L v. F

FCMC 7917/2018

[2023] HKFC 108

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 7917 OF 2018

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JUDGMENT
(Crossley application, Preliminary Issue)

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1.  This is the Petitioner wife’s (“W”) Crossley application by her Summons dated 28 June 2021 (“Crossley Application”). W asks the Respondent husband (“H”) to show cause as to why he should not be bound by the terms of a Pre-nuptial agreement dated 23 April 2005 (the “PNA”).

2.  H opposes her application.

3.  I have found that the H has failed to show cause. My reasons are as follows.

Procedural History

4.  W’s Petition says that the parties separated on 1 June 2016, H says this did not happen until August 2017.

5.  On 25 June 2018, W petitioned for divorce on grounds of two years separation and filed her Statement as to Arrangement for Children. The said documents were personally served on H on 3 September 2018.

6.  On 3 June 2021, W proposed a global settlement for matters concerning the parties’ children and finances based on the PNA. H was personally served the relevant documents on the following day.

7.  H never responded to any of those documents.

8.  Decree Nisi was pronounced on 11 June 2021.

9.  After W issued her Crossley Application on 28 June 2021, H filed a Notice to Act on 6 August 2021. This was the first time H became active in these legal proceedings (three years after he was personally served the Petition).

10.  The parties tried to resolve their differences by way of mediation, but only managed to agree on some interim access arrangements regarding the Children in November 2021.

11.  The parties exchanged affirmations on the Crossley Application. Thereafter, at a call-over hearing before HHJ Melloy on 10 January 2022, Her Honour ordered, inter alia:

a.  That a trial on the Crossley Application be set down (i.e. the current hearing)

b.  Parties to file and exchange Form Es, within 28 days, with disclosure of bank account statements from January 2020 and credit card statements from January 2021.

c.  No further affirmations or questionnaires to be filed without leave of the Court.

12.  The Court further directed that if there were any issues about disclosure, that would need to be raised at the PTR.

13.  Parties exchanged their Form Es on 7 March 2022.

14.  By the W’s amendment Summons on 18 July 2022 (a few days before the PTR), she sought to amend her Crossley Application to include Rule 6 of the Matrimonial Causes Rules (Cap 179A) (“MCR”) as a further or alternative basis for her application (amendment as underlined):

“There be a hearing fixed at which the Respondent shall show cause why he should not be bound by the terms of the Pre-nupital Agreement signed on 23 April 2005 (Crossley application); or in the alternative, there be an opinion to be expressed by the Court as to the reasonableness of the Pre-nuptial Agreement signed on 23 April 2005.”

15.  This latter Summons was returnable the same day as the PTR date on 22 July 2022 before me, I dismissed the amendment Summons.

16.  The hearing took place over three days from 11 - 13 October 2022, both parties gave evidence at trial.

Rule 6 of the Matrimonial Causes Rule

17.  Rule 6 of the MCR is titled “Application to court to consider agreement made in contemplation etc of divorce or judicial separation”. Rule 6(7) in particular provides that:

“[O]n the hearing of an application under this rule, the judge may express an opinion, should he think it desirable to do so, as to the reasonableness of the agreement or arrangement and may give such directions, if any, in the matter if he thinks fit”.

18.  W’s counsel submitted that the substantive issues that require the Court’s determination at trial, namely why H should not be bound by the terms of the PNA will be the same whether this is a Crossley or Rule 6 application. But Rule 6 provides express statutory basis for the Court to opine on the PNA and give consequential directions such as those relating to discovery.

19.  H’s counsel in his closing submission said that since I dismissed the amendment summons, I have restricted myself to choosing between the following options: “either the H has not shown cause and the PNA is of magnetic decisive force OR he has shown cause and his claim is not excluded by terms of the PNA.”

20.  It is worth highlighting here that the Family Procedures Bill, which is in the process of moving through Legislative process at this moment, seeks to abolish Rule 6 of the MCR. It says:

“77. Applications to enable the parties to seek the court’s opinion on an agreement or proposed arrangements before or after the presentation of a petition are now seldom, if ever made, and there are no rules dealing with their practice and procedure. We took the view that in the absence of a comprehensive statutory code, the law and practice relating to such agreement should continue to be developed by the courts and the New Code should not include any such specific provision, except in the context of a joint application for the agreement or proposed arrangement to be incorporated in an order of the court or in the context of a FDR or CDR hearing.

78. As stated in the Interim Report, applications under Rule 6 of the MCR are now seldom, if ever made, and the proposal is that the New Code should not include this rule. (Proposal 35)

(Family Procedure Rules: Final Report)”

21.  The legislators are clearly of the view that even without Rule 6, there is enough jurisprudence to deal with applications involving agreements “made in contemplation of divorce or annulment”. It also anticipates the Court to further developing that jurisprudence. Some of these jurisprudence will be dealt with below.

The Marriage and the PNA

The Parties to the Marriage

22.  W was born in Hong Kong in 1972. She is now 50. She is the granddaughter of a successful entrepreneur and renowned philanthropist in Hong Kong. She grew up here, attended university in the United States of America, and obtained an EMBA from a University in China.

23.  H was born in 1970. He is now 52. He holds an MBA from the Business School of X. He is a Swiss national. He moved to Hong Kong in 1999, and is now a Hong Kong Permanent Resident.

24.  The parties met in August 2000, and got married on XX April 2005. 3 children were born to their marriage (“Children”). They are aged 12, 10, and 8 respectively. They all currently live with W.

Circumstances surrounding the execution of the PNA

25.  On 26 October 2004, W instructed Johnston Stokes & Master to prepare the PNA. H received legal advice from Vincent T K Cheung, Yap & Co (“VTKCY”) on the PNA.

26.  Initially in these proceedings, H said in his affirmation that the PNA came as a “surprise”, was prepared “in a rush”, and on terms which were “blatantly clear to him” to be “non-negotiable”. He also alleged that W proposed signing a PNA only “shortly before the legal marriage on XX April 2005”.

27.  W disagreed. She said:

(1)  The parties discussed signing a PNA before the parties celebrated their wedding banquet in December 2004.

