Tym and Others v. Wsp, The Intended Executrix of the Estate of Lm, Deceased and Another

FCMP 309 / 2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS

NUMBER 309 OF 2014

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J U D G M E N T
(Application for a Hadkinson Order)

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Background

1.TYM, the 1^st Applicant, and LM, the Deceased, were married in November 1994 in Hong Kong.  They had a son born in August 1996 and a daughter born in March 1998.

2.On 29 August 2013, the 1^st Applicant as the Petitioner therein commenced proceedings for divorce from the Deceased and claimed against him for ancillary relief for herself and the two children of the family under FCMC 12333 of 2013 (“the Divorce Proceedings”).  In the Divorce Proceedings, an order dated 11 November 2013 (“the MPS Order”) was made by Deputy District Judge K.K. Pang, by which the Deceased was ordered to pay her a sum of HK$40,000 (“the MPS order”) per month as maintenance pending suit for the two children of the family and herself.  After the MPS Order was made the Deceased was punctual with the payments until October 2014 when he passed away.

3.On 25 November 2014, the 1^st, 2^nd and 3^rd Applicants commenced the present proceedings for, among other things, interim maintenance.  The 1^st Respondent initially opposed to the application for interim maintenance.  By an order dated 31 December 2014, Deputy District Judge K.K. Pang ordered the 1^st Respondent to pay monthly periodical payments of HK$40,000 to the Applicants as a stopgap measure pending determination of the application.  The hearing of the interim maintenance application was adjourned for argument.  By the letter dated 27 January 2015, the 1^st Respondent through her solicitors stated that she was prepared to consent to the Applicants to receive HK$40,000 per month as an interim measure.  On 6 March 2015 an order was made by consent that the 1^st Respondent was ordered to pay monthly periodical payments in the sum of HK$40,000 to the Applicants until further order of the court, while the hearing for argument on the application for interim maintenance was adjourned sine die with liberty to restore.

4.From April 2015, the 1^st Respondent was late in payments.  Since July 2015, the 1^st Respondent has only paid HK$20,000 per month.  From July 2015 to September 2016, the 1^st Respondent was in arrears of HK$300,000, i.e. HK$20,000 per month x 15 months.

5.On 20 April 2016 the Applicants took out the present application for an order that unless the 1^st Respondent shall comply with the order dated 6 March 2015 and pay up the arrears of the monthly periodical payments within 14 days thereof, the 1^st Respondent shall not be heard in the present proceedings commenced under the section 4 of the Ordinance until she fully complied with the said order, and costs of the application on indemnity basis.  On 27 September 2016, the Applicants took out the 2^nd summons to bring the amount of the arrears up to September 2016.  This is the substantive hearing of the summons dated 20 April 2016 and the summons dated 27 September 2016.

Applicable principles to the making of Hadkinson Order

6.The jurisprudence for the making of Hadkinson orders is founded under the authority of Hadkinson v Hadkinson [1952] P 285.  In CWG v MH [2014] 4 HKLRD 141, the Court of Appeal held that:

“The questions a court should ask itself in Hadkinson applications have been conveniently set out in MA v MI [2004] 2 FLR 932, 946, [59].”

7.Applied to the present application, they are:

(a) Is the 1^st Respondent in contempt?

(b) Is there an impediment to the course of justice?

(c) Is there any other effective means of securing compliance with the court’s orders?

(d) Should the court exercise its discretion to impose conditions having regard to the question?

(e) Is the contempt wilful, i.e. is it contumacious and continuing?

(f) If so, what conditions would be proportionate?

8.The standard of proof is the civil standard: Mubarak v Mubarik (No 2) [2007] 1 WLR 271, 286, [72].

Discussion

9.The 1^st Respondent’s first stance is that the present application for a Hadkinson order is legally misconceived and is bound to be dismissed at the threshold stage.  The Applicants sought an order that the 1^st Respondent, who is the defendant in these proceedings, should not be heard in the proceedings.  The 1^st Respondent argued that, as a matter of principle and as a matter of the 1^st Respondent’s constitutionally guaranteed right under Article 35 of the Basic Law and Article 10 of the Hong Kong Bill of Rights, the court would not make a Hadkinson order against the 1^st Respondent to debar her from defending the Applicants’ claims.

