Hctt v. Tyyc

CACV 380/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 380 OF 2007

(ON APPEAL FROM FCJA NO. 341 OF 2003)

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BETWEEN 

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Before: Hon Tang VP, Lam J and A Cheung J in Court

Date of Hearing: 11 June 2008

Date of Judgment: 11 June 2008

Date of Reasons for Judgment: 2 July 2008

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REASONS FOR JUDGMENT

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Hon Tang VP:

Introduction

1.The 1^st applicant (the husband) and the 2^nd applicant (the wife) married on 8 January 2002, following a short period of cohabitation.  They were 31 and 33 years old respectively.  On 12 March 2003, they filed a Joint Application for divorce on the ground that they had lived apart since about February 2002. 

2.The Decree Nisi was made on 17 September 2003, and the Decree Absolute on 2 February 2004.  The parties did not attend the hearing for maintenance fixed on 14 January 2004.  According to the 2^nd applicant she was unaware of the appointment because the address which was given in the Joint Application was not her address and she had not received any of the Orders of Decree Nisi or Decree Absolute issued by the court.  She told the learned judge that the Joint Application was prepared by the 1^st applicant.  She had not noticed that the 1^st applicant had given a wrong address for her so that she had not received any of the correspondence from the court.  This is what the learned judge said in para. 51 of her judgment:

“51.   The above evidence by the Wife is not without controversy.  However, I do not think it is necessary, apart from the disputes relevant to the consideration of the circumstances of the case, to determine each and every controversy between the parties. It is not disputed that the parties reconciled after the Joint Application.  However I find as a fact that the Wife did not receive the Orders of Decree Nisi or Decree Absolute as the address purported to be the Wife’s address in the Joint Application plainly was not her address.  In most cases, once a decree absolute is issued, the parties legally are no longer regarded as man and wife.  In this case, however, the facts warrant quite a different consideration.  I find that the Husband had, without informing the Wife, taken steps to annul the marriage while misleading the Wife into believing that their marriage had not been legally dissolved.  In the circumstances, I do not consider it inequitable to treat the marriage continuing beyond the date of the grant of Decree Absolute – until the end of the reconciliation in early 2005.”

3.The 2^nd applicant has a son by a previous marriage, L.  She, her son and her mother lived with the 1^st applicant during the marriage.  In the Joint Application it was stated that the 1^st applicant would give $6,000 a month to the 2^nd applicant until her remarriage.  The 1^st applicant is a university graduate and was a senior inspector of police, earning about $73,000 a month at the time of the Joint Application, inclusive of overtime and other benefits.  He now lives with his girlfriend in a property purchased with a mortgage.  The 2^nd applicant is educated up to Form 5, has been made bankrupt as a result of negative equity in a property purchased during her first marriage, and worked as a planning and procurement officer earning about $21,000 per month.  She has to support herself, L and her mother and the official receiver has permitted monthly outgoings of $24,000. 

4.On 24 March 2006, an order was made by Deputy District Judge Woo by consent (“the consent order”) under which the 1^st applicant agreed to pay the 2^nd applicant $4,500 a month as maintenance, commencing 1 April 2006 during their joint lives and until her remarriage.

5.Mr Egerton, appearing for the 1^st applicant, informed us that the consent order was made on a directions hearing (presumably at the 1^st appointment) under the Financial Dispute Resolution Pilot Scheme (“FDR”).

6.By summons dated 28 July 2006, the 1^st applicant applied for variation of the consent order so as to reduce the amount payable monthly from $4,500 to $1,000.

7.On 8 May 2007, at the hearing before Deputy District Judge Levy, the 1^st applicant asked that the payment should be limited to 6 months.  As a result, the learned judge proceeded on the basis that the 1^st applicant applied to vary the amount payable from $4,500 to $1,000 a month, and such reduced payment to be limited to 6 monthly only.

8.After a 2-day hearing, the learned Deputy Judge varied the consent order and in essence ordered that the 1^st applicant should pay to the 2^nd applicant $4,500 until 1 February 2008.