(2)  H proactively negotiated the fine terms of the PNA. She refers to emails dated 20 April 2005 where H had attached a revised agreement containing his proposed amendments aimed at “tighten[ing] further up” the parties’ intentions and “mutual firm wills”;

(3)  H’s proposed revisions were in line with the terms of the finalised PNA. For example, H proposed that “each of the parties, at all times throughout the Marriage, is responsible for supporting and maintaining himself or herself”. This mirrors Clause 3.8 of the PNA; and

(4)  He has acknowledged signing the PNA of his own free will with benefit of independent legal advice.

The PNA

28.  The parties then executed the PNA. The salient terms thereof are as follows:

(1)  All assets held prior to the marriage or acquired during the marriage (including but not limited to gift or inheritance received) by the parties in their respective names shall remain in their respective absolute beneficial ownership: Clauses 3.1 and 3.2. Assets are to be construed expansively: they refer to “all properties, real or personal”, and all “payments or distribution actually received or rights which have vested during such period”: Clause 3.3.

(2)  Neither party will make any claim to the assets in the separate absolute beneficial ownership of the other: Clause 3.4.

(3)  At all times throughout the marriage, each party is responsible for supporting and maintaining himself/herself, there being no express or implied obligation on either party to support or maintain the other in any way: Clause 3.8.

(4)  The parties agree that in the event of dissolution or annulment of the marriage or separation of the parties for a period in excess of one year, all assets in the separate absolute beneficial ownership of either party whether pursuant to Clauses 3.1 or 3.2 or otherwise shall remain in the respective absolute beneficial ownership of that party free from any claim by the other: Clause 4.1.

(5)  The parties agree that the provisions of the PNA relating to dissolution or annulment of the marriage will be incorporated insofar as they may be relevant into a consent order and the parties will make joint application to the Court for approval of such order and will include appropriate dismissal of either party’s claim against the estate of the other: Clause 4.3.

(6)  If there are any children born to the marriage, it is agreed by the parties that they will have joint custody of the children with care and control to W and reasonable access to H. It is further agreed by the parties that they will jointly be responsible for the financial support of the children in equal shares: Clause 4.4.

(7)  Each party acknowledges that he/she is executing the PNA of his/her own free will, and that he/she has had the opportunity of seeking separate and independent legal advice in respect of the PNA and that both parties are satisfied with the duty of full and frank disclosure to each other of his/her respective financial position and other circumstances: Clause 4.7.

(8)  Any variation to the PNA must be by a supplemental deed executed by both parties: Clause 6.

(9)  The Schedule of H’s respective assets attached to the PNA records H having assets of HK$72,190,000 and W having HK$72,827,000.

29.  H’s assets, listed in the Schedule to the PNA, are as follows:

	HK$
Annual salary	None
Monies in Bank Accounts	2,820,000
VPL	36,000,000
Stock Investments:     (1)  V Bank     (2)  M Bank     (3)  S Bank	4,860,000 2,210,000 13,800,000
Offshore companies shareholding: GCM	3,800,000
Watch collection	6,580,000
Art collection	2,120,000
Total Assets	72,190,000

30.  Despite having had legal advice from VTKCY, H now says the “financial information included in the PNA [2005] was not accurate as I have never had accounts with entities called ‘M Bank’ or ‘S Bank’”.

31.  H also says he included fictitious accounts in his financial disclosure because he was “advised that [W’s] and [H’s] assets should be roughly the same”. He did not explain why he was given this admittedly odd piece of advice, nor why he took it. He also did not provide any evidence to corroborate what he says.

2012 Agreement

32.  The parties signed an agreement on 5 December 2012 (“2012 Agreement”), it was titled “Cost, Payment and Residential Agreement”. The parties interpret the nature of this document differently.

33.  H drafted this agreement. W says it is an agreement to apportion family expenses in anticipation of the birth of their third child. She says this agreement reinforces the fundamental idea of separation of property laid down in the PNA. On 16 September 2013, the parties agreed in writing that H would contribute $35,000 every month towards the family expenses.

34.  H argues that one of the reason the parties signed the 2012 Agreement to inter alia address concerns about his accommodation. The 2012 Agreement gave him “indefinite and unrestricted right of abode and residency” of their previous matrimonial home, and should W set up a home close to the Children’s school, H could visit and live in that premises free of charge until the last kid turns 25. H says he was “evicted” from the previous matrimonial home and accuses W of not honouring this agreement.

35.  It is of note that the 2012 Agreement was not a variation to the PNA as it was not signed as a Deed, Clause 6 of the PNA refers.

W’s Case

36.  It is W’s case that after H moved out from the matrimonial home in 2015, he found employment with a Swiss bank between 2016-2017, and frequently left for Europe. He was absent, and practically disappeared from the Children’s lives. He only showed up occasionally, and demanded to see the Children on short notice; and sometimes not even when he was in town.

37.  During this period, W was solely responsible for the Children’s care and financial support. H did not contribute to family expenses at all since January 2017.

38.  W says H only started taking an interest in these proceedings after W’s father died in 2021, and W issued the Crossley Application in June 2021. H sought to impugn the PNA, said he is in financial destitution, and (despite maintaining little and irregular contact with the Children) asked for a 5-5-2-2 shared care arrangement, and for provision of lifetime accommodation (a furnished 4-bedroom apartment) in the range of $68,000-82,000 monthly rental for him so that the Children can spend time with him in Hong Kong. Incidentally, W says that H started exhibiting new-found interest in the Children’s lives at around the same time.

39.  W says that H’s suggestion that he has been dishonest with his financial disclosure in the PNA is unsubstantiated.

40.  W says that H’s other allegations about his financial destitution are also unsubstantiated, that the disclosure in the H’s Form E is inadequate, and that even though W has given him opportunities to make good his lack of disclosure, H has failed to do so.

41.  H also appears to allege that the PNA was not freely entered into by him, W opposes this position.

42.  W also contends that the parties had (since the day it was executed) led their lives in total accord with the terms of the PNA. They kept their finances separate and paid for their own expenses. H would repay loans from W, and H would pay a monthly fee for his accommodation at the parties’ previous place of residence.

43.  W therefore argues that the PNA is of magnetic and overriding importance and should be given the fullest possible effect.

44.  Referring to the W’s counsel’s note for the PTR on 22 July 2022, and although I acknowledge that this was in the context of the amendment she was seeking to make to the Crossley Summons, I accept that the intentions for these proceedings on the W’s part are very clear; she has the following alternative positions:

a.  To give the PNA full weight and that it should be determinative of the AR Order

b.  Court to make a determination on the PNA and to case manage these proceedings, including to make findings on the effect of the PNA and give appropriate directions for the further conduct of the proceedings as necessary.

c.  If the Court considers that H should be held to the PNA, then the scope of discovery that H should be allowed to seek from W ought to be substantially limited, from the perspective of fairness or cost efficiency.