10.I accept that the present state of the law in this respect can be summarised as follows:

(1) The making of a Hadkinson order restricts a litigant’s constitutional right of access to court under Art 35 of the Basic Law and Art 10 of the Hong Kong Bill of Rights: see China Construction Realty Ltd v Lucky Dragon Ltd, at §§9-16(unreported, HCA 1237/2012, 8 July 2014);

(2) As observed by the court in China Construction Realty Ltd (supra), where the plaintiff sought to advance its claims against the 4^th defendant but at the same time sought to deny the 4^th defendant’s right to be heard (citing from ST v Betty Kwan & Others (unreported, CACV 115/2013, 26 June 2014)):

“14. ... fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result...”

(3) As observed by the English Court of Appeal: Gordon v Gordon [1904] P 163 at 171:

“In my opinion there are general principles which apply to this case, and which are not really affected by the decisions to which our attention has been particularly called. What I mean is this - that, taking it generally, it has not been disputed in the discussion before us that this rule, that a person who is in contempt cannot be heard, primâ facie applies to voluntary applications on his part - when he comes and asks for something, and not to cases in which all that he is seeking is to be heard in respect of matters of defence. I do not for one moment suggest that every matter of defence entitles a person in contempt to be heard; for instance, if an order has been made in the exercise of the discretion of the Court, and some one who is oppressed, or thinks himself oppressed by that order, appeals, saying that the Court has exercised its discretion wrongly, that person if he is in contempt cannot be heard to say anything of the kind until he has purged his contempt.”

11.I however do not accept that, as a matter of principle and as a matter of the 1^st Respondent’s constitutionally guaranteed rights the court would not make any Hadkinson Orders against defendants to debar them from defending the plaintiff’s claims.  As the Court of Final Appeal made clear in Ng Yat Chi v Max Share Ltd (2005) 8 HKCFAR 1 (at §73), the defendant’s constitutional right to be heard can be taken away if (a) the restriction pursues a legitimate aim; (b) the restrict is proportionate to the achievement of that legitimate aim; and (c) the restriction does not impair the very essence of that right.

12.I now turn to the questions set out in the paragraph 7 above.

13.The Applicants contended that in relation to a party’s default in making periodical payments as required under a Court Order, the mere fact that non payment alone is sufficient per se to establish contempt of court without the need of proving any culpability or means to pay, relying on Mubarak v Mubarik (No 2) [2007] 1 WLR 271 where it was held at §65 that:

“Non-payment in breach of a matrimonial order to pay money is in itself contempt of Court. There is...no requirement that it should be shown to have been culpable, i.e. that the non-paying party had the means to pay...Questions of culpability come into play as regards the Court exercising its discretion as to whether and how to act on the contempt as so established.”

14.The 1^st Respondent however contested that the Applicants have not discharged their burden to prove any contempt on the part of the 1^st Respondent and that the Applicants’ contention that “the 1^st Respondent is in contempt by non-payment per se” not only is a proposition unfair and unattractive (as it would be counter intuitive to find a person who simply has no means to satisfy a judgment sum in contempt of court), but plainly incorrect as a matter of Hong Kong law.

15.After having taking into consideration of the following arguments put forwards on behalf of the 1^st Respondent, I accept the 1^st Respondent’s position in this regard, to viz:

(i) As confirmed by the Court of Final Appeal in Kao Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830, the mens rea for a finding of contempt of court is that the breach must have been “intentional”; in other words, the breach must have been “neither casual nor accidental and unintentional” (at §§45-46, pp 855J-856H, per Sir Gerard Brennan NPJ).

(ii) “Impossibility” of fulfilling a court order (such as a judgment debtor not having the financial means to meet a money judgment) would mean the non-compliance was “unintentional”: see Kao Lee & Yip v Koo Hoi Yan §48 (pp 857I-858B) and Concorde Construction Co Ltd v Colgan Co Ltd (No 2) [1984] HKC 253 at 258B-C (per Rhind J).

(iii) Accordingly, a judgment debtor who has no means to pay the judgment debt cannot be regarded as in contempt of court, for he lacks the requisite culpable mental state of mind to be found guilty.

