A v. B

HCA 2431/2017

[2021] HKCFI 77

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2431 OF 2017

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Before: Hon Au-Yeung J in Chambers (Not Open to the Public)

Closing Date for Written Submission: 30 September 2020

Date of Decision: 8 January 2021

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D E C I S I O N

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Introduction

1.Although the parties are divorced, I shall for convenience call them “Husband” and “Wife”, respectively, in accordance with the written submissions of their counsel.

2.The Wife filed a petition for divorce together with 2 Consent Summonses. The Consent Summonses were approved by Her Honour Judge Melloy, which I shall refer to as the “Children’s Consent Order” and “AR Consent Order” respectively.

3.Shortly afterwards, the Husband accused the Wife of misrepresentation and material non-disclosure for failing to disclose her relationship with a man called TT and her intention to relocate with the children to Europe to join TT there (“the 2 Matters”).  No error was alleged on the party of the Family Court judge.  The Husband filed the present writ seeking to set aside the AR Consent Order and other reliefs.

4.This is the Wife’s application for this case to be transferred to the Family Court where, she submits, Her Honour Judge Melloy should be in the best position to handle.

5.The Husband opposes the application on the ground of complexity of law and facts of his claim.  He also submits that there would be appearance of bias against the Husband for the set aside application to be dealt with by Her Honour Judge Melloy, as she has unequivocally expressed views rejecting the merits of the Husband’s case. 

The background

6.The Husband and the Wife married in France on 3 September 1999, having first signed a Prenuptial Agreement (“PNA”) on 27 August 1999.  There are two children of the marriage, now aged 15 and 12.

7.Between 8 April 2016 and 21 July 2016, the parties entered into negotiations for divorce, during which time the Wife repeatedly denied her romantic involvement with anybody.  With legal advice from specialist matrimonial lawyers, the parties signed the Consent Summonses as part of the overall package, with the divorce being undefended.

8.The Consent Summonses were signed by the Husband on 21 July 2016 to be held to the order of his solicitors pending the Husband’s approval of the Wife’s draft petition.  On the same day, the Wife accepted TT’s invitation to join him and his family in Mykonos, Greece. 

9.The Wife signed the Consent Summonses and Petition on 29 July 2016. She arrived in Mykonos on the following day to spend a holiday with TT. She claims that it was a late and spontaneous invitation from him.

10.The Husband claims that without his prior approval, the Wife caused the Petition to be filed on 1 August 2016. 

11.The Children’s Consent Order and AR Consent Order were made, and a decree nisi of divorce was pronounced, on 20 September 2016.

12.The Wife now accepts in §9 of her counsel’s submission that at the time of the AR Consent Order, she had a boyfriend “which was neither surprising nor unpredicted”.

13.On 25 September 2016, 5 days after the Consent Orders were made, the Wife allegedly informed the Husband (which she disputes) of her plans to relocate to Europe with the Children.  She refused to amend the Children’s Consent Order to state that she had no current intention to leave Hong Kong, whilst also denying again her relationship and her intention to relocate.

14.The Husband accuses the Wife of material non-disclosure of the 2 Matters until after the decree nisi and making of the Consent Orders because she knew that he would not otherwise have consented to the divorce or the Consent Summonses.

15.The parties’ relationship then turned into a high conflict situation with 4 years’ of litigation ensuing.  It included the Husband’s appeals against the decree nisi and the Consent Orders (which he failed). He contested the Wife’ application’s in March 2017 for permanent removal of the Children to live with her and TT in his home in Zurich and lost after trial.  There were also proceedings in the Family Court relating to the Wife’s enforcement of the Ancillary Relief Consent Order.

16.The decree nisi was made absolute on 15 November 2017.

17.On 20 October 2017, the Husband issued the writ in the present action seeking the following reliefs:

(1)  An order setting aside the AR Consent Order;

(2)  Remission of the parties’ claims for ancillary relief to the Family Court or to a judge of the Court of First Instance;

(3)  Stay of the AR Consent Order in the interim;

(4)  Injunction to restrain the Wife from enforcing the AR Consent Order;

(5)  All appropriate restitutionary remedies; and

(6)  Damages including equitable damages.