H’s Case

45.  In H’s affirmation and as mentioned above, he says that the PNA which was raised only shortly before the marriage in April 2005 was a surprise to him and that he felt that it was clear the terms therein were not negotiable. He then said that those advising him were in a position of conflict but they continued to act for him as they were “running out of time”.

46.  His counsel in the opening paragraph of his submission asks this question: “Is the prenuptial agreement between the parties in the form of the Deed dated 23 April 2005 prior to their formal marriage the next day to be finally determinative of their respective claim for ancillary relief.” (my emphasis)

47.  He also says the W’s Summons does not seek Court’s views on the weight to be attached to the PNA in the determination of the claims, and that W was seeking this to be done via her amendment Summons (referred above), which I dismissed.

48.  H says that the weight to be given to the PNA depends on Court ascertaining with disclosure the financial resources of the parties, their needs and the needs of the children.

49.  However, in §5 of his counsel’s opening submission, he said that it was:

“not [H] case that little or no weight should be given to the PNA; that he accepted it was a factor, and one which may result in a significantly different award than otherwise might have been the case.”

Furthermore, the following stance was repeated in his closing submission at §30, and then at §81:

“The H has conceded that the PNA should be given significant weight and that, as such, the award the Court may make might well be substantially different than it would otherwise be, absent such an agreement.” (my emphasis)

50.  Furthermore, H insists that the AR claim should not be determined by use of the Crossley procedure. That the Court does not have the benefit of full and frank disclosure by either party and has given direction “curtailing the disclosures made”. This clearly refers to the Order made by HHJ Melloy in January 2022. He also argues vehemently that:

“The W is asking the Court to conduct the Section 7 exercise now, at this trial. The Crossley procedure is not a determination of a preliminary issue as to the weight to be accorded to the PNA.”

51.  H then argues that as this case does not accord with the specific facts of Crossley v Crossley [2007] EWCA Civ 1491, and that W was wrong to “press on with her Summons with all the restrictions that entails”. H also seems to insinuate that it was wrong for this Court to “afford the W a full trial of her summons on the understanding that the disclosure obligations be severely modified”.

52.  Trying to pull together the threads of the H’s arguments, it appears that he is saying:

a.  Court should not have allowed a Crossley Summons trial as a preliminary issue

b.  Court does not have enough information to determine the weight to be given to the PNA because Court has curtailed the discovery process

c.  That said, H has conceded that the PNA is to be given significant weight and acknowledged that the award would be different than what it would have been under normal circumstances absent this nuptial agreement.

53.  H says that it would be unfair to hold him to the PNA because his financial situation has changed. He claims that he is jobless, all his businesses have failed, he does not speak Cantonese or Putonghua, companies that would employ him are relocating from HK due to social unrest and covid, he was forced to leave HK because it was unaffordable; and so on. In his March 2022 Form E, he declared that he has HK$2.28 M in his bank account; and zero income. His counsel in his opening submission says H’s net worth was then down to less than $500,000.

54.  H argues that the PNA is unfair because it made no allowance if one party to the marriage has fallen on hard times as in his current position.

55.  He also says that W is attempting to “change the goalposts” of the Crossley Application by suggesting that it be conducted as a case management process to “guide the court in determining the degree of further disclosure”.

56.  As mentioned above, H says W has breached the 2012 Agreement.

57.  H argues that his needs must be considered for the AR:

“It is recognised in this case that the Court may well conclude that it should interfere with the PNA only to the extent to which it is necessary to ensure the H’s needs and those of the Children are met” (§64 of H’s opening)

Analysis of some Issues

58.  I would like to address the following issues which arose out of the arguments in this case:

a.  What is a Crossley application?

b.  Should a Crossley application be heard as a Preliminary Issue?

c.  Role of PNA in AR proceedings?

d.  What is the meaning of having shown cause? And what happens when a party fails to do so?

What is a Crossley Application?

59.  H’s counsel appears to be arguing that a Crossley application should be made only when the facts of a case is akin to that in the case of Crossley v Crossley. In that case, the marriage lasted less than two years between two mature adults, H aged 62 and Wife aged 50, both were married before, and came into the marriage with their own wealth. They executed a pre-nuptial agreement which stated that both of them should walk away from the marriage with whatever they had brought into it, and neither party shall apply to court for any order for financial provision. The husband in that case applied for the wife to show cause why their pre-nuptial agreement should not be binding on the wife. In a case management hearing, Bennet J ordered Form E without supporting documents, nor allow questionnaires; and added that “in the Form Es it can be explained why the prenupital agreement is or is not what I would call a knockout blow”. The wife appealed against the case management decision and was dismissed.

60.  In the H’s cross-examination of W on day 3 of the hearing, H’s counsel asked of W whether she is asking for the PNA to be a “knockout blow”; understandably, W did not comprehend his question. This was then followed by:

H’s counsel: Summons to show cause, he should be bound?

W: Correct

H’s counsel: Your case, he should be bound

W: He should be bound, he hasn’t shown cause

H’s counsel: He should be bound even though this is not a short childless marriage

W: Even if there are kids, should follow the PNA

61.  In my view, a Crossley application is not confined to facts similar to that in the actual case of Crossley v Crossley. Crossley application has become understood to be made when one party seeks to resile from a nuptial agreement, and is asked by the counter party (the applicant) to show cause as to why the nuptial agreement should not be binding on the parties.

62.  In a Crossley application, the Court is concerned with whether the parties should be bound by the subject nuptial agreement, it is not concerned with the final outcome of the ancillary relief application. Of course, in certain cases, a finding that the parties should be bound by the subject nuptial agreement may be tantamount to deciding the final outcome of the ancillary relief application; but that would be a consequence of the circumstances of that particular case, rather than that of Crossley applications generally.

63.  Crossley v Crossley made it clear that nuptial agreements should not oust court’s discretion in respect of the ultimate ancillary relief proceedings.

