Wmc v. Stw
Read the full judgment text of CACV 162/2009 on BabelCite. This Court of Appeal judgment was delivered on 7 June 2010 before Hon Cheung, Yuen and Kwan JJA.
Matrimonial Proceedings and Property Ordinance – financial provision – conduct – Consent Order – equal sharing – gross and obvious – ancillary relief – Court of Appeal – Appeal from Deputy Judge on ancillary relief regarding distribution of matrimonial assets. Parties married in November 2001 and divorced in May 2006. Husband was a doctor and Wife a director of a family business. They had no children and held various matrimonial assets including properties such as Bowen and Hoi Tan. A Consent Order dated 27 April 2007 required the sale of certain properties within six months at minimum prices. The Deputy Judge found the Husband's refusal to sell after the time limit expired was conduct inequitable to disregard and awarded the Wife additional financial provision. The main issue on appeal was whether the judge was right to take into account the Husband's conduct in relation to a Consent Order when considering distribution of the matrimonial assets. The court held that under the MPPO, conduct must be 'gross and obvious' to justify departure from equal sharing. The 'inequitable to disregard' test from English law was not directly applicable. The court also held that the Consent Order time limit for selling properties had lapsed on 27 October 2007. There was no evidence of an offer within that period. An obligation to sell after expiry could not be lightly implied. The offer for Bowen came in early 2008, after the 6-month period expired. The appeal was allowed. Orders amended. Payment reduced from $2.7m to $1.2m. Words '$0.4million or whichever is higher' deleted. Wife to pay costs of appeal to Husband. Certificate for two counsel.
Legal issues: Test for conduct in financial provision · Interpretation of Consent Order time limit
Outcome: Appeal allowed. Orders amended.
Cited by 9 cases · Cites 2 cases
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CACV 162/2009 in the high court of the hong kong special administrative region court of appeal civil appeal no. 162 of 2009 (on appeal from FCMC NO. 5382 of 2006) ________________________ BETWEEN
________________________ Before: Hon Cheung, Yuen and Kwan JJA in Court Date of hearing: 20 April 2010 Date of Judgment: 7 June 2010 ________________________ J U D G M E N T ________________________ Hon Cheung JA: 1.One of the issues raised in this appeal is the conduct of the husband which was relied upon by the Court below to increase the financial provision for the wife beyond the equal sharing principle. Conduct which is inequitable to disregard 2.In DD v. LKW [2008] 2 HKLRD 523 this Court (Cheung, Yuen JJA and Lam J) applying the White v White [2001] 1 AC 596 line of cases held that the conduct of a party becomes relevant in the assessment of financial provisions if the conduct is such that it would in the opinion of the Court to be inequitable to disregard. It was not drawn to the Court’s attention in DD that this test is in fact based on the wording of section 25 of the English Matrimonial Causes Act 1973 as amended by the Matrimonial Family and Proceedings Act 1984. Gross and obvious conduct 3.The wording of the applicable section 7(1) of the Hong Kong Matrimonial Proceedings and Property Ordinance (Cap. 192) (‘MPPO’) is different:
4.Both parties in this appeal accepted that the relevant test for Hong Kong is still based on the Wachtel v. Wachtel [1973] Fam 72 test of ‘gross and obvious’ where Ormrod J observed at page 80 that
5.Rayden & Jackson on Divorce and Family Matters 18th Ed Vol 1 at paragraph 16.77 gives a summary of the ‘gross and obvious’ requirement:
6.The editors of Rayden at paragraph 16.76 further observed that it has been said that the words in the amended section 25 ‘may give a broader discretion to the court than that envisaged hitherto under the authorities’. Nevertheless, as a matter of both language and logic, it would seem inequitable to disregard conduct which is ‘both obvious and gross’. Accordingly, the cases in which that was the test are still relevant. My view 7.Since the MPPO is differently worded, on reflection it was not necessary in DD to adopt the words of the English legislation as if they are part of our legislation. Consistent with the interpretation on conduct based on the Hong Kong legislation, it would be more appropriate to say that conduct will be taken into account if it is ‘gross and obvious’. However in terms of substance, my view is that there is no difference in whether one adopts the ‘inequitable to disregard’ test or the ‘gross and obvious’ test. As a matter of principle if the financial provision is to start from the premises of equal distribution, then the misconduct must be an extremely serious one in order to justify a departure from the equality starting point. In the majority of matrimonial cases such misconduct must be rare. It has been repeatedly said that it is difficult for judges to unravel mutual recrimination about the events in a marriage and it is undesirable for them to do so. In Miller v. Miller [2006] 2 AC 618, Baroness Hale at [145] addressed the distinction between the old and new approaches on financial distribution. In respect of the old approach, since all the assets were assumed to be the breadwinner’s and he was making an allowance to enable his wife to live separately from him, the wife’s conduct might reduce the allowance she would otherwise have needed or even extinguish it altogether. But in respect of the new approach,
