Cwcv v. Lckc

FCMC 7162/2013

[2021] HKFC 228

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 7162 OF 2013

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Before Coram: Deputy Judge R. Chow in Chambers (Paper Disposal)

Date of Written Submissions:  7, 21 and 30 December 2020

Date of Judgment:  5 November 2021

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DECISION

( Discharge of Charging Order Absolute )

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Introduction

1.This is an application by the Respondent (“R”) to discharge a charging order absolute against his property and vacate the relevant registration at the Land Registry.  Alternatively,R seeks variation of the charging order absolute so that the property do stand charged for a lesser amount.

2.The charging order absolute in question was granted on 30 June 2020 (“COA”) in favour of the Petitioner (“P”) against R for HK$531,900.00 being the maintenance due and unpaid by R to P from 9 January 2019 to 9 January 2020 with costs against R’s interest in his residential property and car parking space.

3.By Amended Order dated27 May 2014 and Order dated 5 February 2015, R was ordered to pay HK$80,000 (increased to HK$90,000 by consent from July 2015 pursuant to R’s undertaking for adjustment) per month and HK$20,000 per month as maintenance for the Child of the Family and P respectively.

4.P by her affirmation filed on 16 January 2020 applied for a charging order against R and a charging order: notice to show cause was granted on 23 January 2020 (“CON”).

5.The hearing for the COA was originally scheduled for 31 March 2020 but was re-fixed to 30 June 2020 due to COVID-19 and public health consideration.  The COA was granted in the hearing on 30 June 2020 where R was absent.

6.R initially applied to discharge the COA in Court of First Instance, the action was subsequently dismissed by consent, R then filed this application in the Family Court.

Issues

7.Parties have no dispute over the legal principles relating to duty to make full and frank disclosure in an ex parte application.

8.The law on the duty to make full and frank disclosure in an ex parte application is trite.  In Tsui Yun Bun Barry v. Law Wan Tung [2019] HKCFI 2955, Recorder Stewart Wong SC summarized the relevant principles (at para. 45) as follows:-

“(1) Material facts are those which are material for the Court, when determining the ex parte application, to know and which are necessary to enable the Court to exercise its discretion properly. Those are facts which should have been put in the scales by the ex parte Court, and not only facts which are determinative one way or another.

(2) Materiality is to be decided by the Court and not by the applicant or his legal advisers.

(3) The applicant has a duty to make proper enquiries before making the application and the duty of disclosure covers not only facts known to the applicant but facts which he would have known had he made such proper inquires.

(4) The matter to be disclosed should normally not be made only in exhibits but must be referred to in the affidavits.

(5) The fact that the non-disclosure is not deliberate but is innocent does not excuse the non-disclosure, but is a factor to take into account when the Court considers what order to be made as a result of the non-disclosure.”

9.It is R’s case that subsequent to the grant of the CON, parties reached an oral settlement agreement that P had failed to disclose to the Court in obtaining the COA, the order ought to be discharged by reason of material non-disclosure.

10.P denies existence of such oral settlement agreement.  Counsel for P argues that there could not possibly be material non-disclosure at the grant of the CON as the alleged oral settlement agreement purportedly came into existence thereafter and the duty of full and frank disclosure no longer continued when the matter had become inter partes after the grant of the CON.  He further submits, even assuming there was material non-disclosure, the Court ought to exercise its discretion to not discharge the COA.

11.In light of the foregoing, the issues in this application are:

(i)  Was there an oral settlement agreement between P and R?

(ii)  If so, did P’s duty to disclose continue after the grant of the CON?

(iii)  If there was material non-disclosure, should the Court exercise its discretion to not discharge the COA?

Was there an Oral Settlement Agreement?

12.It is not in dispute that R failed to keep up with payments of the maintenance.  R received a demand letter dated 14 January 2020 from P’s Solicitors demanding payment in the sum of HK$555,283.63 representing maintenance owed by him between January 2019 and 13 January 2020.   

13.R does not dispute the liability.  According to R, after receipt of the demand letter, he kept in contact with P throughout January to May 2020.  He said in his affirmation that “The Petitioner and myself reached an oral agreement on 21 April 2020 that I would help the Petitioner to pay the surrender fee of her Manulife insurance policy (No.xx-xxxxxx-x) as a way of repaying and settling the said outstanding arrears of HK$555,283.63”.

14.R deposed that he later received Whatsapp messages from P that she received the insurance company’s cheque and a snapshot of the policy surrender notice and the cheque for HK$466,957.29.  R then said the “confirmation of the Petitioner’s receipt had let me believe that I had fully carried out my part in the April 2020 Settlement Agreement, and I was given the impression that I had resolved the matters stated in the Letter dated 14 January 2020”.

15.Counsel for R submits, by reason of the oral settlement agreement, the following should have been disclosed by P in her application for the COA:-

(i)  the oral negotiations and WhatsApp text messages with attachments between January 2020 to June 2020;

(ii)  the April 2020 Settlement Agreement and its terms; (iii) Manulife’s Policy Surrender Notice and the crossed-cheque attached.

