Cwg v. Mh and Others

HCMP 643/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 643 OF 2012

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REASONS FOR DECISION
(Hadkinson Order )

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Introduction

1.Before this court is the husband’s application for a stay of execution of my order of 26 March 2013 (“Order”) pending the result of his appeal in CACV 80 of 2013 (“Stay Application”).  The Stay Application is being supported by R2.

2.I will adopt in this ruling the same abbreviations in my judgment handed down on 26 March 2013   (“Judgment”).

3.Prior to dealing with the husband’s Stay Application, there was a preliminary point raised by the wife on whether the husband and R2 should be heard at all due to their alleged contempt of court orders, that is the wife sought an order following the principle in Hadkinson v Hadkinson[1] against the husband and R2 respectively ( “Hadkinson Order”).  In addition, it was the wife’s case that R2 should not be heard as the Order was not made against her.

4.So far as R2 was concerned, the Hadkinson Order was sought on the ground that she had not complied with a disclosure order made on 10 August 2012 by Poon J against her (“Disclosure Order”).  At the hearing before this court (“Hearing”), Mr Li, Senior Counsel for R2 , however, submitted that the wife had waived the compliance of the Disclosure Order, but this was not admitted by the wife.  In order to give time for the parties to consider whether there was any waiver of the Disclosure Order, this court adjourned the preliminary issue on whether R2 should be heard to the next hearing.

5.In relation to the husband, after hearing submissions from Ms Eu, Senior Counsel for the wife, and Mr Pilbrow, Senior Counsel for the husband, I formed the view that the husband was in contempt of the MPS Order and further the periodical payments part of the Order, namely paragraph 1, for which he had not sought a stay and yet had not paid in full up until the date of the Hearing. I  made an order, with reasons to be handed down, that the husband should not be heard on the Stay Application until the conditions laid down by this court have been met, and the conditions were:

(i) That he undertakes to continue to procure the free accommodation for the wife and the children at the Grand Panorama Flat until further order;

(ii) That he undertakes to comply with paragraph 1 of the Order in timely fashion until further order;

(iii) That he pays the arrears under paragraph 1 of the Order, up to the Hearing, namely a sum of HK$120,000   within 7 days; 

(iv) That he pays  all arrears under the MPS Order up to the date of his Variation Summons, totaling HK$1,415,000, being 5 months of arrears from November 2011 to March 2012 (inclusive), within 7 days;

(v) That he pays the costs of the Hearing summarily assessed at HK$300,000 within 7 days.

(“Conditions”)

6.My reasons are set out hereafter.

Legal Principles

7.There is no dispute on the general ruleestablished as early as 1952 in the case of Hadkinsonthat a party in contempt cannot be heard or take proceedings in the same cause until he has purged his contempt[2].  

8.There were exceptions to the general rule set out in Hadkinson , namely [3]:

“One of such exceptions is that a person can apply for the purpose of purging his contempt, and another is that he can appeal with a view to setting aside the order on which his alleged contempt is founded. … The only other exception which could in any way be regarded as material is the qualified exception which, in some cases, entitles a person who is in contempt to defend himself when some application is made against him.”

9.It has been held in the 2004 judgment in the case of Mubarak v Mubarak[4]that Hadkinson remains good law and is available in the context of family proceedings, and that it is compliant with Art 6 of the European Convention of Human Rights.

10.It was further suggested by Ryder J (as he then was) in the above judgment in Mubarak that the following questions should be answered  (“ 6 Questions”):

(i) Is the husband in contempt?

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

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

(iv) Should the court exercise its discretion to impose jurisdictions having regard to the question?

(v) Is the contempt wilful, ie is it contumacious and continuing?

(vi) If so what conditions would be proportionate?

11.The 2004 judgment in Mubarak was not on Counsel’s list of authorities, but what was said by Ryder J  above was referred to in the case of C v C (Appeal:Hadkinson Order)[5].

12.Then in  the 2006 reported judgment of Mubarak, namely Mubarak v Mubarak (No 2) (Fam D)[6] , Bodey J   said[7]:

“Those basic Hadkinson principles all pre-suppose an established contempt. They are the background against which the first of the two issues of principle arises, namely as to whether on such application regarding non-compliance with an order to pay money, the applicant has to prove culpability, ie that the non-paying party could have paid.”