“14. … [H’s counsel] accepts that the court must conduct the section 25 exercise by reference to all the statutory criteria. He accepts that the existence of the agreement cannot oust the court’s obligation to apply section 25. He accepts that a prenuptial agreement is one aspect of the case. However, he emphasises that this is a childless marriage of very short duration, for a substantial portion of which the parties were living apart. The marriage was between mature adults, both of whom had been previously married and divorced; both parties have and had prior to the marriage very substantial wealth. The prenuptial agreement provides for the retention by each of the parties of their separate properties and division of joint property if any, and finally that there is no such joint property. Upon these facts [H’s counsel], correctly in my view, adds that the combination of these factors gives rise to a very strong case that a possible result of the section 25 exercise will be that the wife receives no further financial award.

15. All these cases are fact dependent and this is quite exceptional case on its facts, but if ever there is to be a paradigm case in which the court will look to the prenuptial agreement as not simply one of the peripheral factors in the case but as a factor of magnetic importance, it seems to be that this is just such a case …”

Should the Crossley application be heard as a Preliminary Issue

64.  H has argued emphatically that the Crossley Application should not be heard as a preliminary issue. He argued this at trial, and continued to do so after the trial in his closing submission. In his opening submission §25, he says this:

“Crossley Application are ancillary relief trials. They are not the determination of preliminary issue. They are to be confined to rare cases where full disclosure is unnecessary.”

65.  H’s position is also that as disclosures had been limited by HHJ Melloy at the January 2022 direction hearing, the court does not have enough information to make a determination on the PNA.

66.  W in contention said that he could have made disclosure in his Form E.

67.  Referring to the transcript of the January 2022 hearing, HHJ Melloy has made her directions quite clear:

“H’s solicitors: if we are in the situation whereby they’re pursuing the Crossley application, then I suppose I would say that we just need to look quite carefully about how that is managed because the way that it’s being pushed forward at the moment, it would seem to me as if the judge would be being asked to make a decision about whether the husband should be held to a prenuptial agreement without any context whatsoever because there’s no disclosure from the parties.

Court: … I know that there’s been obviously a discussion between the two of you about the Form Es – but I would certainly want at least truncated Form Es from the parties, from both sides, and I would not be willing to entertain the notion that one of you files a detailed Form E and the other one doesn’t … I think what you need to think about is ensuring that there is sufficient information before the court to enable the matter to be dealt with fully in the Crossley application.” (my emphasis)

68.  A show cause application puts the onus on the resiling party to advance reasons why he should not be bound, as quoted in the W’s opening submission from Luckwell v Limata [2014] EWHC 502 at §130(5) “there is at least a burden on the husband to show that the agreement should not prevail”. It is therefore quite clear that it is up to H to deliver up sufficient information to satisfy this Court that he should not be bound to the PNA; and HHJ Melloy has indicated clearly that he should put forward his case fully for this trial.

69.  This matter was thus so set down by HHJ Melloy in January 2022. There was no appeal to this case management decision.

70.  H has said none of the case law shows Crossley Applications can be heard as a preliminary issue. He also said in his closing that the parties should have applied for the issue to be heard under Order 33 r 4.

71.  H’s counsel is incorrect on the first count, HHJ Melloy in her decision of V, RHM v V, ES also know as B, ES [2019] HKFC 279, did precisely just that, she set down issues of a two Consent Summons heard as preliminary issues. Furthermore, my view is that the Court can decide that a Crossley application can be heard as a preliminary issue; and it can indeed order the same without a formal application from the parties.

72.  However, I should not be taken to mean that Crossley applications should invariably be heard as preliminary issues. Quite the contrary, Crossley applications could be heard as preliminary issue if the court determines that in doing so, there would be a chance to avoid protracted hearings, costs, and duplicitous effort. It is clear from the transcript that HHJ Melloy had cast her mind in considering hearing the Crossley application as a preliminary issue, and she had opined that in her experience, “after the first round of litigation … and once it’s all been aired and a judgement’s been handed down, then often the areas of dispute are so narrow that it makes the settlement easier.”

73.  In my mind, whether a particular Crossley application should be heard as a preliminary issue should not be determined by looking at whether previous Crossley applications have been ordered to be heard as such. That decision is one concerning case management, so one should instead look at whether the Crossley application should be heard as a preliminary issue as a matter of sound case management. There is no straitjacket requiring a Crossley application to be rolled up with the ancillary relief trial.

74.  On this point of case management, the case of S v S [2008] EWHC 2038 (Fam) heard by Madam Justice Eleanor King, 8 months following the Crossley decision, was a case management direction hearing where after assessing the husband’s show cause application, she made the following comments:

“88. In all the circumstances I have unhesitatingly concluded that this is one of that category of cases identified by Lord Justice Thorpe in Crossley v Crossley where there is a factor of such magnetic importance that it must necessarily dominate the discretionary process. I do not stay or adjourn the ancillary relief proceedings as the agreement must be considered in the context of s25 although I propose to order that the Notice to Show cause is to be determined at the next hearing and intend also to limit any additional disclosure as set out in my proposed directions.”

Inter alia, she directed that there would be no further disclosures nor replies to questionnaires which had been filed.

75.  One factor the Court should consider when deciding whether to order a Crossley application to be heard as a preliminary issue is what the applicant is seeking to achieve in corollary to the show cause proceedings. In the present case, W makes this Crossley Application and following its determination, asks this Court to consider limiting the scope of her own disclosure for the ensuing ancillary relief proceedings. In this context, her net worth according to her Form E is around $200M (and that does not even account for the value of her shareholdings in more than 10 companies incorporated in different parts of the world, the value of around 48 properties also situated in different parts of the world, and artwork and jewellery). Clearly, disclosure of these information could be a long and expensive, and maybe even a contentious exercise.

76.  Having considered the background of this case, perused the Form Es and the contents of the PNA, it is quite clear to me that this Court could save costs and time if some findings can be made on the PNA before proceeding further down the usual path of discovery.

77.  Directing a separate of trial of an issue is clearly in line with the case management power placed on this court under RHC Order 1B and in accordance with the underlying objectives of Civil Justice Reform under Order 1A. The spirit of this approach is clearly echoed in the case of Crossley at §15:

“15. …It is very important that the judge in dealing with the case should seek to save expense. It is very important that he should seek to deal with the case in ways proportionate to the financial position of the parties. It is very important, … that he should allot to each case an appropriate share of the court’s resources, taking into account the need to allot resources to other cases. In his general duty of case management, he is required to identify the issues at an early date and particularly to regulate the extent of the disclosure of document and expert evidence so that they are proportionate to the issues in question.”