(iv) To the extent that there is any contrary suggestion in the English first instance decision in Mubarak v Mubarik (No 2) at §65 that non-payment of the judgment sum per se constitutes contempt of court, the Court of Final Appeal’s observations in Kao Lee & Yip (as well as the ruling of Rhind J in Concorde Construction Co Ltd) must prevail in this jurisdiction.

16.The question thus boils down to whether the Deceased’s estate was able to make full payment of the monthly periodical payments.  The burden of proof lies upon the Applicants to prove that the 1^st Respondent as the intended executrix of the Deceased’s estate has the means to make the payments ordered: CYM v YML [2013] 1 HKLRD 701 §51 (per Lam JA as Lam VP then was).

17.In support of the allegation that Cheung Fat was able to fully pay the monthly periodical payments, the Applicants contended:

(a) If Cheung Fat was genuinely impecunious due to change of circumstances as alleged by the 1^st Respondent, the 1^st Respondent would have taken out an application for variation down.

(b) The 1^st Respondent’s disregard of the Applicants’ repeated demands for payment and warnings about the Hadkinson application suggested that she was evading payment rather than having been unable to pay.

(c) Despite requests, the 1^st Respondent has failed to produce documentary proof, such as ledgers, accounts and records, to prove that business of Cheung Fat has got worse.

(d) The Profit and Loss Statements produced by the 1^st Respondent are unaudited and self serving.

(e) The Deceased had punctually paid the Applicants HK$40,000 per month for more than 3 years before his death.  In light of such track record, the 1^st Respondent’s allegation that the business of Cheung Fat has got worse was unbelievable in the absence of solid proof.

(f) It was improbable that, as shown in the Profit and Loss Statements produced by the 1^st Respondent, the expenses had increased when the gross income of Cheung Fat had gone down.

(g) There was no documentary proof of the 1^st Respondent’s allegation that she had personally contributed money to Cheung Fat.

(h) According to the Profit and Loss Statements, the net profits of Cheung Fat were HK$84,572.53 and HK$75,483 for year 2014/2015 and 2015/2016 respectively, and, therefore, there was no material change in the net profits earned by Cheung Fat after the consent order dated 6 March 2015 was made and the 1^st Respondent had no justification to unilaterally vary down the monthly periodical payments.

18.The 1^st Respondent did not agree the fact that she had not applied for varying down the interim periodical payments suggested that she was evading payment rather than having been unable to pay.  She remarked that as at December 2014, the Deceased’s estate comprised only (a) Cheung Fat; (b) the Cooke Street property and (c) balance in bank accounts in the sum of around HK$160,000, and before she accepted the consent order dated 6 March 2015, in her Affirmation dated 30 December 2014, she had already stated that there were insufficient cash flow in the Deceased’s estate to meet the Applicants’ request for interim maintenance, that she had been contributing significant amount of money to Cheung Fat, that looking at the liquid assets of Cheung Fat potentially available for distribution to the Applicants, a significant part thereof actually was her own money, and that should it prove too burdensome on her part, she would have no alternative but to cease contributing further money to Cheung Fat.  In other words, it is always her open position that despite that Cheung Fat does not have the cash flow to pay the interim monthly periodical payments as requested by the Applicants, the payments were made possible by her own money, and she might choose not to accommodate the Applicants’ request with her own money anymore at any time.  In the circumstance, despite the Applicants’ contention to the contrary, I consider that I should not make too much of the fact that the 1^st Respondent did not take out a formal application to vary down the monthly periodical payments. 

19.The 1^st Respondent also did not agree that she had no justification to vary down the monthly periodical payments.  She produced the Profit and Loss Statements of Cheung Fat.  It can be seen from those documents, which were submitted to the Inland Revenue Department, that the net profits of Cheung Fat for year 2014/2015 and 2015/2016 were HK$84,572.53 and HK$75,483.6 respectively.  She argued that, in view of the downturn in the business of Cheung Fat, after the balance in the bank accounts were fully paid out to the Applicants pursuant to the Order dated 6 March 2015, she was only able to pay 50% of the interim monthly periodical payments. 