8.The approach I have indicated was also adopted by H H Judge Bruno Chan in KWLK v. DC also known as DTMC (FCMC 5508 of 2005). On appeal where the case was named as WLK v. TMC (CACV 339 of 2008), this issue was not specifically discussed. The present case 9.In this case, in terms of the husband’s conducts relied upon by Deputy Judge Tracy Chan, details of which are set out in Yuen JA’s judgment, I am of the view that it does not come within the ‘gross and obvious’ requirement and it was plainly wrong for the Judge to have taken conduct into account in the exercise of her discretion. The misconduct was said to be the breach of an undertaking in the Consent Order by the husband to sell Bowen Road within 6 months. However, there is no evidence that there was any offer by purchasers to buy at $10 million during this period which expired on 27 October 2007. On the contrary the offer to buy at $15.5 million was only first made in early 2008 by which time the husband had decided to use this property as the residence for his new family unit. In the circumstances to give an additional $1.5 million (about 7.7% of the joint assets of $15.6 million) was not justified. 10.I agree with the judgment of Yuen JA and the order she makes. Hon Yuen JA: 11.This is an appeal from a decision on ancillary relief made by Deputy Judge T. Chan on 6 February 2009. Leave to appeal was refused by the judge but granted by Rogers VP on 7 July 2009. As Cheung JA has said in his judgment, the main issue on the appeal was whether the judge was right to take into account the Husband’s conduct in relation to a Consent Order dated 27 April 2007 (“the Consent Order”) when considering distribution of the matrimonial assets. That issue arose in the following context. Background 12.The parties were married in November 2001. The petition for divorce was presented in May 2006. Both parties were in their 30's. The Husband is a successful doctor with 2 clinics in Kowloon. The Wife had returned to Hong Kong after living and working in Canada. Her family was in the building material business in Hong Kong. They had no children. Income 13. The judge found that the Husband and his nurses who gave evidence at the hearing were not credible witnesses. She found that the Husband made more than $170,000 a month but an accurate estimate of his income was not possible due to payments made in cash and the absence of reliable records. As for the Wife, she was a director of a family business which was unsuccessful and ultimately de-registered, but the judge found that she was capable of earning $15,000 to $20,000 a month Properties 14. The parties were involved with a number of properties. I shall first list out those with which this court is not concerned. The judge found that the parties were trustees for their respective parents in respect of certain properties (Laurels and Wong King for the Husband and Tropicana for the Wife), so we are not concerned with these. Further, the judge found that two properties which the Husband had acquired with a colleague in his medical practice before the marriage (Merlin and Parc Oasis) should not be regarded as matrimonial assets. 15. As for properties acquired during the marriage,
16. Accordingly, the properties still held at the time of the hearing before the judge were:
At the time of the hearing, the Husband lived in Bowen and the Wife lived in Begonia. Proceeds of other properties 17. The Husband had received the proceeds of Fortune in the sum of about $580,000 which he used to service the mortgages of Bowen and Begonia, and the Wife’s solicitors stakeheld the proceeds of Kam Yee of about $450,000 from which maintenance was deducted. Other assets 18. There were also some bank accounts and shares found by the judge to belong to each of the parties which amounted in total to more than $2m. Husband’s circumstances 19. At the time of the hearing, the Husband was living with his fiancé and their child. A second child was on its way. Parties’ positions 20. The Husband was less than frank about his income and assets, and for those assets which were disclosed, his case was that he had provided all the money for their acquisition. He rejected the Wife’s claim to any of the properties, even though certain properties had been held in both their names, either as Tenants in Common or as Joint Tenants. He argued that he had made a “special contribution” as that term is understood in matrimonial cases, so that he should have more than an equal share of the assets. 21. The Wife’s position was that their success in “trading up” from one matrimonial home to another was due to her efforts as well, as she decorated the homes, obtaining discounts from building material suppliers by reason of her family’s connections, and made them attractive to purchasers, with the result that they were able to reap handsome profits from them. Judgment 22. The judge held that the Husband did not make a “special contribution” as that term is understood in matrimonial cases, and that the principle of equal sharing should apply. However, she found that there was conduct on the part of the Husband which it was “inequitable to disregard”, i.e. his refusal to sell Bowen and Hoi Tan which were the subject of the Consent Order, and for that reason, she ordered the Husband to pay an extra $1.5m to the Wife in respect of Bowen and she also ordered that the Wife should receive $400,000 or half the sale proceeds of Hoi Tan, whichever was more. Consent Order 23. Under the Consent Order made on 27 April 2007 the parties agreed and undertook that they would sell the 3 properties known as Bowen, Hoi Tan and Kam Yee, and to sell Bowen “at a price not less than HK$10,000,000 within 6 months from the date hereof”, and to procure AT to sell Hoi Tan “at a price not less than HK$600,000 within 6 months from the date thereof”. Appeal 24. The Husband’s argument on appeal was that the Consent Order lapsed by effluxion of time on 27 October 2007. There was no evidence of an offer for Bowen at the stated minimum price within the period 27 April to 27 October 2007, and the same point