78.  As a trial judge managing the process of a case, one should take a step back and consider the case in full perspective, and bear robust case management objectives in mind in making directions. It is my view that this matter was rightly set down with those objectives in mind.

Role of the PNA in AR proceedings

79.  It is fully accepted that the consideration of a nuptial agreement and the weight it carries is not to oust the s.7 considerations in an ancillary relief proceedings.

80.  It is well recognized principle that a nuptial agreement can be considered as part of the factors in the S.7 exercise; it can be “peripheral” in nature, or it can be so significant that it will dominate the exercise of discretion process. This will differ case by case and must be facts dependent.

81.  This is well recited by case law including in Crossley v Crossley, and in a non-exhaustive manner, some of these are quoted below.

82.  In the case of Wyatt v Vince [2015] UKSC 14, quoted by the H’s counsel, Lord Wilson has this to say at §29:

“…. Family courts have developed specific procedures for the determination of certain types of financial application. The obvious example is the determination of an application on a summons to a respondent to show cause why the order should not be in the terms with which, prior to an attempt to resile from them, she or he had agreed either following the separation (Dean v Dean [1978] Fam I61) or prior to the marriage: Crossley v Crossley [2008] I FLR 1467. In both cases, however, the court stressed that the show-cause procedure did not obviate the need for the court to discharge its duty under section 25 of the I973 Act, powerful though the effect of the agreement would, within that exercise, probably prove to be.” (my emphasis)

83.  On the home turf, in the case of CKK v WMY FCMC 10089 /2007 (23 December 2014), the husband was seeking an application for the Court to deal with, as a preliminary issue prior to FDR, as to whether an agreement between parties was for full and final settlement of ancillary relief; DDJ I Wong (as he then was) stated that the determination of the preliminary issue would not dispose of the ancillary relief hearing, as the “nuptial agreement is merely one of the factors that the court may consider in the section 7 exercise”. In the case of CKP v SYK [2021] HKFC 14, HHJ G Own, while taking issue with the application for a show cause exercise under Rule 6 of the MCR (Cap 179A), also made the observation that the Court has a statutory duty to consider the section 7 factors of the MPPO (§§12 - 28).

84.  Looking at the Opening Submissions of the W, her case is not that the PNA should displace the s.7 exercise. She argues that there are no vitiating factors to the execution of the PNA; that there is no unfairness in holding H to the terms of the PNA, and that the PNA must be given the fullest weight possible and dictate the ensuing case management directions specifically relating to disclosures. Therefore, it appears that the H has misunderstood the W’s case in this regard.

What is the meaning of having shown cause? And what happens when a party fails to do so?

85.  In my view, if a party has shown cause that he should not be bound by a nuptial agreement, then it is open for the court to set aside the agreement. These findings are often in the examination of vitiating factors at the time of the execution of the agreement; or the Court’s finding that the nuptial agreement in question will cause unfairness to the parties if bound.

86.  This was what happened in the abovementioned case of V, RHM v V, ES also know as B, ES, where HHJ Melloy ordered full discovery at the end of the case after setting aside a consent agreement as a result of finding that there was material lack of disclosure, the W did not receive advice, and was under inappropriate pressure. Hence the Judge held as follows at §40:

“… this is not the sort of case that was anticipated in Crossley, where truncated Form E’s were filed and the parties proceeded to bypass many of the normal rules relating to disclosures etc. Here it will be necessary for the parties to make full and frank disclosure of their financial situation and this is likely to go beyond the disclosure filed to date.”

87.  In the event that a party has failed to show cause, I am of the view that the Court can look at how much weight the PNA carries, and the timing as to when the Court can do this depends on the facts of the case, and the contents of the agreement.

88.  In Crossley, the court has found that the agreement was of “magnetic importance” by assessing the possible outcome of the case in the light of the agreement made, Bennett J’s case management decision at the early stage of the proceedings remained unchallenged on appeal.

89.  In the present case, H has said that I am not able to assess the weight of the PNA for lack of information because of the limited disclosures allowed to be made. However, he has helpfully conceded that the PNA is of significant weight in his counsel’s submission.

Two matters that arose just before and at time of Trial

90.  I need to flag the following two issues:

a.  H stated that the PNA was unvitiated only 2 weeks before the trial

b.  H had on three days before the trial sought to introduce 200+ pages of documents into the trial

Was the PNA vitiated?

91.  It is very clear that W has embarked on these proceedings ready to argue on the vitiating factors to the PNA. This was obvious from her note for the PTR and also in the opening submission.

92.  I must admit that looking at the H’s case up to the PTR, I had the same view, in that he intends to take issue with the execution of the PNA. The following is from the H’s Note for the PTR hearing on 22 July 2022:

“A day prior to the marriage the parties signed the PNA. Issues of enforceability of a document signed on the doorstep of the marriage have been raised by the Husband”.

93.  W then argued that the H has changed his position that this is not a point he would be taking. W said it was only apparent in a letter from the H’s solicitor firm dated 14 September 2022 when the following was said. One must have in mind that this was less than one month from the trial, and one year after the H has been served with these proceedings.

“In our client’s affirmation dated 15 November 2021, in paragraphs 13-15, he set out the background to our clients signing the PNA on the day before their legal marriage. To be clear, he did not allege that there had been any Rachmacher / SPH v SA vitiating factors that would taint the PNA and that is not his case.

….

In view of the above, the sole issue in dispute is the weight to be given to the PNA.” (my emphasis)

94.  When asked in Court at the end of the three-day trial what is H’s position on this, his counsel confirmed that they are not arguing validity and only on weight.

95.  It goes without saying that these proceedings could have been more expeditiously dealt with and argued with a different focus if this has been known to the Petitioner and to this Court. Undoubtedly, legal costs have been wasted and will have to be dealt with in due course.

New evidence three days before trial

96.  Three days before the trial, this Court received a bundle containing more than two hundred pages of documents from H, saying that these has to be incorporated into the hearing. There was no summons to adduce these evidence, and this has resulted in the W’s side providing the Court with supplemental submission and authorities on late evidence, within a tight time frame and when they should have been focusing on the trial.

97.  I spent more than an hour dealing with this last-minute development, and I ordered that these documents not to form part of the hearing.