13.Bodey J  went on to consider the various cases and came to the conclusion that non-payment in breach of a matrimonial order to pay money is in itself a contempt of court, and in his judgment , no requirement that it should be shown to have been culpable, ie that the non-paying party had the means to pay[8]. Bodey J further went on to say that in his judgment questions of culpability would only come into play as regards the court’s exercising its discretion as to whether and how to act on the contempt so established.  At that stage all the circumstances would be considered.  Crucial, if not decisive, would be whether the non-paying party could have paid if he had wanted to[9].

14.The 2^nd issue of principle referred to by Bodey J was the standard of proof, as he said[10]:

“Whether the non-payer having the ability to pay is regarded as an essential ingredient of contempt (as I have held it is not) or is regarded as a factor in the exercise of discretion (as I have held it is), what is the required standard of proof of that ability to pay?”

15.Bodey J came to the conclusion that on a Hadkinson application, the standard should be the civil standard.  He said:   

“It goes without saying that consideration of a Hadkinson application, Article 6 of the European Convention is engaged. All the usual considerations about a fair hearing of the later substantive application therefore need to be addressed. That engagement of Article 6 provides protections for the non-paying party, which protections do not in my view need to be bolstered by importing the criminal standard on whether or not the failure to comply with the order was wilful”.[11]

16.Bodey J  went on to say:     

“On the contrary, it would, in my judgment, be quite unreasonable in the context of a Hadkinson application to require the aggrieved party under a money order to prove “beyond reasonable doubt” that the non-payer had the means to pay. That would or could mean a near re-run of the original application within which the order was made. It could well put the aggrieved party at a considerable forensic disadvantage including as to funding legal representation and it would be “a recipe for protracted litigation”: Baker v Baker (No 2) [1997] 1 FLR 145, 154, per Sir John Balcombe.”[12]

17.With the above principles in mind, I now turn to the facts of the present application.

The Contempt

18.There were two orders under which the husband had failed to make payments.  The first was the MPS Order. Mr Pilbrow submitted that the husband was asking in his Notice of Appeal[13] for, among other things, both paragraphs 4 and 5 of the Order be set aside. Under paragraph 4, I ordered the husband to pay off all the arrears under the MPS Order/Interim Order within 3 months from the date of the Order, and in paragraph 5, I ordered that the husband’s Variation Summons be dismissed.

19.Ms Eu, however, pointed out that in the husband’s Notice of Appeal there was no appeal against the MPS Order and that his appeal against the above two paragraphs of the Order arose out of his appeal against my order dismissing the Variation Summons only.

20.The MPS Order was made on 13 August 2010. As referred to in paragraph 34 of the Judgment, in November 2011, the husband unilaterally stopped complying with the MPS Order save for his undertakings therein, and paying a sum of HK$40,000 per month only instead of HK$323,000 per month as ordered.

21.The wife issued her Judgment Summons on

22.Thereafter, on 14 May 2012, the husband suddenly went back to the Family Court and issued a summons for leave to appeal out of time against the MPS Order.  He was out of time for almost 1 year 10 months.  On 30 October 2012, his application was adjourned sine die by consent with liberty to restore[14].  By then, the trial for the wife’s Part IIA application and the Variation Summons had already commenced before this court.

23.Up until the Hearing, the husband had not restored his application for leave to appeal.  Thus, at the moment, there is clearly no appeal against the MPS Order, and in fact the husband has not even obtained leave to do so.   As the husband only took out the Variation Summons on 8 March 2012, there was no reason why he should not at least pay all the arrears accrued and payable including the month of March 2012, due prior to the issue of the Variation Summons.  He had failed to pay those arrears up until the Hearing, and in my view he was clearly in contempt of the MPS Order.

24.The other order the husband was said to be in contempt is paragraph 1 of the Order, namely the periodical payments for the children.  In the husband’s Notice of Appeal, he has asked for paragraph 1 to be set aside. 

25.However, as mentioned earlier, the husband did not seek a stay in relation to paragraph 1 of the Order, and thus the periodical payments of HK$100,000 per month became payable as from 1 April 2013 and thereafter payable on the 1^st day of each calendar month.

26.For the month of April, the husband sent a cheque for HK$100,000 on 5 April 2013 through his solicitors.

27.Then came a rather curious letter sent on 3 May 2013, stating that first of all upon advice from Senior Counsel he should maintain paying only HK$40,000 per month pending his appeal, and secondly that he was unemployed and was unable to afford paying anything more than HK$40,000 per month, and then thirdly, as he had paid HK$100,000 in April out of loans, he would “deduct the excess payment” of HK$60,000 by 6 months.  In other words, from May 2013 onwards until November 2013, he would only pay HK$30,000 per month, and this was what he then paid for May.