18.The Wife denies the claim.  She says that even on 5 October 2016, she was not in a relationship with TT in which she contemplated cohabitation or re-marriage.  The intention to relocate came about due to a promotion offered by her employer to work in Europe.  In any case, the alleged non-disclosures were immaterial since the ancillary relief matter was disposed of on the “sharing” principle.  Even if the PNA was taken into account, given her contribution to the marriage and other circumstances, it would not have made a material difference to the outcome of the ancillary relief proceedings.

19.The Wife further claims that whilst she has performed her part of the AR Consent Order (including using about HK$13 million to redeem the mortgage of the B Road property in joint names), the Husband has not.  She has had difficulties leasing out the B Road property due to failure of the Husband to transfer it to her in accordance with the AR Consent Order.  She counterclaims for damages for loss of profit, loss of opportunities and emotional distress. 

20.The existence of a duty of full and frank disclosure is not in dispute but its extent is.  The main issues disclosed on the pleadings are:

(1)  Misrepresentation or material non-disclosure: whether the Wife had misrepresented or failed to disclose the 2 Matters, and whether it was intentional or inadvertent (issue 1);

(2)  Obligation: whether the Wife was obliged to disclose the 2 Matters to the Husband (issue 2);

(3)  Reliance: whether the Husband had relied on the Wife’s misrepresentation or non-disclosure (issue 3);

(4)  Detriment – whether the Husband has suffered loss/ prejudice – including not defending the divorce instead of filing for divorce in France, refraining from deploying the PNA; and entering into the Consent Summonses (issue 4);

(5)  Whether the result of the ancillary relief proceedings would have been the same even with disclosure of the 2 Matters (issue 5); and

(6)  Whether, if the AR Consent Order is set aside, the Husband is entitled to the reliefs claimed (issue 6).

21.The counterclaim does not pose a problem because, for present purposes, the Wife is willing to limit her claim to an amount within the jurisdiction of the District Court.

Parties’ respective case on transfer to the Family Court

22.The Wife says that this case should be transferred to the Family Court. By now Her Honour Judge Melloy is more familiar with this case than any other judge, having dealt with various matters between the parties including refusing leave to appeal against the decree nisi and the 2 Consent Orders, ruling on costs in respect of relocation of children, ruling on jurisdiction to enforce the AR Consent Order, leave to appeal on her ruling on jurisdiction, a substantive ruling on chattels, property and jurisdiction and a hearing on taxation.

23.Further, the application to set aside an order is best to be dealt with by the judge who granted it.  After that issue is disposed of, the rest of the claims are ancillary relief matters.

24.The Husband opposes the application.  He claims that the factual and legal issues raised in the statement of claim are of such complexity that the Court of First Instance is the natural forum for their determination:

(1)  The Husband’s claim against the Wife’s misrepresentation that induced the Husband to forbear enforcing the PNA and enter into the AR Consent Order, are novel and may involve complex questions of contract and/or tort.

(2)  The PNA is governed by the French Civil Code and foreign legal expert evidence is likely required.

(3)  The quantum of damages suffered by the Husband includes at least HK$4 million spent on rent as a result of the Wife’s unjustified occupation of the former matrimonial home, contrary to the PNA which provides for the Husband to retain full ownership.

(4)  If the AR Consent Order is set aside, the Wife would be holding assets to a current value of US$12 million, to which she is not entitled and should be repaid to the Husband.

(5)  The parties’ assets, as set out in a schedule to the Consent Orders, are up to US$38 million and are located in multiple countries.

25.Procedure-wise, the Husband says that the complexity of the facts will inevitably require numerous interlocutory applications, in particular applications for discovery and taking of evidence overseas.  The Husband may need to apply for a subpoena duces tecum for the production of documents in the possession of the Wife’s employer. 

Legal principles on setting aside an order made by consent

26.The Court of Appeal has, in dealing with a related appeal between the present parties, set out the procedure for setting aside a consent order whether there is no fault alleged against the judge making the order: GM-SA v DDPJ [2020] HKCA 488, 17 June 2020, §§38-40 & 44.