20.It is the Applicants’ contention that the Profit and Loss Statements produced by the 1^st Respondent are self serving, they also made complaint about that the 1^st Respondent has not provided the accounts and ledgers of Cheung Fat, or the authorization letter to the Applicants for making an enquiry with the Food & Environmental Department about the records of burial and cremation undertaken by Cheung Fat.  Up to the present stage, however, I consider that it is not readily apparent to me that the Profit and Loss Statements produced are unreliable.  Despite the Applicants’ contention to the contrary, I do not see that it is inherently improbable that the business of Cheung Fat got worse after the death of the Deceased, or that the expenses of Cheung Fat went up when its incomes went down.  Suffice to say, as life happens, there are tons of ups and downs.

21.I accept the 1^st Respondent’s argument that the 1^st Respondent can only be found to be in contempt of court only if it is shown by the Applicants that Cheung Fat has the means and yet she has refused to fully pay the monthly periodical payments.  For the present application, I am prepared to accept that the Profit and Loss Statements produced by the 1^st Respondent show that the Deceased’s estate is not in a position to make full payment of the monthly periodic payments to the Applicants.  Given that the Applicants have not discharged their burden of proving to the contrary, there is no basis to find that the 1^st Respondent is in contempt of court and hence no basis to make the proposed Hadkinson order.

22.Notwithstanding that the above finding is sufficient to dispose of the present application, for the sake of completeness, I shall go on with the discussion on the other questions set out in the above paragraph 7.

23.The Applicants contended that there was serious impediment to the course of justice because as a result of the shortfall in the interim periodical payments, the Applicants had to go into debts to meet their monthly expenses.

24.It is not seriously disputed by the 1^st Respondent that there are no other effective means of securing compliance with the Order dated 6 March 2015, and both parties accepted that the judgment summons procedure is not applicable to the present proceedings.

25.The 1^st Respondent however disagreed that there was impediment to the course of justice and argued that, in any event, the court should exercise its discretion against making the Hadkinson Order, citing the court’s observation in China Construction Realty Ltd (supra) (citing from Denning LJ in Hadkinson v Hadkinson [1952] P 285, which passage was endorsed by Lord Bridge in X Ltd v Morgan-Grampion (Publishers) Ltd [1991] 1 AC 1):

“Applying this principle, I am of the opinion that the fact that a party to a cause has disobeyed an order of the court is not of itself a bar to his being heard, but if his disobedience is such that, so long as it continues, it impedes the course of justice in the cause, by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make, then the court may in its discretion refuse to hear him until the impediment is removed or good reason is shown why it should not be removed.”

26.The 1^st Respondent argued that typical examples of impediment to the course of justice was where a litigant fails to comply with an order for specific discovery, or a party to a matrimonial proceeding refusing to file his Form E.  The contempt of those litigants would impede the course of justice in the sense that it would make it more difficult for the court to carry out its functions in resolving the dispute between the parties.  In the present case, the Applicants are legally aided and therefore the alleged contempt of the 1^st Respondent (which is denied) that lies in the failure of the Deceased’s estate to fully satisfy the monthly periodical payments cannot hinder their ability to continue to pursue their claims in these proceedings.  After having carefully considered, I accept the 1^st Respondent’s argument that there is no impediment of the course of justice involved in the present case.

27.I also accept the 1^st Respondent’s argument that, not only the effect of the court making a Hadkinson Order will not advance the interests of justice, but, as the court observed in China Construction Realty Ltd (supra), at§12:

“Quite the contrary, if the 4^th defendant is debarred from being heard, the Court will not be assisted by its counsel to make submissions on its behalf for the Court to come to a fair conclusion.”

28.In conclusion, I accept that the court should exercise its discretion against the making of a Hadkinson Order in any event.

Disposition

29.It is ordered that the Applicants’ summons dated 20 April 2016 and summons dated 27 September 2016 be dismissed and ordered nisi that the Applicants shall pay the 1^st Respondent’s costs of the two summonses, including reserved costs, with certificate for Counsel’s attendance.  The costs order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.  The Applicants’ own costs be taxed in accordance with the Legal Aid Regulations.

Mr Adrian But instructed by Cheung Wong & Associates for the Applicants

Mr Martin Ho instructed by Au & Associates for the 1^st Respondent