28.The wife’s solicitors responded by asking for the identity of his Senior Counsel and for authorities relied on by his Senior Counsel for such advice. What followed was a letter on 4 June 2013 in which the husband suddenly claimed he had by mistake paid HK$60,000 per month for the wife’s occupation of the Grand Panorama Flat which he claimed he was no longer obliged to pay as from 1 April 2013, as the MPS Order had come to an end, and then according to his calculations, he overpaid the wife a sum of HK$50,000.  Although he seemed to have decided that he would pay HK$100,000 per month, he then proceeded to deduct HK$50,000, and he ended up paying only HK$50,000 for June. 

29.In the above letter, the husband’s solicitors did not disclose that by then the husband had in fact signed a new employment contract with Pyrenee and with MVI (Panama) on 1 June 2013.  Pyrenee is the same company which the husband said was R2’s company  which he was working for in San Francisco  from 1979 until about 1984 or 1985[15], and this was also the company which opened an account with Wocom in May 1985 for which the husband was at that time conducting Trading Activities[16] .  As for MVI (Panama), this is the company to which R2 transferred her 6,251 shares in the Macau Corporation and the 40,450 shares in ST Shipping, which is now subject of HC Action[17]. The husband’s salary from each of those companies is allegedly US$10,000 per month, totaling US$20,000.

30.Then, according to Mr Pilbrow, the husband went to San Francisco on business for Pyrenee and was unable to attend the Hearing. 

31.Anyway, Mr Pilbrow confirmed to this court at the Hearing that he did not give the husband the advice referred to in the letter of 3 May 2013.

32.The husband himself stated in his 34^th affirmation filed on 18 June in support of the Stay Application that he was willing and he undertook to comply with the periodical payments for the children of HK$100,000 per month[18].

33.There were no arguments put forward on behalf of the husband at the Hearing that he was entitled to deduct or to set off the alleged HK$50,000.   It seems that the husband had since reconsidered the matter, or was so advised. 

34.His latest position as I was informed by Mr Pilbrow at the Hearing was that the husband was willing to give an undertaking that he would not deduct any sums out of the HK$100,000 per month and that he would continue to provide the undertaking previously given in the MPS Order, namely to continue to provide free accommodation for the wife and the children at the Grand Panorama Flat until further order.

35.Notwithstanding that the husband said he would continue to pay HK$100,000 per month, up until earlier the day before the Hearing, he was in arrears of HK$220,000.  He then decided to send over to the wife a cheque for HK$100,000 late that day, leaving the wife no time to clear the cheque prior to the Hearing.

36.Thus, by the time of the Hearing, assuming the above cheque for HK$100,000 would clear, there was still a sum of HK$120,000 outstanding. 

37.In my view, the husband was in contempt of paragraph 1 of the Order.  Mr Pilbrow did not try and argue otherwise, but only submitted that as the husband undertook to pay the sum of HK$120,000 within 7 days, Mr Pilbrow asked the court to accept the husband’s undertaking, and to hear him on the Stay Application.

The other of the 6 Questions

38.Ms Eu has referred the court to the case of M v M (Financial Provision)[19], where Eleanor King held, among other things:

“There had been a wilful contempt of court which had impeded the course of justice: if a wife who did not work outside the home and who had, throughout the marriage, been wholly reliant upon the husband financially, applied to the court for financial relief, the husband’s wilful refusal to provide the court with financial information would necessarily impede the course of justice. A Hadkinson order provided the only effective means of securing compliance with the court’s orders; contempt proceedings, like judgment summonses, were notoriously cumbersome and largely effective……….”[20]

39.In the present case, I have found in the Judgment that the wife and the children have been entirely dependant on the Husband since the marriage[21].

40.I note that according to the husband’s estimate of costs dated 28 January 2013, his then costs were already a staggering sum of almost HK$24.5m. As with his case throughout, these costs were paid by R2 and/or R2’s companies, in particular R3, namely MVF.  There were also other proceedings launched against the wife in Hong Kong and also in Beijing. As a result, the wife had to incur huge costs for these proceedings and to defend herself in the other litigations.

41.I have found in the Judgment that the husband was evasive, and he had not made full and frank disclosure as to his financial means and that he adopted a “catch me if you can” attitude[22]. I have drawn adverse inferences against the husband, and set out in the Judgment my findings on the husband’s assets and financial resources.   These findings are now subject to the husband’s appeal. 