27.In essence, if there is serious dispute of facts, a fresh action should be issued to set aside the consent order in a court of competent jurisdiction so that the allegations of fraud and misrepresentation can be pleaded and tried. If the consent order is set aside, the aggrieved party can restore the ancillary relief proceedings.  A District Judge has jurisdiction to entertain such action under Section 37(1)(g) of the District Court Ordinance, Cap 336 (“DCO”) so long as the subject matter in the case is within the monetary limits set by section 37(2)(g).  The Family Court is part of the District Court and a Family Judge is ex officio a District Judge. A Family Judge can exercise the powers of a District Judge.

28.The combined effect of sections 37(1)(g) and 37(2)(g) of DCO is that the monetary limits of the District Court in proceedings for relief against fraud or mistake is $3,000,000 where the proceedings do not involve land; or $7,000,000, where the proceedings partly involve land and the part that does not so involve does not exceed $3,000,000 in amount.

Legal principles on full and frank disclosure

29.There is no dispute that the duty of full and frank disclosure exists. It applies not only to contested proceedings but also to exchanges of information between the parties and their solicitors leading to orders by consent without further inquiry by the court.  The disclosure must also be correct and up to date, to enable the court to properly exercise its discretion Jenkins v Livesey [1985] AC 424, at 437H and 438B. 

30.Even innocent misrepresentation as to a material fact is a vitiating factor and courts will set aside orders because the undisclosed fact undermined the whole basis on which the order was made: Sharland v Sharland [2015] 3 WLR 1070, at §30.

31.Where a party’s non-disclosure was inadvertent, there is no presumption that it was material and the onus is on the other party to show that proper disclosure would, on the balance of probabilities, have led to a different order.  But where a party’s non-disclosure was intentional, it is deemed to be material, so that it is presumed that proper disclosure would have led to a different order, unless that party can show on the balance of probabilities that it would not have done so: see Gohil v. Gohil (No. 2) [2015] 3 WLR 1085, at §44.

Legal principles on transfer from the Court of First Instance to the District Court

32.Under §6 of Practice Direction SL10.3, where an action to set aside a consent order on ancillary relief is commenced in the Court of First Instance, the court may, pursuant to sections 43 or 44 of the DCO, transfer the action to the District Court (including the Family Court) so that the action can be tried in the District Court or by the original family judge whose order the plaintiff is seeking to set aside.

33.Under section 43 of the DCO, the Court of First Instance may, at any stage of the proceedings, order the transfer to the District Court of all or part of an action which appears to the Court of First Instance likely to be within the jurisdiction of the District Court.   Under section 43(3), the Court of First Instance is required to make an order under this section unless it is of the opinion that, by reason of the importance or complexity of any issue arising in the action or proceeding, or for any other reason, the action or proceeding ought to remain in the Court of First Instance.

34.Section 44 of the DCO concerns transfer to the District Court where the parties consent, but here the Husband does not consent.

35.The Court shall take the Husband’s case at its highest when determining the proper forum for the case.  As a matter of practice the Court should apply the following principles in relation to a transfer application:

“(a)   In the absence of abuse, a plaintiff should be entitled to frame his case in the manner that he wishes.

(b)   At an interlocutory stage, it would not be proper for the court or a master to view the plaintiff's claim in the same way as it would be viewed at trial by weighing the different evidence or by believing or disbelieving some or all of the evidence. That exercise can only be carried out when all the evidence, cross-examination and submission has been heard, particularly where there are factual and or other disputes between the parties, as for instance disputed expert opinion.

(c)   Accordingly, the plaintiff's case on quantum as framed by him ought to be viewed at its highest when determining the proper jurisdiction where the case should be brought.”

Wong Miu Kwan v FPD Savills Property Management Limited [2006] 1 HKC 575, at §21, Suffiad J (overturning a Master’s decision to transfer the personal injuries case to the District Court)

36.In N v W, FCMC 5026/2015, 8 September 2017, (Transfer up to the High Court), §4, Her Honour Judge Melloy sets out the criteria for transfer up to the High Court where:

(a)  The case raises very substantial points of law.

(b)  Included within the substantial points of law, the case involves allegations of fraud.

(c)  The margin of error on the dispute runs to many tens of millions of dollars.

