph (1) of H’s March Summons.

iii.  W’s Summons dated 5 February 2021 (“W’s February Summons”) seeking the Court’s assessment on whether H has paid any sum due for Davena’s educational expenses etc under Recital G(ii)(b), and for an order for variation of H’s undertaking in the Consent Order in connection with the stakeholding arrangement for HK$1.5 million.

Hadkinson Order

5.  To start with, Ms Chow for W submitted that H blatantly refused to observe the stakeholding arrangement in the Consent Order by failing to transfer HK$1.5 million to his solicitors for their stakeholding and payment of Davena’s expenses and therefore invited the Court to make a Hadkinson order debarring H from making any submissions on H's January Summons and H's March Summons.

6.  W has not taken out any Summons nor has she given any prior warning for an application of a Hadkinson order.

7.  The Court of Appeal has clearly held in CWG v MH [2014] 4 HKLRD 141 that an application of such significance as a Hadkinson application should not be made without a Summons and exchange of affidavit evidence on the application.

"16.3 ... bearing in mind the principles of Civil Justice Reform, an application of such significance as a Hadkinson application should not be made without the other party duly forewarned by way of summons, with enough time for affidavit evidence to be adduced for and against the making of the order." (CWG v MH per Yuen JA at pg. 147)

8.  In the absence of a Summons and a chance for H to adduce evidence in this relation, I refuse to entertain such "invitation" made by way of counsel submission for Hadkinson order.

H’s March Summons

9.  For paragraphs (2) to (4) of H’s March Summons, which do not have much dispute including the calculation of interest, I therefore made an order at the hearing on 15 July 2021 as follows:

i.  W do pay H interest of agreed amount at $347,942 forthwith;

ii.  No order be made for para. 3 thereof;

iii.  Cost of and occasioned by paragraphs 2 and 3 thereof including all costs reserved and in relation thereto to be paid by W forthwith with certificate for counsel.

Parties’ Undertakings in The Consent Order

10.  The Consent Order was made following a Consent Summons (signed by H and W) dated 22 January 2019 together with a joint letter dated 20 January 2019 from the legal representatives of the parties to Court setting out the terms of their agreement in full and final settlement of the ancillary relief claims.

11.  Recital G and Recital H set out both parties’ undertakings in regard to the children’s maintenance. The undertakings in Recital G and H are relevant to H’s January Summons while W’s February Summons relates only to the educational expenses in Recital G (ii)(b) and the stakeholding arrangement in Recital G(iii).

12.  Recital G sets out the parties’ undertaking to pay Davena’s living and educational expenses as follows:

i.  Recital G(ii): H & W acknowledged and undertook that they will share equally all of Davena’s living and educational expenses payable from 1 December 2018 until she finishes full time education. The agreed manner of payments is set out in Recital G(ii)(a) and (b), that is by depositing into Davena’s sole US account at Citibank (“Davena’s Account”).

ii.  Recital G(ii)(a): each of the parties will pay HK$19,000 per month to Davena on the 1^st day of each calendar month from 1 December 2018 into Davena’s Account.

iii.  Recital G(ii)(b): each of the parties will share equally Davena’s education related expenses, tuition and health insurance to be paid equally within 7 days of receipt of invoice for the same by depositing the payments into Davena’s Account.

iv.  Recital G(vi) states that “parties be at liberty to apply to Court in the event of any disagreement over Davena’s expenses”.

13.  Recital H deals with 3 joint accounts in the joint name of W and the respective child (“3 Joint Accounts”), pursuant to which W undertook to the Court and H that she would transfer all monies then held in the 3 Joint Accounts to the respective child’s sole account within 28 days of the making of the Consent Order (i.e. by 21 March 2019).

14.  Recital I sets out W’s undertakings to make payments to H, which is relevant to H’s March Summons.

15.  Under paragraph 4 of the Consent Order, there are “Liberty to apply in respect of the implementation of the Recitals herein and this Order.”

The Law in relation to “liberty to apply”

16.  Parties’ counsel do not dispute that this court has jurisdiction to make order and deal with the parties’ summonses under the “liberty to apply” provisions as per Recital G(vi) and §4 of the Consent Order.

17.  In gist, as explained in Cristel v Cristel [1951] 2 KB 725, “liberty to apply” is utilized in orders which “requires working out, and the working out involves matters on which it may be necessary to obtain the decision of the Court. Prima facie, certainly, it does not entitle people to come and ask that the order itself shall be varied.”, and “[p]rima facie, the words ‘liberty to apply’ refer … to the working out of the actual terms of the order.”