98.  Again, the H’s unhelpful litigation conduct to these proceedings has caused further cost and time wastage.

The Credibility of the Witnesses

99.  I find W to be an honest and reliable witness. She gave direct and frank answers throughout the trial. Moreover, I find that her oral testimony tallies with her sworn evidence, and is well supported by contemporaneous evidence.

100.  I find H to be argumentative and evasive. This Court hardly got a straight answer from H. Whenever he was asked something on which he does not have a good response, he would go on wild and prolonged tangents, seemingly in the hopes of diverting this Court’s attention away from the question and his evasive answers.

101.  Where H and W’s evidence conflict, I accept W’s without any hesitation.

Issues

102.  Regarding W’s Crossley application, I must address two issues:

a.  Whether H can show cause on why he should not be bound by the PNA.

b.  In the event of H or failure to show cause, whether and/or what case directions I should give.

Has H Shown Cause?

The Law

103.  That a pre-nuptial agreement has been entered into is significant. In Hong Kong SPH v SA (Forum and Marital Agreements) (2014) HKCFAR 364, the court adopted the analysis of Radmacher v Granatino [2011] 1 AC 534 (“Radmacher”), in §§33-35:

33. In particular, an agreement would carry full weight only if each party had entered into it of his or her own free will, without undue influence or pressure, having all information material to his or her decision to enter into the agreement and intending that it should be effective to govern the financial consequences of the marriage coming to an end; and the court should give effect to an agreement which was freely entered into by each party with a full appreciation of its implications unless the circumstances prevailing it would not be fair to hold the parties to the agreement. Enforcement of the agreement could be rendered unfair by the occurrence of contingencies unforeseen at the time of the agreement or where, in the circumstances prevailing at the time of separation, one partner would be left in a predicament of real need while the other enjoyed a sufficiency.

34. The particular matters which were stressed by the Supreme Court were these. The court when considering the grant of ancillary relief was not obliged to give effect to nuptial agreements – whether they were ante-nuptial or post-nuptial. The parties could not, by agreement, oust the jurisdiction of the court. The court must, however, give appropriate weight to such an agreement. But it was the court and not any prior agreement between the parties, that would determine the appropriate ancillary relief when a marriage came to an end, for that principle was embodied in the legislation.

35. The Supreme Court said:

68. If an ante-nuptial agreement, or indeed, a post-nuptial agreement, is to carry full weight, both the husband and wife must enter into it of their own free will, without undue influence or pressure, and informed of its implications …

69. …the Court of Appeal was correct in principle to ask whether there was any material lack of disclosure, information, or advice. Sound legal advice is obviously desirable, for this will ensure that a party understands the implications of the agreement, and full disclosure of any assets owned by the other party may be necessary to ensure this. But if it is clear that a party is fully aware of the implications of the ante-nuptial agreement and indifferent to detailed particulars of the other party’s assets, there is no need to accord the agreement reduced weight because he or she is unaware of those particulars. What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.

70. […]

71. The first question will be whether any of the standard vitiating factors: duress, fraud, or misrepresentation, is present. Even if the agreement does not have contractual force, those factors will negate any effect the agreement might otherwise have. But unconscionable conduct such as undue pressure (falling short of duress) will also be likely to eliminate the weight to be attached to the agreement, and other unworthy conduct, such as exploitation of a dominant position to secure an unfair advantage, would reduce or eliminate it.

72. The court may take into account a party’s emotional state, what pressures he or she was under to agree. But that again cannot be considered in isolation from what would have happened had he or she not been under those pressures. The circumstances of the parties at the time of the agreement will be relevant. Those will include such matters as their age and maturity, whether either or both had been married and been in long-term relationships before. For such couples their experience of previous relationships may explain the terms of the agreement and may also show what they foresaw when they entered into the agreement. What may not be easily foreseeable for less mature couples may well be in the contemplation of more mature couples. Another important factor may be whether the marriage would have gone ahead without an agreement, or without the terms which had been agreed. This may cut either way.

73. If the terms of the agreement are unfair from the start, this will reduce its weight, although this question will be subsumed in practice in the question of whether the agreement operates unfairly having regard to the circumstances prevailing at the time of the breakdown of the marriage.

104.  To sum up:

(1)  The Court presumptively gives effect to bargains for the division of matrimonial assets entered in by both parties and should give effect to a PNA entered into with a full appreciation of its implications and benefit of independent legal advice.

(2)  Nonetheless, circumstances surrounding the PNA’s execution may make enforcing a PNA unfair. For instance, it would be unfair to hold a party to a PNA if vitiating factors (e.g. duress, fraud, misrepresentation) were present when the PNA was executed. The same applies to unconscionable conduct falling short of duress, such as undue pressure, or exploitation of one’s dominant position to secure an unfair advantage.

(3)  Further, prevailing circumstances may also make enforcing a PNA unfair. For instance, the PNA would not be fair if it prejudices the reasonable requirements of any children of the family; or if the agreement leaves one spouse in a predicament of real need, while the other enjoys a sufficiency or more.

Circumstances surrounding the PNA’s execution

105.  As mentioned, H’s case in these proceedings appeared to take issue with the circumstances of the PNA’s execution.

106.  H is now no longer taking issue on this. In my judgment, it was sensible for him to do so. The evidence before me shows that such a position on his part would be untenable, as it appeared that H actively partook in negotiating the PNA’s terms and sculpting its content.

107.  As this point was no longer live, I do not propose to dwell upon it much. I will move forward on the basis that the PNA is an unvitiated agreement.

Events since the PNA’s execution: H’s alleged destitution and unfairness argument

108.  H says he should not be held to the PNA because it would cause unfairness.

109.  This is because his financial position has tremendously deteriorated since the PNA was signed.

110.  H is of course right in saying that him being destitute whilst W is beyond sufficient is a reason not to hold him to the PNA. W very fairly accepts this.

111.  However, H has fallen well short of showing he is now financially destitute. Remarkably, he has not produced any meaningful documentary evidence showing he is currently financially destitute. If H wants to claim that his bank balance as of October 2022 is under HK$500,000; he could easily have directed this Court to such evidence, and would no doubt be challenged. Yet, he did not do so.

112.  In fairness, H has given a number of reasons on why his finances have taken a downturn since the PNA was executed. However, he has not provided the Court with documentary evidence corroborating his claims.