37.N v W even had criminal overtones and perhaps other civil law ramifications (such as proceedings for defamation).  There were also issues of fraud and it was likely that expert evidence may be necessary.  At least US$18 million was at stake.  Her Honour Judge Melloy ordered that the case be transferred to the High Court.

Proper approach in the application of the above principles

38.First of all, the submissions for the Wife make various comments on the merits and strength of the Husband’s case.  Applying Wong Miu Kwan, those comments are irrelevant.  I shall take the Husband’s case on the facts at its highest.

39.Secondly, whilst it is best for the set aside application to be heard by the judge who made the order, it is a wrong starting point to see which judge is most familiar with the litigation between the parties and hence most suitable to handle this claim.  (I hasten to add that Her Honour Judge Melloy is probably the best judge to deal with this claim, if the case is transferred to the District Court.)

40.The proper starting point is to look at the pleaded issues and the reliefs to see if they fall within the jurisdiction of the District Court and then ask if there are reasons of complexity or otherwise that the case should remain in the Court of First Instance. 

Pleaded issues

41.Issue 1, issue 3 and issue 4 are principally issues of fact.  The major focus is the parties’ own evidence and their credibility.  There is no complexity in those issues.

42.Issue 2 (obligation to disclose) is one of law.  Despite the submission of Mr Scott SC, I am not persuaded that this issue has any complexity.  It is an issue which a District Court judge (especially one with experience in family matters) can well handle. 

43.As for issue 5:

(1)  There is no principle or practice that requires all cases involving a PNA to be dealt with in the Court of First Instance instead of the Family Court.  Applicability of a PNA and extent of issues covered by it are matters which a Family Court Judge will have to consider under section 7 of the Matrimonial Property and Proceedings Ordinance, Cap 192. 

(2)  Restoration of the ancillary relief proceedings upon setting aside of the AR Consent Order is a prayer of the Husband.

(3)  Issue 5 involves a serious duplication of the ancillary relief proceedings if the AR Consent Order is to be set aside.  Such duplication should be avoided. 

44.The fact that the case involves foreign law does not make the case complex.  The District Court has rules that govern adducing of expert evidence as for the High Court.   The fact that expert evidence from both sides conflict also does not make the case complex.  It is precisely due to conflict in views that the parties need to engage different experts.

45.The Husband’s description of the need for discovery is in fact an exaggeration of the complexity of the case.  When it is a matter of the Wife’s intentions as regards her relationship with TT, it is difficult to see how complex the discovery can be.  As regards the need for discovery relating to the employer’s involvement in the Wife’s deception of the Husband, the deception has not been pleaded.  Even if discovery is needed against the employer, there are rules to govern.  Remote hearing of a witness beyond Hong Kong is also feasible.

46.The value of the parties’ assets and its locations in the world do not raise complexity.  For example, just the former matrimonial home takes up HK$85 million in value out of a total of HK$300 million.  There is no suggestion that the schedule of assets (with values) attached to the AR Consent Order is incomplete.  Most of the assets are liquid (being shares and cash).  The only possible “complexity” concerns some investments in companies but updating of valuation by expert evidence can be done.

47.In summary, I am of the view that the issues are well within the competence of the District Court in its civil jurisdiction.

Reliefs claimed

48.Mr Todd submits that this is not a money claim.  With respect, I do not agree.  An order to set aside the AR Consent Order is no doubt the primary relief that the Husband seeks.  However, his claim does not stop there.  He goes on to seek damages and restitution, which he may be entitled to if the facts are established.  

49.In respect of damages, apart from bare assertions, the statement of claim does not disclose what the special damages are.  The alleged loss in terms of rental (HK$4 million), renovation costs and investment in a business based in Hong Kong and damages for mental distress for losing care and control over the children, appear only in the reply and/or affirmation of the Husband’s solicitor. 

50.As for restitution, the Husband claims that assets in the Wife’s hands which she could not otherwise obtain/keep because of the PNA amount to US$12 million.

51.The Husband’s claimed damages should in principle be ignored.  However, for present purposes, I shall use the figures of HK$4 million and US$12 million provided by the Husband.  Setting off the HK$13 million which the Wife spent on redemption, there is still a balance which, on its face, exceeds the District Court’s jurisdiction. 