The appeal

9.The 2^nd applicant appealed.  On 11 June 2008, we allowed the appeal with costs.  These are our reasons.

10.The jurisdiction to vary an order for financial provision including an order by consent, can be found in section 11 of the Matrimonial Proceedings and Property Ordinance, Cap. 192.  Section 11(7) provides:

“(7)   In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates and, where the party against whom that order was made has died, the changed circumstances resulting from his or her death.”

11.It is common ground that there has been no change of circumstances since the consent order.

12.After a review of the relevant authorities including Lewis v Lewis [1977] 1 WLR 409, the learned Deputy Judge noted that her discretion in the application is “wide and unfettered”.  She said:

“33.   … The fact that there is no change of circumstances is one of the factors to be considered but it should not be a fetter on a court’s power.”

Earlier in her judgment she referred to Flavell v Flavell [1997] 1 FLR 353, and said:

“A court is not precluded from using the original order as the starting point but also empowered to look at the matter de novo.”

13.In Lewis v Lewis, the English Court of Appeal was concerned with the argument that according to Foster v Foster [1964] 1 WLR 1155, even when there has been a change of circumstances:

“… the correct approach was to start from the original order and see what changes had taken place since the original order, and make adjustments roughly in proportion to the changes, if that were possible.” Page 411.

14.In that context Ormrod LJ said that the power of variation under section 31(7) of the Matrimonial Causes Act 1973 (on which our section 11(7) is based), was conferred with the intent that:

“… the court should have as unfettered a discretion as possible to deal with the situation as it is when the matter comes before it. I am sure it is not the intention of Parliament in any way to trammel the discretion by any kind of technical reasoning or technical grounds.”  Page 412.

15.But as Garner v Garner [1992] 1 FLR 573 shows that does not mean that the earlier order, whether made by consent or not, carries no weight.  How much weight should be given to the earlier order must depend on the circumstances.  Cazalet J said in the English Court of Appeal:

“Almost invariably, an application to vary an earlier periodical payments order will be brought on the basis that there has been some change in the circumstances since the original order was made; otherwise, except in exceptional circumstances, the application will, in effect, be an appeal. If an order is not appealed against, or is made by consent, then the presumption must be that the order was correct when made. If it was correct when made, then there will usually be no justification for varying it unless there has been a material change in the circumstances. However, because of the impact of continuing inflation, because children grow older and cost more to support and because, for example, the cost of living in its increase may hit one party harder than another, it will usually follow that, if time has passed, there will inevitably have been some changes in the circumstances, and in particular in the financial circumstances, of the parties concerned.

Following Lewis v Lewis, by which decision this court is bound, a court on the hearing of an application to vary is fully entitled to look at all the relevant matters set out in s. 25 of the Matrimonial Causes Act 1973. On occasions, the court may be slow to accede to an application to vary a consent order; not least because the parties’ solicitors might otherwise be deterred from either seeking to negotiate such a provision or to achieve finality. Another factor which may influence a court will be the time that has passed since the original order was made. If an application consequent on an order is brought very soon after that order has been made, the court, in normal circumstances, is likely to attach more weight to the earlier order than if it had been made some years previously. Likewise, the court would expect to pay full regard to any special terms agreed between the parties at the time the original order was made - as, for example, when endorsements on briefs or contemporaneous correspondence show that an agreed order has, for some particular reason, been set at an artificially low figure. Shortly stated, the court must decide what weight it should attach to the original order and all the surrounding circumstances. However, once an application to vary is before it, the court is fully entitled to make an order considering all the circumstances afresh, paying such regard to the old order as may be thought appropriate.”

16.Thus, although the jurisdiction to vary is untrammelled, normally the earlier order would not be varied unless there has been a material change in circumstances.

17.It is not clear what weight, if any, the learned judge gave to the consent order.  She was referred to Gray v Gray [2001] 1 HKLRD 580 which she felt able to distinguish.  She said:

“21.   The facts in the present case are starkly different to those in Gray in which the parties to the consent order had the benefit of legal advice.  Contrary to Gray, both parties in this case did not have any legal advice when they agreed to the terms of the Original Order.  Accordingly, I am unable to draw much guidance from Gray in respect of the issues under consideration.”