42.Notwithstanding what the husband said about his financial position, on 8 November 2012, the husband did make a “Revised Open Offer”[23]. Among other things, he proposed to pay to the wife HK$25m upon the wife and the children vacating the Grand Panorama Flat irrespective of whether Grand Panorama Flat could be sold or not, HK$1m for repayment on her behalf of an alleged loan due to R3 from the wife, and a further sum of HK$4,465,700 on her behalf allegedly due by the wife to AC Beijing.  It would therefore appear that even on the husband’s own case, his proposed payments to the wife at that time totaled slightly over HK$30m.

43.In view of the husband’s own open proposals, he should have the ability to pay the arrears under the MPS Order and under paragraph 1 of the Order, or he could have paid had he wanted to. 

44.The arrears of maintenance under the MPS Order had been outstanding for 5 months before the husband decided to take out the Variation Summons the day before the first hearing of the Judgment Summons, and he then tried to seek leave to appeal against the MPS Order 22 months out of time.  These seemed to be all tactical moves to try and delay the wife’s Judgment Summons from being heard.   I note his application for leave to appeal against the MPS order was  issued in May 2012, and this was two months after, what he now claims,  the termination of the  MPS Order .  His present stance in his appeal against the Order seems to be that the MPS order should be terminated after the wife was granted leave to issue her Part IIA application on 14 March 2012 and thereafter, there should no order for any interim maintenance at all.   Such stance in any event would not affect the arrears accrued before 14 March 2012.

45.The periodical payments under paragraph 1 of the Order are for the benefit of the children, which the husband said he would comply, and yet his attitude in trying to claim refund and deduction from children’s maintenance can be seen from the series of correspondence mentioned earlier. 

46.The Judgment Summons was also directed by this court to be restored and fixed for hearing on the day of the Hearing for directions, after the Stay Application.  The husband, if he had been properly served with the Judgment Summons, should have attended the Hearing personally.

47.Having regard to all the circumstances, the husband’s contempt was in my view wilful, contumacious and continuing, at least up until the date of the Hearing and had been an impediment to the course of justice.

48.In view of what was said by E King J in M v M,   the judgment summons procedure would not be an effective means of securing compliance with the court’s orders.   I have further mentioned during the Hearing that there is a doubt as to whether the judgment summons procedure in Hong Kong, as it now stands, is compliant with human rights, in light of the comments made by Lam J in CYM and YML aka YMLJ [24], when he referred  to  another earlier 2001 report of a judgment in the Mubarak case[25].  Since the 2001 judgment in the Mubarak case, there had been amendments in the procedure in England, but so far there have been none in Hong Kong.  At the Hearing, I adjourned the Judgment Summons to the next hearing for Counsel to consider what directions to seek.

49.The husband’s case throughout has been everything is held in the name of R2 and/or the companies, in particular the Offshore Companies. The husband has now produced expert opinions from BVI and Bahamas and it seems if the wife is trying to enforce any orders against the husband’s beneficial interest in the Offshore Companies as found by this court, she will need to take fresh action(s) in those foreign jurisdictions.

50.Having considered all the circumstances of this case, I came to the conclusion that it would be appropriate for conditions to be imposed before the husband would be heard.  I therefore ordered that the husband should not be heard on the Stay Application until the Conditions have been met. Two of the Conditions were the husband’s undertakings to continue to provide free accommodation, and to pay the periodical payments under paragraph 1 of the Order in a timely fashion, which Mr Pilbrow indicated he was willing to provide.  I imposed the condition that he is to pay the arrears of HK$120,000 under paragraph 1 of the Order and the 5 months’ arrears prior to the Variation Summons of HK $1,415,000, within 7 days.  Finally, I imposed a condition of payment within 7 days of the wife’s costs of the application for the Hadkinson Order and the Hearing, summarily assessed to be HK$300,000.

51.Lastly, I would like to thank all Counsel for their submissions and assistance to this court. 

Ms Audrey Eu SC, Mr Elliot Fung, Mr Eric Leung and Mr Jacky Chan instructed by C T Chan & Co, for the Petitioner

Mr David Pilborw SC instructed by Tso Au Yim & Yeung for the 1^st Respondent

Mr Li Chau Yuen SC and Mr Adrian But instructed by B C Chow & Co, for the 2^nd Respondent