WONG OI HAN v. SIN WAI CHUNG

HCMP 276/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 276 OF 2012

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BETWEEN

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J U D G M E N T

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Introduction

1.  On 29 July 2010, the applicant filed a divorce petition with the Family Court in FCMC9658/2010 (“the Matrimonial Proceedings”).  After negotiation, the parties reached a settlement on ancillary relief, which resulted in a consent order made by the Family Court on 30 November 2010 (“the Consent Order”) whereby :

(1)  The respondent shall transfer to the applicant all of his shares in Company A;

(2)  The applicant shall transfer to the respondent all of her shares in Company B; and

(3)  The respondent shall pay the applicant maintenance of HK$150,000 per month following the issuance of the decree absolute.

2.  The decree absolute was made on 1 February 2011.

3.  The applicant had since discovered that at the time of the settlement, she was mistaken about the respondent’s financial position, in particular, the net worth of Company B.  She would not have settled her ancillary relief application with the respondent had she not been labored under the mistaken belief.  According to the applicant, the respondent had also at the time of the settlement made a mistake concerning the profitability of a factory in the Mainland owned by one of his companies of which he had a controlling interest. Because of his mistake, the respondent wrongly believed that he could pay her a monthly maintenance of HK$150,000.  Having discovered the mistakes, the parties re-negotiated.  They have now come to a new full and final settlement of the matters pertaining to ancillary relief whereby :

(1)  The applicant shall get a lump sum instead of monthly maintenance;

(2)  In order to secure payment of the lump sum, the respondent shall execute a share mortgage in the applicant’s favour of his shares in Company C;

(3)  The applicant shall not be required to transfer her shares in Company B to the respondent and the respondent shall transfer his shares in Company B to the applicant instead; and

(4)  The respondent remains under a duty to transfer his shares in Company A to the applicant.

4.  The applicant commenced the present proceedings by way of originating summons in the High Court on 14 February 2012, seeking a declaration that the Consent Order be set aside; and the matters of ancillary relief in the Matrimonial Proceedings be returned to the Family Court for disposal.  The respondent did not contest the proceedings.  At the hearing on 22 March 2012, having heard the parties, I directed them to file further written submissions on the procedure to be adopted for setting aside the Consent Order.  I indicated that I would then dispose of the matter on paper, which I now do.

Discussion

5.  The Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”), recognizes two separate ways in which financial provisions may lawfully be made for parties to a marriage upon dissolution.  One is a maintenance agreement falling within the meaning of section 14.  The other is by obtaining an order from the court for periodical payments, secured or otherwise, and lump sum payments for a spouse (section 4); the same financial provision for a child (section 5); property adjustment orders (section 6) and sale of property orders (section 6A).

6.  MPPO then makes provisions for variation or setting aside of the two forms of financial provisions separately.

7.  For maintenance agreements, a party may apply to vary if he or she satisfies section 15 (during lifetime of parties) or 16 (after death of one party).  An application under section 15 shall be made by originating application containing, unless otherwise directed, the information required by Form 16 : rule 100 of the Matrimonial Causes Rules, Cap 179A (“MCR”). An application under section 16 shall be made by originating summons in Form 17 : rule 101 of MCR.

8.  For orders, section 11 empowers the court to vary or discharge (i) an order for periodical payments or payment of a lump sum by instalments (section 4(1)(a) or (b) or 4(2)(b) and section 5(2)(a) or (b) or 5(4)) and (ii) property adjustment orders as specified (section 6(1)(b), (c), (d) or (e)) on or after a decree of judicial separation; (iii) a sale of property order (section 6A).  A variation order under section 11 is within the definition of “ancillary relief” in rule 2(2) of MCR.  The procedure for making an application for a variation order generally follows that for making any other application for ancillary relief : Rayden and Jackson on Divorce and Family Matters, 18^th Edn, para 18.26.  In particular, it should be made by notice in Form 8 (rule 68(3) of MCR) and supported by an affidavit (rule 75 of MCR).