18.  This principle has been recognized by the Hong Kong courts, both by the Family Court in LCKLM nee CKLM v LWK (unreported, FCMC 11425/2011) and the Court of Appeal in Leung Yee & Another v Ng Yiu Ming & Another [2001] 1 HKLRD 309. As further elucidated by Lord Mackay, the purpose of a “liberty to apply” provision is to “permit persons having an interest under the judgment to apply to the court touching their interest in a summary way without again setting the case down.” Indeed, as stated in Leung Yee & Another v Ng Yiu Ming & Another, the existence of such a provision is itself indicative that “the court’s power to intervene is clearly envisaged by the parties”.

19.  Thus so long when it comes to the enforcement as opposed to the amendment or alteration of the order, the Court has the jurisdiction to implement a pre-existing order in light of the parties’ expectations under a “liberty to apply” provision.

20.  I accept that the disclosure and discovery sought by H and the Court’s assessment and determination of H’s share of outstanding unpaid amounts due for Davena’s maintenance fall within the scope of implementation of the provisions embodied in the Consent Order, without causing any variation or amendments to the terms therein.

H’s January Summons

21.  H’s January Summons is for :

i.  an order for disclosure of certified true copy documents evidencing W’s compliance of her undertakings under Recital G and Recital H of the Consent Order (concerning the children’s maintenance);

ii.  in case of any non-compliance of W’s undertaking, an order that W shall comply with the same; and

iii.  an order for mutual discovery of certified true copy documents evidencing both parties’ future compliance of Recital G of the Consent Order.

22.  Ms Liu for H submitted that due to the lack of a clear mechanism for providing proof of compliance, W was able to hide behind and defaulted from the compliance of undertakings. Hence, mutual future disclosure should be granted so that H does not have to engage in the lengthy and costly exercise to compel compliance.

23.  With respect, I disagree. Davena is a grown child of 26 years old, and a medical student in the US. There had been no complaint ever from her that there was any non-compliance from W as to her maintenance, payments towards her living or education related expenses. More importantly, the mode of payments is very clear, namely all these maintenance and payments shall be deposited by the parties into Davena’s Account as defined in Recital G of the Consent Order. I can see no reason why the parties are unable to strictly comply with it. I consider that if the parties choose their own mode of payments by depositing the payments into another account or settling payments in their own ways, as they wish, they are simply trying to create more disputes. If the relevant part of Davena’s Account can be produced, preferably by Davena herself, showing the parties’ non-compliance of Recital G of the Consent Order, it would not be difficult for the court to determine whether they are in breach of the undertaking in Consent Order and may be eventually liable for contempt of the court.

24.  Besides, Ms Chow for H rightly submitted that where discovery is sought to incriminate and punish the party who gave the undertaking for contempt of court for breaking his undertaking, the Court would dismiss such application as it would go beyond the legitimate purpose of an order for discovery in aid of a Mareva injunction or undertakings: AJ Bekhor & Co v Bilton [1981] QB 923, at 955 per Stephenson LJ. In that case, the English Court of Appeal allowed an appeal against an ancillary disclosure order made as such order was unnecessary for the proper operation of the Mareva injunction or undertakings, even if it was to establish the extent of the defendants’ non-compliance thereof. Ackner LJ made clear at 945 that the plaintiff’s application failed as “I do not consider that he [the judge at first instance] had the jurisdiction to achieve it by the order which he made.”

25.  The sentiment is echoed by Knox J in Bhimji v Chatwani (No 2) [1992] 1 WLR 1158, 1169:

“AJ Bekhor & Co Ltd v Bilton is, however, of assistance in the present case as indicating that before an order for disclosure is made under the ancillary jurisdiction there must be an intrinsically justifiable reason directly connected with the proper exercise of the court’s primary jurisdiction… I am not satisfied that… the promotion of compliance in the future by collecting evidence of past non-compliance, does constitute in itself an intrinsically justifiable reason directly connected with the proper exercise of the court’s primary jurisdiction.” (emphasis added)

26.  Lastly, W fails to explain why certified true copy but not plain copy or original documents have to be produced. I am also not satisfied that W is in possession, custody or control of the documents sought in H’s January Summons.

27.  In the circumstances, I consider improper and unnecessary to make an order for disclosure of documents as sought by H. H’s January Summons shall be dismissed.

W’s February Summons

28.  W asked the Court to :

i.  assess and determine whether H has not paid his shares of Davena’s educational related expenses etc from 23 June 2020 to the date of the order to be made; and

ii.  vary the undertaking in connection with the stakeholding arrangement under Recital G(iii) and G(v) of the Consent Order (“Variation of Undertaking”).