18.Here, when the consent order was made neither party was represented.  The absence of legal advice may be important in some cases.  However, we are not here concerned with a complicated agreement.  The consent order provided for payment of a monthly sum to the 2^nd applicant during their joint lives and until her remarriage.  Apart from reducing the amount payable to $4,500 from $6,000, it is essentially the same as provided for in the Joint Application.  The 1^st applicant has never satisfactorily explained why he had agreed to pay $6,000 per month in the Joint Application.  On the other hand, it seems clear that the 2^nd applicant would not have agreed to the Joint Application had the 1^st applicant not agreed to pay.  It is also noted that according to her, the parties had not lived separate and apart for one year prior to the Joint Application.

19.In Gray v Gray the court was concerned with an application to vary a consent order for payment of a lump sum by instalments.  Rogers VP said he agreed with the trial judge that:

“But in the absence of circumstances which make the agreement voidable due to duress, a mistake, fraud or the like, it seems to me that this should only be done where there has been a material change of circumstances so drastic and unforeseen as to make it only fair to vary.”  at 584.

20.In L v C [2007] 3 HKLRD 819 at 844, Stock JA took the view that the approach adopted in Gray v Gray:

“45.   … is overly rigid, and that it is inappropriate in the context of the matrimonial setting to think in the language of vitiation of contracts.”

21.However, Stock JA was of the view that an agreement entered into by the parties should be “presumptively dispositive” at 841.

22.Neither Gray v Gray nor L v C was concerned with a periodic payment order made by consent.  However, fairness and common sense requires that weight should be given to the consent order.

23.As Baroness Hale said in Miller v Miller [2006] 2 AC 618 at para. 122:

“My Lords, there is much to be said for the flexibility and sensitivity of the English law of ancillary relief.  It avoids the straitjacket of rigid rules which can apply harshly or unfairly in an individual case.  But it should not be too flexible.  It must try to achieve some consistency and predictability.  This is not only to secure that so far as possible like cases are treated alike but also to enable and encourage the parties to negotiate their own solutions as quickly and cheaply as possible.”

24.With respect to the learned judge, it seems that she had conflated the width of her power under section 11 with how her discretion should be exercised.  She had all but ignored the consent order. 

25.According to the learned Deputy District Judge, the application is based on highly unusual facts.  It is not clear what those highly unusual facts were.

26.The fact that the parties were not legally represented is not a sufficient reason to place no weight on the fact that the 1^st applicant was seeking to vary a consent order 3 months after it has been made when admittedly there had been no change in circumstances.

27.Suppose the order was not by consent, and was made by the court, the jurisdiction to vary such an order under section 11(7) is equally “wide and unfettered”.  But it is inconceivable that in the absence of any change, the court would vary such an order.  As Cazalet J said in Garner:

“… otherwise, except in exceptional circumstances, the application will, in effect, be an appeal.”

28.In this context, I note that the learned Deputy District Judge has rejected the 1^st applicant’s allegation that:

“19.   … it was as a result of the constant urging by [Deputy Judge Woo] that he felt being compelled or coerced into accepting the suggested sum of $4,500.  He further said that without the benefit of legal advice in matters such as his obligations or the Wife’s needs, he could not be regarded of having truly consented to the terms of the Original Order. In essence, the Original Order – as submitted by the Husband – is not a truly consent order.”

29.Indeed, she said:

“34.   … Rather than being pressured into a settlement- I am inclined to find -the Husband was instead motivated by the attraction of the early resolution of the disputes between him and the Wife.  To conclude, therefore, I am unable to find a scintilla of evidence of any improper pressure by the court as alleged.  The complaints by the Husband against the Deputy Judge are most unfounded.”