113.  First, H says that VPG, the company H founded in 1999 and to which he attributed a value of HK$36,000,000 in the PNA, was dissolved in 2010. He said he was unable to recover anything from VPG after its dissolution.

114.  The documents H has produced clearly shows that VPG was dissolved in 2010; but he has not produced any documents that even comes close to suggesting that H did not recover anything from the dissolution. In the absence of evidence, I am entitled to consider that it is well possible that H recovered substantial amounts from VPG from its dissolution.

115.  Secondly, H held shares in GCM valued at HK$3,800,000 in the PNA. H says after he purchased those shares, GCM was liquidated, and H did not receive anything from the liquidation. H has not supplied any documentary evidence to support his claim.

116.  When pressed on the complete dearth of documentary evidence on this claim, H said the authorities in Holland would not provide document stating a business has ceased.

117.  Even if that were true, and even if I accept that GCM has ceased business; it still would not mean that H’s investment in GCM has vanished. Again, in the absence of evidence, I am entitled to consider that it is still possible that H recovered something from GCM’s liquidation.

118.  Thirdly, H’s watch and art collections were respectively valued at HK$6,580,000 and HK$2,120,000 in the PNA. H says he sold the bulk of those watches and all of his art between around 2006 and 2008 to cover VPG’s losses.

119.  However, H has not produced any evidence that shows (i) VPG was suffering losses; or (ii) the evidence of disposition of the watch and art collection; or (iii) the proceeds from those watches and pieces of art were put into VPG; or (iv) he recovered nothing from the value of those watches and pieces of art from VPG’s dissolution.

120.  Fourthly, H had a number of valuable stock investments in V Bank, M bank, and S Bank, totalling HK$20,960,000 in the PNA. He says:

(1)  His investments in V Bank (valued at HK$4,860,000 in 2005) was only worth HK$1,279,000 by 2016, as he said he liquidated the rest and injected it into VPG;

(2)  He says his investments in M Bank and S Bank (valued at HK$16,100,000 in 2005) never really existed.

121.  I do not put much weight on either of H’s points:

(1)  H has not produced any evidence that shows (i) VPG was suffering losses; or (ii) the proceeds from the V Bank investments were put into VPG; or (iii) he recovered nothing from the value of those investments from VPG dissolution;

(2)  H’s suggestion that his investments in M bank and S Bank never existed is incredible. It flies in the face of him declaring that he has made frank disclosure in the PNA, which he himself executed after negotiating its terms and receiving legal advice on the same. In fairness, H explained that he included those (on his case) fictitious accounts in the PNA as he was “advised that [W’s] and [H’s] assets should be roughly the same”. This explanation is inherently incredible in the extreme, and I do not accept it.

122.  Fifthly, H set up M1 Limited in 2006, and had it dissolved in 2018. H says he did not derive any money from that company because it had no operations and no transactions. However, none of the documents H provided supports H’s claim.

123.  Sixthly, H set up M2 Limited in 2016. H says this company is not worth anything because it has no operations or transactions. However, he has not even adduced documents to support what he says.

124.  Quite the contrary, it appears that H has more financial resources than he cares to admit to the Court. In my judgment, the following facts are of particular significance here:

(1)  H chose to declare his “intended future monthly expenses in Hong Kong which will allow me to have a full and proper relationship with the children” under “Expenses” in his Form E, but not his current ones. W has repeatedly asked H for proof of H’s current expenses. If H is telling the truth about his current financial predicament, he could easily disclose documents which could put this matter to bed. Tellingly, H did not do so.

(2)  W says that H hails from a wealthy family. His mother comes from old money and owns several landed properties. His stepfather is the chairman of a few big companies. H’s mother and stepfather have a track record of financially supporting H. Further, H admitted in cross-examination that he contemplates receiving a significant inheritance in future.

(3)  Despite declaring he only had $2.28M liquidity in his March 2022 Form E, he had boldly incurred around $500,000 legal fees by June 2022, and this has not even taken into account counsel’s brief for the current hearing. According to his Form H, up to the date of this trial, he has incurred $1.8M. I find it baffling why anyone would incur legal fees to this extent with such level of alleged available funds.

125.  H argues that he has no earning capacity. For these proceedings, he produced only four pieces of job-hunting evidence during the period from November 2018 to early 2020; in my view, this shows a less than half-hearted attempt at job hunting, and could hardly be relied on to say he has no earning capacity.

126.  H has the onus to prove his financial destitution if this is what he relies on to say that being held to the PNA is unfair. Echoing HHJ Melloy at the January 2022 hearing, at which she said during the discussion of the scope of the Form E, that there must be “sufficient information before the court to enable the matter to be dealt with fully in the Crossley application”; in my view he has fallen far short of discharging his burden of proof; and knowing full well HHJ Melloy’s comment, it was disingenuous of him to complain about the Court limiting disclosure and asking that W’s Crossley Application be dismissed on this basis.

Events since the PNA’s execution: H’s inability to pay for the Children

127.  H says he should not be held to the PNA because his financial position has deteriorated since the PNA was signed. He says that as W’s estimate of the Children expenses comes to $321,038 monthly, he will not be able to share this amount equally in accordance with the provisions of the PNA; and that he cannot meet the Children’s needs without ancillary relief from W.

128.  I reject H’s position. Given my findings above, I am entitled to draw the necessary inference against him to conclude that he is not in the financial destitute situation he claims; and that he has the financial resources to meet the Children’s needs.

129.  W’s case has spelled out H’s absence from the Children’s life since the parties’ separation. Her argument is that since H has not even tried to be a part of the children’s life for such a long time, he probably will not be a part of the children’s life moving forward, and therefore cannot ask W for money now to pay for the Children’s needs. I acknowledge that it is well possible that W’s counsels are in fact making this as a forensic point to impress upon the Court that H is opportunistically using his Children to resile from the PNA.  

130.  In this context, I take myself back to examining his Form E and in particular his intended / future expenses to “enable him to have a proper relationship with the Children”. The latter constitutes $142,149, which includes the cost of a furnished accommodation for life with a monthly rental range of $68,000 to $82,000. And because he is destitute, he says that “the Petitioner is extremely wealthy and is more than capable of making financial provision so that we can share care of the children”.

131.  I remind myself of W’s evidence of H’s long absence over a period of time, of his sparse access to the children, and his timely re-appearance after the death of his father-in-law and after W initiated this application, all of which evidence remain unchallenged at trial. Since H’s participation in these proceedings, he has asked for shared care of the Children, and despite having come to some interim access arrangement after mediation in late 2021, W says H has disappeared again for a long period of time and did not adhere to the terms of the agreed interim access arrangement.