52.However, one needs to look at the reliefs in substance.  Any damages which the Wife may have to pay the Husband will be her financial obligation. Any subject matter of a restitution order will be a financial resource of the Husband.  Either way, they have to be taken into account under section 7(1)(a) or (b) of the Matrimonial Property and Proceedings Ordinance, Cap 192, when the court decides the question of ancillary relief between the parties.  A transfer order or lump sum order in the ancillary relief proceedings would achieve the same purpose of assessment of damages and a restitution order of a civil court. 

53.I therefore agree with Mr Todd that after the AR Consent Order is set aside, the rest is ancillary relief in nature.  For ancillary relief, the District Court has unlimited jurisdiction under section 10A(3) of the Matrimonial Causes Ordinance, Cap 179.

54.In fact, it was the position of the Husband that the Family Court was the most appropriate court to deal with the application to set aside the AR Consent Order.  See §9(4) of the supplemental note dated 21 July 2017 of Mr Coleman SC (as Coleman J then was) and Mr Egerton, both counsel for the Husband in the application for leave to appeal and stay in HCMP 1052/2017.  The complexity (or lack of it) of this case was no different in 2017 from now.

55.In summary, I can find no complexity in the issues or reliefs sought. 

Appearance of bias of Her Honour Judge Melloy

56.Mr Scott SC criticizes the Wife for forum shopping and justice would not be seen to be done for the proceedings to be transferred to and determined by Her Honour Judge Melloy who has already unequivocally stated her disapproval on the merits of the case to be tried.  He relies on the following passages in her decision in refusing to grant leave to appeal in FCMC 9657/2016, §§7 & 12.

(1)  In the context of the Wife’s non-disclosure, the learned judge stated that she could see no basis for either giving leave to appeal or for setting aside the AR Consent Order on that premise (§7).

(2)  In the context of the PNA, even if the PNA had been applied, it was by no means certain that a different result would have ensued (§7).

(3)  As things stood, there was no basis for disturbing the current orders and that if the Husband wished to pursue matters with regard to the Children’s Consent Order further then it would be more appropriate for him to issue an application to vary (§12).

57.With respect, there is no merit in Mr Scott SC’s submission. What Her Honour Judge Melloy did was in accordance with the procedure in considering a leave application.  She merely considered if there was an arguable point of law with reasonable prospect of success or if there existed grounds in the interest of justice for the appeal to be heard. 

58.Judges express preliminary views on merits in interlocutory applications, eg in applications for injunctions, security for costs and discovery. Judges may, after trial, in the light of all the evidence before him or her, come to findings different from the preliminary views.  There is no basis for asserting bias.

59.In any case, any allegation of bias would at most disqualify Her Honour Judge Melloy from handling the case, but not a reason not to transfer this case to the Family Court. 

Conclusion

60.Having considered the pleaded issues and reliefs, I am of the view that there is no complexity that justifies having this case dealt with by the Court of First Instance.  There is no merit in the complaint that Her Honour Judge Melloy might be biased against the Husband.  I order the case to be transferred to the Family Court.

Costs

61.Costs should follow the event and be to the Wife.  I deal with matters of principle in relation to her statement of costs:

(1)  The summons is on a confined issue.  Only costs of one solicitor and one trainee are allowed, with some supervision costs of a partner.

(2)  Only scale costs instead of time costs of the litigation clerk are allowed.

(3)  The affirmations (of solicitors on both sides) were more like submissions and were in breach of Order 41, rule 5 of the Rules of the High Court.  Costs in relation to preparation of those affirmations should be substantially reduced.

(4)  There was no justification for claiming party-and-party costs for internal conference, discussion, and planning for this summons.

(5)  There was no justification for attendance at hearings by more than one solicitor and the hearing on 28 March 2019 was only for about 30 minutes.

62.On a nisi basis, I order the Husband to bear the Wife’s costs with certificates for 2 counsel and summarily assess those costs at $401,000.

63.I thank counsel for their assistance.

Written Submission by Mr John Scott SC and Mr Robin Egerton instructed by Oldham, Li & Nie, for the Plaintiff

Written Submission by Mr Richard Todd and Mr Jeremy Chan, instructed by Withers, for the Defendant