30.However, she went on to say:

“35.   That said, however, this case highlights the importance for the court to always be vigilant to the possibility of a perception by the parties that the court is exerting pressure on them to settle financial disputes.  A financial consent order made without any financial disclosure having been given by the parties or legal advice having been received by them, can lead to a perception of undue influence by the court- which is highly undesirable-   and can be akin to the opening of a Pandora’s box.”

31.I have difficulty understanding the significance of para. 35 of the judgment.  It is true that there had been no financial disclosure prior to the making of the consent order.  But this is not a case where the 1^st applicant could say that he was unaware of the 2^nd applicant’s financial circumstances.

32.As for the lack of legal advice, to which the learned judge had referred more than once, the 1^st applicant is a university graduate and a senior inspector of police.  From what I could see from the transcript and his written submission, he was able to present his case adequately.  In any event, he was earning about $73,000 a month and it was his choice not to be legally represented, and I do not think he can complain about that.  Although he complained about the lack of legal representation when he appeared before Deputy District Judge Woo he chose to continue to act in person in the application for variation.  Moreover, we are concerned with maintenance of a few thousand dollars a month.  In such circumstances, the legal cost, is likely to be disproportionate to the amount at stake. 

33.It is not clear whether the learned Deputy District Judge regarded the shortness of the marriage as an exceptional circumstance.  However, the learned judge proceeded on the basis that she could treat the marriage as continuing until the end of the reconciliation in early 2005.  On that basis the marriage lasted 3 years.  Indeed during the reconciliation period, the 2^nd applicant allowed herself to become pregnant because she said the 1^st applicant had wanted a child.  She had an abortion when she discovered that the 1^st applicant did not want a child by her.

34.The learned judge agreed with the 1^st applicant’s submission that this was a suitable case for a financial clean break.  She said:

“59.   I consider there is force in the Husband’s arguments.  This is indeed a classic case where a financial clean break order would be proper.  Before coming to this view, however, I have had regard to the agreement in the Joint Application by the Husband to maintain the Wife until her remarriage.  However, the said agreement, similar to the Original Order, was also made without any legal advice having been given to the parties, and the inherent problems underlying such a situation were already discussed above.  I therefore decide - in order to do justice between the parties – to look at the matter afresh.  After having considered all the circumstances of the case, I am inclined to take the view that it is appropriate to end the Husband’s financial obligation to the Wife when she is discharged from bankruptcy by the operation of the regime of automatic discharge, which would be around February 2008.”

35.If a clean break was desired and the court could not order a lump sum payment, should periodic payment be limited to 8 months only?  February 2008 was chosen because that was when the 2^nd applicant would come out of bankruptcy, but I do not know why that should be thought to be appropriate.  There is no evidence that her financial position would improve. 

36.The learned judge said she had:

“60.   … balanced the possible hardship that might cause to the Wife and the need to do justice to both parties.”

37.I do not agree.  Justice requires that proper weight should be given to the consent order.  With respect, the learned Deputy District Judge’s total disregard of the consent order would undermine the court’s effort:

“… to enable and encourage the parties to negotiate their own solutions as quickly and cheaply as possible.”

As Stock JA said in L v C at 842:

“42.   … the notion that one accords [the agreement] not too much weight becomes an inappropriate one.”

38.I believe we are entitled to interfere with the learned judge’s exercise of the discretion because quite obviously she had placed no or insufficient weight on the fact that the order was made by consent, and that there had been no change in circumstances.  She also gave undue weight to the fact that when the consent order was made, the parties were unrepresented.

Hon Lam J:

39.I agree with the judgment of the Vice President. I will say a few words since we are reversing the decision of the learned judge on a matter of discretion.

40.The 1^st Applicant made the application for variation four months after the consent order without showing any material change of circumstances. He put his application on the basis that the agreement embodied in the consent order was reached under undue pressure from the judge at the direction hearing for FDR. That allegation was rejected by the learned judge who heard the variation application.

41.However, the learned judge was attracted by the argument of the 1^st Applicant on clean break and she therefore proceeded to exercise her power of variation with a view to achieve that end. In so doing, she erred in two respects,

(a)      As explained by the Vice President, she failed to have regard to the fact that the original order was an order by consent and the court should usually respect an agreement of the parties unless a party seeking to disturb the same show good and substantial cause;

(b)     Her purported variation would not achieve clean break.