16.While Counsel for R expects the oral negotiations and terms of the oral settlement agreement to be disclosed by P, as can be seen from R’s own evidence, there have been no or very limited details given for the so-called oral negotiations and the terms of the oral settlement agreement, it is not even clear what was said by each party in their reaching the agreement.

17.I also could not help but wonder what R was supposed to do to “help the Petitioner to pay the surrender fee”.   R did not have a single shred of evidence as to what he did or whether he did anything at all to hold up his end of the bargain, whatever that was.

18.To my mind, if there was a genuine oral settlement agreement between parties, there should be no reason why R would not have supplied a detailed description of the terms and performance of the oral settlement agreement.

19.R’s Solicitors wrote to P’s Solicitors on 20 July 2020 to ask for variation of maintenance and discharge of the COA citing R’s change of financial circumstances and unemployment.  However, there was no mention of any oral settlement agreement between P and R.  Again in R’s Solicitors’ letter dated 24 July 2020 threatening application for variation of maintenance and withdrawal of consent for the removal of the Child of the Family, there was no mention of the oral settlement agreement.  I fail to understand why the oral settlement agreement would not have been referred to should it be genuine.

20.P disputes the existence of the oral settlement agreement.  She explained in affirmation that the insurance company did not require any surrender fee to be paid for surrendering the insurance policy, all she had to do was to give a simple surrender instruction to the insurance agent.  Neither P nor R had to pay the insurance company the so-called “surrender fee” for surrendering the insurance policy.

21.P deposed that she would not have accepted a lessor amount in full settlement of a larger sum.  R merely proposed in April 2020 to surrender the policy in exchange for the surrender amount to be paid by the insurance company to P to meet the monthly maintenance, but P never agreed that the surrender amount would fully settle the outstanding amount between January 2019 and January 2020 plus interest.  Her understanding was that the surrender amount was used to pay towards the monthly maintenance incurred from 1 February 2020 onwards.

22.Counsel for R argues that P’s version is unbelievable as she only first mentioned it in P’s Solicitors’ letter dated 12 August 2020 after seeing R’s affirmation for the High Court application. 

23.I do not follow this logic, P’s said letter was to demand outstanding payments since February 2020, the surrender payment was received by P in May 2020 which satisfied maintenance payments until August 2020, there was simply no need to bring it up in earlier correspondence. 

24.On the contrary, it was R who should be expected to refer to the surrender payment by the insurance company in support of the alleged oral settlement agreement in correspondence.  R only first mentioned it in his affirmation filed on 6 August 2020 but not in his 2 letters in July 2020.

25.Counsel for R also questions that P’s Solicitors’ letter dated 21 July 2020’s denial of knowledge of R’s financial status contradicts her affirmation that R had informed her of his inability to pay maintenance. 

26.The financial status referred to in R’s Solicitors’ letter dated 20 July 2020 was that R left his business in 2018 and failed to find jobs and remained unemployed.  All P said in her affirmation was that R told her he was not able to pay maintenance and insurance premium.  I do not agree that her affirmation contradicts her letter dated 21 July 2020.

27.From my observation, it is R’s Solicitors’ letter dated 21 July 2020 that casts doubts on R’s own evidence.  R’s said P had previously agreed to vary the maintenance downward to around HK$60,000.  This obviously would be another piece of information that P was supposed to have disclosed in addition to the alleged oral settlement agreement.  Curiously enough, this non-disclosure was never made a subject of R’s complaint for material non-disclosure.

28.Counsel for R made another point that the fact that P sent the Whatsapp messages regarding the surrender payment should support the existence of the oral settlement agreement.   I do not think it is necessarily so, as P was willing to accept the surrender sum in satisfaction of the maintenance payment, sending the Whatsapp messages to R is also consistent with P’s version, I do not agree that P could not explain the Whatsapp messages.

29.Counsel for R further questions that if P’s assertion that she would not accept a lessor sum in full settlement of a larger sum is true, P would not have waited more than a year before taking any legal action when R had been short in his maintenance payments from January 2019.  I do not quite understand this argument for P obviously did not accept the lessor amount, that is why she applied for a charging order against R for all the outstanding payments.

30.In my view, R’s evidence that there was an oral settlement agreement lacks particulars and is evasive, it is inherently improbable and cannot be believed.  On the contrary, I find P’s evidence to be reasonable and consistent.  I reject that there was any oral settlement agreement as alleged.  

31.It follows that, in my ruling, there was nothing that ought to have been disclosed by P that she had failed to disclose in her application for the CON and the COA.

Did P’s Duty to Disclose Continue after the Grant of the CON?

32.With my finding that there was no oral settlement agreement as alleged, there is no need for me further deal with the remaining issues.  For sake of completeness, I would nevertheless express my view on this question.

33.In the present case, the alleged oral settlement agreement was purportedly made on 21 April 2020 after the grant of the CON on 23 January 2020 but before the hearing of the COA on 30 June 2020.