9.  An order under section 4, 5, 6 or 6A may be obtained after a contested hearing or by consent.  But it matters not.  As Lord Diplock explained in the leading case of de Lasala v de Lasala [1980] AC 546 at p 560G-H :

“Financial arrangements that are agreed upon between the parties for the purpose of receiving the approval and being made the subject of a consent order by the court, once they have been made the subject of the court order no longer depend upon the agreement of the parties as the source from which their legal effect is derived. Their legal effect is derived from the court order.”

This statement represents a significant departure from the general principle that the force and effect of consent orders derives from the contract between the parties leading to, or evidenced by, or incorporated in the consent order.  This is a necessary consequence of the legislative policy behind the statutory provisions for ancillary relief in the final form (relating to lump sum payments and transfer or sale of property) to permit the parties to a divorce to make a clean break in financial matters, if they wish, from which there is no going back.  If the legal effect of a consent order of this kind depended on the agreement between the parties it would be difficult to avoid the conclusion that it is a subsisting maintenance agreement within the meaning of section 14 of MPPO and consequently subject to variation by the court under section 15.  This would defeat the policy of a clean break.  Since their legal effect is derived from the court order, it must follow that consent orders for ancillary relief are, as far as possible, to be dealt in the same way as non‑consensual orders : Thwaite v Thwaite (1981) 2 FLR 280, per Ormrod LJ at p 284C-E.  So if a consent order falls within section 11, the court may vary or discharge it accordingly : Brister v Brister [1970] 1 WLR 664.

10.  If a consent order does not fall within section 11, it is well established that the court may set it aside on the following grounds :

(1)  fraud;

(2)  mistake;

(3)  non-disclosure or misrepresentation of material facts at the time the order was made;

(4)  new events have occurred since the order was made which have invalidated the basis upon which the order was made.

See Rayden, supra, para 18.30.

11.  What is less straightforward is the proper procedure to be adopted to set it aside.

12.  In England, a number of procedural routes are available :

(1)  a fresh action : de Lasala v de Lasala, supra, per Lord Diplock at p 561C-D;

(2)  an appeal to a higher court : de Lasala v de Lasala, ibid;

(3)  an application in a county court for a re-hearing under the County Court Rules Order 37, rule 1(1), which provides : “in any proceedings tried without a jury the judge shall have the power on application to order a rehearing where no error of the court at the hearing is alleged”;

(4)  the issue of a summons in existing proceedings returnable before the trial judge. In Robinson v Robinson (Disclosure) (1983) 4 FLR 102, Ormrod LJ observed at p 114B-D:

“From the point of view of convenience there is a lot to be said for proceedings of this kind taking place before a judge at first instance because there will usually be serious and often difficult issues of fact to be determined before the power to set aside can be exercised. These can be determined more easily, as a rule, by a judge at first instance. Moreover, he can go on to make the appropriate order which we cannot do in this court. I think that these proceedings should normally be started before a judge at first instance, although there may be special circumstances which make it better to proceed by way of appeal.”

      In Re C (financial provision: leave to appeal) [1993] 2 FLR 799, Thorpe J (as he then was) said at p 800G – H :

“[Ormrod LJ] does not there say explicitly the method by which proceedings should normally be started before a judge at first instance, but I am in no doubt at all that his meaning was that they should be started by issue of summons [in existing proceedings].”

      This appears to be the simplest route to simplify complex procedures : Benson v Benson (Deceased) [1996] 1 FLR 692, per Bracewell J at p 697H.  But it is also the most controversial and the subject of a difference in judicial opinion.  In Harris (formerly Manahan) v Manahan [1996] 4 All ER 454, Ward LJ disapproved the procedure at pp 465h-466a.  In Shaw v Shaw [2002] 2 FLR 1204, Thorpe LJ reiterated at para 44 (v) that it is a proper procedure. 

13.  Despite the judicial difference principally between Thorpe and Ward LJJ, it appears that in the special circumstances where the parties consent to setting aside or where the facts are not in dispute and the vitiating factor is plain beyond all argument, then a summons may be issued before the trial judge for setting aside the consent order : Allsop v Allsop (1981) Fam Law 18, as explained in B-T v B-T (Divorce : Procedure) [1990] 2 FLR 1, per Ward J (as he then was) at pp 14F-15H.