42.On the first point, I need not repeat what the Vice President has said. I wish to highlight what Stock JA said in L v C [2007] 3 HKLRD 819 at para.42, p.842C,

“The courts must be astute in this field to guard against the manipulative litigant who seeks to undo an agreement … and to bear in mind the factors, quite clear now as a result of developed authority, which might go to vitiate such agreement …”

43.I hasten to add that the courts in the family jurisdiction must be equally astute to guard against unmeritorious applications for variation by litigants who have second thoughts about settlements they have knowingly reached on their own volition.

44.Nowadays, with the introduction of family mediation and FDR in our Family Courts, a large proportion of applications for ancillary relief are settled. It is recognized by judges, lawyers as well as those involved in counseling parties that in most cases, the interests of parties in matrimonial proceedings are better served by resolving ancillary relief disputes by agreed solutions adopted by the parties rather than having some judgments imposed on them.

45.Further, in many instances, one or both parties are acting in person. Lack of legal representation should not be regarded as a vitiating factor in an ordinary case.

46.Therefore it would go against the modern ethos of family dispute management if the court were to entertain lightly an   application to vary the terms of a settlement embodied in a consent order. 

47.I think the following approach suggested by Stock JA at para.42 of L v C [2007] 3 HKLRD 819 at p.841, with slight modifications, can equally serve as a good guidance for deciding whether an application for variation of periodical payments in a consent order should be entertained,

“an agreement [on periodic payments] is ‘presumptively [not to be varied without material change of circumstances]’, the burden being on the party seeking to achieve a different [terms] to show good and substantial cause why the compact should not be respected, and … the scope for so doing is one directed at an injustice in the circumstances in which the agreement came to be concluded or in clear injustice occasioned to one of the parties by reason of event unforeseen at the time of the agreement were the agreement to be enforced to its letter.”

48.On the judge’s own findings, the 1^st Applicant had failed to show good and substantial cause why the consent order should not be respected. It follows the application for variation should have been dismissed.

49.Even though we are only dealing with a consent order, I also agree with the observations of the Vice President regarding the approach of Cazelet J in Garner v Garner [1992] 1 FLR 573 on applications for variation generally. Application for variation should not be pursued when in substance the grounds advanced for variation tantamount to re-argument of the same issues that have been argued before the court before the making of the original order. If a party is aggrieved by the terms of the original order, the proper course is to appeal against that order.

50.On the other hand, one should go back to the judge for variation where it can be shown that the assumption the judge made about the future conduct of one party has proved by developments subsequent to the hearing to be incorrect, see Fournier v Fournier [1998] 2 FLR 990 at p.995H per Lord Woolf MR.  

51.The learned judge also fell into error in believing that the order she made would achieve clean break. This is illustrated by the contention of Mr Egerton. He submitted that the 2^nd Applicant should not appeal, instead she should apply for a further variation to extend the period for which periodical payment should be payable. It follows from what has been said in this judgment that that would not be a proper course. However, counsel’s contention serves to highlight the inherent lack of finality in an order for periodical payment by reason of the power of variation. Clean break can only be achieved by a lump sum order and that was the reason why section 31 of the English Matrimonial Causes Act 1973 was amended in 1996 by adding provisions for capitalization of periodical payment into a lump sum by way of sub-sections (7A) to (7F). Hong Kong has not yet introduced similar provisions.     

52.Since the learned judge misdirected herself in the exercise of her discretion, this court is entitled to intervene. I agree with the conclusion of the Vice President that the orders of learned judge should be set aside and the original consent order should be restored.

Hon A Cheung J:

53.I agree.

Ms. Anita Yip, instructed by Messrs Gloria Chan & Co., assigned by Director of Legal Aid, for the 2^nd Applicant.

Mr. Robin Egerton, instructed by Messrs Jal N. Karbhari & Co., for the 1^st Applicant.