34.Counsel for P relies on JSCBTA Bank v. Mukhtar Ablyazov, Ilyas Khrapunov [2018] EWHC 259 (Comm) where the ex parte applicant for a worldwide freezing order was held not to be under a duty to make full and frank disclosure after the respondent had been served with the material on the basis of which the ex parte order had been made.  Sir Andrew Smith stated in paragraph 13 of the case:-

“13 As Saville J explained, the duty of full and frank disclosure placed on ex parte applicants is designed to minimise the potential unfairness that a litigant has no opportunity to be heard when an application for an order against him is determined. The WFO made by Males J, like any properly drawn ex parte order, provided that Khrapunov might apply to the court for its variation or discharge, and he does not complain that he was not properly informed of the material on the basis of which the WFO was made. To my mind, there is no cogent reason that in these circumstances an ex parte applicant should remain under the duty of full and frank disclosure; the respondent is then in a position to apply to the Court and to put before it any information that he considers relevant.”

35.Counsel for R submits if the ruling of JSCBTA Bank were to be taken as a generalised formulation of the principle, it would unnecessarily curb on the general principle laid down by Saville J in Commercial Bank of the Near East Plc v. A [1989] 2 Lloyd’s Rep. 319 (as cited in Gee on Commercial Injunctions, 6th edn., at §9-026 ).

“Thus in Commercial Bank of the Near East Plc v. A, Saville J considered the position in relation to Mareva relief when, following the application, the plaintiffs had obtained leave to register cautions over property belonging to the defendants in Greece. Although the case was not one in which the court had been misled or incomplete information had been given on the initial ex parte application, Saville J held that while the proceedings remain on an ex parte basis, the applicant has a duty to the court to bring to its attention any subsequent material changes in the situation, i.e. any new or altered facts or matters which, had they existed at the time of the application, should have been disclosed to the court.”

36.I do not agree that the above passage supports Counsel for R’s argument that the duty to disclosure continues past ex parte stage, it should be noted that in the above quoted passage, Saville J expressly said there was the duty of full and frank disclosure “while the proceedings remain on an ex parte basis”.

37.My view is that Sir Andrew Smith’s ruling in JSCBTA Bank was in line with the general proposition of the law that the duty of full and frank disclosure applies to only ex parte application but not after the respondent has been given an opportunity to put his case before the court.

38.In Tsui Yun Bun Barry v. Law Wan Tung [2019] HKCFI 2955, while Recorder Stewart Wong SC allowed the application by a creditor for discharge of the charging order for which she had no notice of by reason of the applicant’s material non-disclosure, he commented in paragraph 35 that “Of course, in a case whether the creditor knows of the charging order nisi but does not object to it being made absolute or if his objection is dismissed, it is difficult to see how he then apply to discharge the charging order absolute after it is made (unless there is a material change of circumstances).”

39.In the present case, R was required to show cause as to why the COA should not be granted, not only was he served with all the materials in support of the CON, he was required to attend the hearing for the COA.  He had been informed and was given the opportunity to oppose the order.

40.Counsel for R argues that the ruling in JSCBTA Bank only applies uniquely to the circumstances of that case.  He submits that the defendant in that case was represented by counsel at the inter partes hearings and was sufficiently heard, there was then no potential unfairness for an order against him.  That case ought to be distinguished on facts for R had no notice of the CON and he was not present in the hearing when the COA was granted and he had not been legally represented.

41.I do not accept that the above authorities can be distinguished.

42.R has not challenged service of the CON which used his residential address that has been used for other correspondence in this case, I do not see how he can now deny knowledge.

43.It is true that R was not present in the hearing for the COA, but there is a difference between an ex parte application in which a respondent has not been allowed participation and a respondent being absent in an inter partes hearing that he is aware of and supposed to attend.  Mere absence of a respondent in an inter partes hearing does not alter the nature of such to make it ex parte.  Whether one is legally represented also has no bearing on the nature of the application.

44.For avoidance of doubt, I do not accept that R had no notice of the CON. There has been no challenge in this case of service of the CON.  R’s service address is his residential address which has been proved to allow effective service.

45.In his affirmation, R never said he had no knowledge of the CON.  As for the COA, all R said was he “was shocked to learn that there was a hearing on 30 June 2020 which proceeded in my absence and that an earlier hearing scheduled on 31 March 2020 was cancelled due to COVID-19 and General Adjournment Period of the Judiciary (GAP)”.  R did not even say clearly whether he did not have knowledge of the hearing for the COA at all.  Whether R was shocked because he had not known there was the hearing or the hearing proceeded in his absence is not known.

46.In any event, if R really had not had notice of any of the previous proceedings, I see no reason why it would not have been mentioned in any of R’s Solicitors’ letters in July 2020.  

Conclusion

47.By reason of my ruling on the alleged oral settlement agreement and the question of duty of full and frank disclosure, all of R’s application must fail.

48.I make the order that R’s Summons filed on 18 September 2020 be dismissed.

49.Costs should follow the event.  I further make an order nisi to be made absolute in 14 days that R do pay P costs of the said Summons, to be taxed if not agreed, with Certificate for Counsel.

Mr. Arthur Hue Yeung Au instructed by Li & Associates, Solicitors for the Petitioner

Mr. Jonathan Tai instructed by Cheung, Chan & Chung, Solicitors for the Respondent