29.  At the hearing on 15 July 2021, this Court directed that the parties do lodge a joint scott schedule relating to the parties’ share and payment for Davena’s expenses, including living, rental, utilities, education related expenses, tuition and health insurance for the period from 1 December 2018 pursuant to the Consent Order to 15 July 2021 (“Joint Scott Schedule”) within 14 days.

30.  The Joint Scott Schedule was eventually filed on 10 December 2021, with time extended by consent. In gist, the parties agreed that the living expenses from December 2018 to July 2021 payable by H under the Consent Order are $608,000 (i.e. $19,000 X 32) and H had made total payment of HK$1,033,696.35 during this period. The difference is the education expenses. H said HK$492,424.02 whilst W’s case is HK$586,653.9.

31.  W contends that H’s calculation fails to take into account tuition fees for 2019 Spring of HK$96,179.05[1], and thus the arrears is in fact HK$160,957.55 (i.e. $608,000 + $586,653.9 - $1,033,696.35).

32.  It is H’s own position that as of 15 July 2021, he has been in default of child maintenance payments to Davena pursuant to Recital G(ii) of the Consent Order with admitted arrears in the sum of HK$66,728.67[2].

33.  H argued that 2019 Spring Tuition should not be counted as a payment under the undertaking in the Consent Order and it was not settled by W's own money, but by money sourced from H.

34.  In my view, the parties are liable to pay Davena’s Spring 2019 tuition fees which the school billed for on 11 December 2018[3]. Recital G(ii) of the Consent Order reads:

“They will share equally all of Davena’s reasonable living and educational expenses payable from 1 December 2018 until she finishes full time education. Davena’s expenses will be paid as follows:-

(a) Davena’s living, rental and utilities expenses are currently HK$38,000 per month and each party’s 50% share is HK$19,000 per month, such sum to be paid to Davena on the 1^st of each calendar month from 1 December 2018 into Davena’s sole name Citibank US account no. 6780XXX610 (“Davena’s account”), such sum to be reviewed from time to time; and

(b) The parties to further share equally Davena’s education related expenses, tuition and health insurance to be paid equally within 7 days of receipt of invoice for the same by depositing the payment(s) into Davena’s account.” (emphasis supplied)

35.  It is the bare assertion of H without documentary evidence that the 2019 Spring Tuition was fully settled prior to the Consent Order with money from the Joint Account with Davena (instead of Davena’s account), which was sourced from H. I refuse to accept it. In any event, H has not complied with Recital G(ii)(b) of the Consent Order by depositing the payment(s) into Davena’s account.

36.  In the circumstances, I order that H do pay Davena her maintenance in arrears in the sum of HK$160,957.55 by depositing into Davena’s Account as defined in Recital G(ii)(a) of the Consent Order.

37.  Regarding Variation of Undertaking, paragraph 3 of W's February Summons read as follows:

"Recital G(iii) and G(v) of the Consent Order shall be varied by replacement of Messrs Tony Lam & Co with Messrs CRB to stakehold the remaining balance of the HK$1,500,000 under Recital G(iii) of the Consent Order, such funds to be paid to CRB within 7 days of the payment at paragraph 2 above, together with a full accounting of how the funds have been spent to be provided at the same time." (emphasis added)

38.  W also confirmed in her unsigned 19^th Affidavit that she was seeking an order to vary Recital G(iii) of the Consent Order[4].

39.  Ms Chow for W tried to argue that W indeed applies for discharge of an existing undertaking and invites the court for acceptance of a new undertaking. With respect, I disagree. As the Court has no jurisdiction to vary an undertaking in the Consent Order, paragraph 3 of W's February Summons be dismissed.

Order

40.  To sum up, I now an order as follows:

i.  H’s January Summons be dismissed;

ii.  H do pay Davena her maintenance in arrears in the sum of HK$160,957.55 by depositing into Davena’s Account as defined in Recital G(ii)(a) of the Consent Order;

iii.  paragraph 3 of W's February Summons be dismissed.

Costs

41.  For the question of costs, all these applications are heard together and W succeeds in opposing H’s January Summons but only partly succeeds in W's February Summons. I have to take into account of my refusal to entertain W’s counsel submission for Hadkinson order. After considering all relevant factors carefully, I exercise my discretion to make an order nisi that H do pay 60% costs of H’s January Summons and W's February Summons, including all costs reserved and in relation thereto, with certificate for counsel, which shall become absolute unless any of the parties apply to vary within 14 days.

42.  Lastly, I thank counsel for their assistance.