132.  I make the observation that W may have a good arguable basis for suggesting that H is opportunistically using the Children to resile from the PNA, although this is not a matter that I need to decide on in this application.

133.  Based on my above findings, I conclude that H has failed to show cause as to why he should not be bound by the PNA.

What’s next?

134.  H concedes that the PNA is of significant weight; but he has refrained from saying how significant it is, and what this means in the context of the ancillary relief proceedings.

135.  It is of note that H never suggested at any point of time that this is a sharing case. He only said that the existence of an unvitiated antenuptial agreement does not automatically exclude the application of the sharing principle. Having said this, he then went on in his submission, to refer to case law which looks into the interpretation of “needs” in the context of nuptial agreement: Luckwell v Limata [2014] EWHC 502 (Fam), KA v MA (Prenuptial Agreement: Needs) [2018] EWHC 499 (Fam), Ipekci v McConnell [2019] EWFC 19, Brack v Brack (CA) [2019] 1 WLR 3438. And further said in his opening submission:

“It is recognised in this case that the Court may well conclude that it should interfere with the PNA only to the extent to which it is necessary to ensure that the H’s needs and those of the Children are met.” (my emphasis)

136.  Clearly, H’s claim in ancillary relief, the veracity and extent of his needs, if any, shall need to be verified at the ancillary relief trial. It is not necessary for this Court to assess his needs at this hearing; presumably the H made these submission in his (mistaken) belief that he thought W was asking this court to make a final determination of the financial claim in this decision.

137.  W asks that in the event I find her Crossley Application to be successful, that I make directions to dispense with the discovery process on the parties. W’s case in this regard is stated in her closing submission:

a.  W’s disclosure in her Form E demonstrate that “there can be no serious dispute that W will be in a position to meet any reasonable financial award (if one were to be made at all) to H.

b.  H has on his own submission asks whether the PNA will enable him to meet his reasonable needs and those of Children when they are with him, and has acknowledged that the PNA “may ultimately result in a significantly different award than might otherwise have been the case had it not existed”.

c.  If this has been a “run of the mill” case, an inordinate amount of time and costs would have been spent on assessing the value of all the W’s assets and recent inheritance, with rounds of questionnaires, and across world expert valuations of companies and real properties.

d.  The precise scope and extent of W’s wealth is unlikely to be material to the outcome of the Ancillary Relief.

138.  H says I should not make any such directions. He says that the case management decisions in Crossley were tailor-made for the specific and exceptional facts in Crossley; that the facts here are very different from Crossley’s and so I should not dispense with the discovery process on the parties’ ancillary relief proceedings.

139.  But the Court of Appeal in Crossley did not find it right to dispense with the discovery process on the parties’ ancillary relief proceedings simply because of Crossley’s unique facts. It did so because those unique facts meant the prenuptial agreement in that case is of such magnetic importance, and made it very likely that, after having regard to all the relevant s.25 factors (the UK equivalent of Hong Kong’s s.7 factors), the wife would not receive any ancillary relief from the husband.

140.  As such, in deciding whether to dispense with the discovery process on the parties’ ancillary relief proceedings, this court should not ask whether the facts before it are similar to those in Crossley. It should instead ask whether the PNA is of magnetic importance.

141.  H’s concession on the PNA’s “significant weight” aside; in my observation, the PNA in this case is indeed of magnetic importance.

142.  First, it goes without saying that the Court should respect the parties’ freedom to agree on how their property should be apportioned; and it is plain that the PNA faithfully bears out the parties’ intention on that matter:

(1)  The parties negotiated the PNA’s terms with the full benefit of legal advice. There is nothing to suggest that the PNA did anything but capture the parties’ intentions on how their property should be apportioned in the event their marriage breaks down;

(2)  The contents of this PNA suggest clearly that the parties have never intended that their assets would be co-mingled, nor could either of them make claims against each other capital assets, and that they never intended to share each other’s assets in the event of divorce.

(3)  The PNA also captures the parties’ intention and conduct all the way up till their divorce. As H fairly admitted in cross-examination, the parties adhered rigorously to the PNA’s terms throughout their marriage.

(4)  This is highly significant, as by their conduct, it suggests that the parties themselves all along regarded the PNA as determinative of how their finances are to be managed / should be apportioned between them and conducted themselves on that basis: S v S (Ancillary Relief) [2009] 1 FLR 254 and T v T [2013] EWHC B3 (Fam) referred.

143.  Secondly, while this Court will readily give less weight to a PNA if doing so will cause unfairness to one of the contracting parties, H has not managed to establish anything that would even tend to suggest that enforcing the PNA would be unfair towards him.

144.  That said, I do not take the view that the case should proceed with a full dispensation of discovery, there is to be limited discovery so as to enable this Court to follow the processes set down in the case of DD v LKD 2010 13 HKCFAR 537 at the ancillary relief proceedings.

145.  The next step is what directions I should give to move this case forward. I have the following guidance from the abovementioned case of Wyatt v Vince in mind:

“… Although, however, the wife’s appeal against the strike-out should succeed and her application should proceed, it is essential at this stage to conduct a provisional evaluation of the issues. For, by rule I.4(I) of the family rules, the court must further the overriding objective by actively managing cases, which, by rule I.4(9.)(b)(i)(c), includes promptly identifying the issues, isolating those which need full investigation and tailoring future procedure accordingly. This exercise will dictate the nature, and in particular the length, of the substantive hearing.”

Conclusion and Directions

146.  I find that H has failed to show cause as to why he should not be bound by the PNA.

147.  A case management hearing is to be set down in consultation with counsels’ diary with two hours reserved. Parties are to prepare proposed directions which shall include, inter alia:

a.  List of Agreed / Disputed issues

b.  Scope of limited discovery within the parameters of the disputed issues

These to be filed with Court 14 days before the case management hearing, with notes / submission for Court 7 days thereafter.

Costs

148.  I see no reason why costs shall not follow the event. I therefore make an order nisi to be made absolute in 14 days’ time that Respondent H shall pay the Petitioner W’s costs of and occasioned by this Crossley Application, including all costs reserved, to be taxed if not agreed. There shall be certificates for all counsels.