14.  In Hong Kong, the state of the law is more settled.  I will follow the order set out in paragraph 12 above.

15.  A fresh action and an appeal to a higher court are the only two recognized procedural routes for setting aside a consent order : Lui Sik‑kuen v Lee Suk-ling [1992] 2 HKLR 371, applying de Lasala v de Lasala.  It is up to the applicant to decide on the procedural route which best suits the circumstances of the case.

16.  The procedural route of rehearing, as is the case under CCR Order 37, rule 1 is not available in Hong Kong in the absence of any equivalent provision in MCR, Rules of the District Court or Rules of the High Court.

17.  Rule 55(1) of MCR does provide that an application for re-hearing of a cause tried by a judge alone (whether in the Court of First Instance or the District Court), where no error of the court at the hearing is alleged, shall be made to a judge.  A cause means a matrimonial cause as defined by section 2 of the Matrimonial Causes Ordinance, Cap 179, which in turn provides that matrimonial cause means any proceedings for divorce, nullity, judicial separation and presumption of death and dissolution of marriage.  Rule 55 does not appear to be appropriate to deal with an application to set aside a consent order for ancillary relief.

18.  In Lui Sik-kuen v Lee Suk-ling, supra, the applicant issued the summons for setting aside the consent order before the family judge.  The judge then treated it as a fresh action so as to satisfy the requirements of de Lasala.  The Court of Appeal (Fuad VP, Penlington and Nazareth JJA) unanimously disapproved the procedure and held that the expression simply could not embrace an application in proceedings already instituted.  The Court also expressed considerable doubt about what Ormrod LJ had said in Robinson v Robinson.  In the end, Nazareth JA observed at pp 381-382 :

“It seems to me rather, that Ormrod LJ, while accepting the law as stated, was recounting the considerable advantage of a further procedural option enabling a judge at first instance not merely to set aside the order improperly obtained, but to go on to make the appropriate order in lieu. Those advantages in the present case were convincingly identified by [the judge]. Nevertheless the procedural option envisaged is not available under the law in its present state…”

19.  As to the effect of Allsop v Allsop, Fuad VP adopted at p 379 Ward J’s conclusion in B-T v B-T, ibid.

20.  Lui Sik-kuen v Lee Suk-ling is binding on this court.  It follows that when contested, issuing a summons for setting aside a consent order in existing proceedings is not permissible.  The procedural route is available only if the case falls within the very limited proposition raised by Allsop v Allsop, as expounded by Ward J in B-T v B-T and adopted by the Court of Appeal in Lui Sik-kuen v Lee Suk-ling.

21.  With these principles in mind, I now turn to the Consent Order.

22.  I first note that the Consent Order is a mixed order in the sense that it contains a provision for periodic payment which is covered by section 11 of MPPO, and other provisions which are not.  But on any view, the Consent Order is meant to be a final order disposing of all the applicant’s claims for ancillary relief.  The parties obviously intended to have a clean break.  And the applicant is seeking to set aside the Consent Order in its entirety.  Procedurally, I do not think the applicant needs to take out separately a section 11 application to deal with the provision for periodical payment.

23.  As noted, the respondent did not contest the application.  In fact, he must have consented to the setting aside of the Consent Order.  And on the evidence before me, the mistakes relied on by the parties for setting aside the Consent Order are not in dispute.  So Allsop v Allsop, as explained in B-T v B-T, applies.  It follows that the applicant should have issued a summons in the Matrimonial Proceedings for setting aside the Consent Order rather than issuing the current proceedings in the High Court.

Conclusion

24.  For the above reasons, I dismiss the present proceedings with no order as to costs.

25.  Finally, I would like to mention this.  I fully agree with the view expressed by the learned editors in Rayden at para 18.44 that setting aside consent orders for ancillary relief is an area that is ripe for reform.  I hope the matter will receive active consideration soon.