applied to Hoi Tan. Accordingly the judge should not have regarded the Husband’s refusal to sell these properties after 27 October 2007 as conduct which it would be inequitable to disregard, or as gross and obvious conduct. Discussion 25. I shall first deal with Bowen. In the judgment given on 6 February 2009, the judge had said that for Bowen, an offer of $15.5m was “first made in early 2008 and was still open during the trial” (paragraph 178). The Husband did not wish to sell Bowen as he wished to continue to live there with his new family, and the judge considered that his refusal to sell Bowen reflected “only his selfishness and his arrogance even when faced with a court order”. For that reason, the judge ordered the Husband to pay to the Wife an extra sum of $1.5m, being half of the difference between the offer of $15.5m and the agreed value of $12.5m. 26. In the judge’s reasons for refusing leave to appeal, she held that even though the Consent Order referred to a time limit for selling Bowen, the parties had undertaken to sell the property in a “stand-alone” clause and the time frame of 6 months was put in to ensure performance without undue delay. The judge took the view that the parties had an obligation to sell at not less than $10m even after 27 October 2007. She further held that even if there was no breach of the Consent Order, as the Wife was a joint owner of Bowen, the Husband should not be allowed to acquire it at a lower price than the one he refused. 27. In my view, first the evidence is clear that the offer of $15.5m only came after 27 October 2007, so the Husband was not in breach of the explicit terms of the Consent Order. Although there was in the evidence a letter asking the Husband to permit Bowen to be viewed before the time frame expired, that could not possibly be evidence that an offer of $10m would have been made had there been such a view. Secondly, it is noted that the Consent Order contained only a specific time frame for selling the property at a particular minimum price. The parties could have inserted words as to what was to happen after the expiry of the time frame, such as “or so soon thereafter as an offer of not less than $10m is received”, but they chose not to do so. Thirdly, an obligation to sell Bowen after 27 October 2007 as soon as $10m is reached cannot be so lightly implied into the Consent Order. A Consent Order is similar to a contract between the parties. They may have had different considerations as to what should happen if a particular event fails to occur. For instance, it could have been that the parties (or one of them) thought that after 6 months, a different minimum price should be adopted. For all those reasons, as the evidence was that the offer of $15.5m was received only after 27 October 2007, I do not think the Husband was obliged to sell Bowen under the Consent Order. 28. I also cannot see the justification for the judge’s alternative holding (in her judgment refusing leave to appeal) that the Husband should have agreed to sell the property at $15.5m even if there was no breach of the Consent Order. If the Consent Order did not take effect, then Bowen’s disposition fell to be dealt with at the ancillary relief hearing, in the same way as Begonia was to be dealt with then. Although the judge said that there was an extant offer to buy Bowen at $15.5m even at the time of the hearing, the fact was that the parties agreed the value of Bowen at $12.5m, not $15.5m. There was no ground for using a different value. 29. For the reasons set out above, I consider that the judge erred in principle in her interpretation of the Consent Order and also in her alternative basis for the order, and there was no ground for the order that the Husband should pay an extra $1.5m to the Wife. That order should accordingly be set aside. 30. As for Hoi Tan, the judge did not refer to the evidence which caused her to arrive at her decision, but it would appear that the evidence was that the first offer for Hoi Tan was in mid- 2008, again after the expiry of the time frame under the Consent Order. For the same reasons as I have given for Bowen, this order should also be set aside. 31. As a matter of completeness, I should mention an argument raised by junior counsel for the Husband which related to post-separation contribution. His argument was that only the Husband had made contributions to the mortgages post-separation, and so that should be reflected in the distribution of assets. However this argument was not substantially raised below or dealt with by the judge, and it would not be appropriate for us to deal with it on appeal, as there may be disputes on the evidence (it being noted that the judge found that the Husband had hidden some of his assets). In any event, the judge was aware that the mortgages had been serviced by the proceeds of sale of Fortune, and for that reason, those proceeds had not been counted in the matrimonial assets available for distribution. In any event, it would not be appropriate in this case to make any adjustments on the basis of post-separation contribution. Unlike a case such as WSW v YKK [2009] HKFLR 37, the period between separation and the proceedings in the present case was not lengthy. The Husband was simply maintaining the status quo by continuing to pay the mortgages. I do not see anything in this ground of appeal. Order 32. For the reasons set out above, the appeal should be allowed, and the judge’s order amended as follows: the payment under paragraph (2) of the Order dated 6 February 2009 should be reduced from “$2.7m” to “$1.2m”, and the words “$0.4million or whichever is higher” should be deleted from paragraph (4). I would make an order nisi that the Wife pay the costs of the appeal to the Husband, and that the costs wasted by the Husband’s amendment of his grounds of appeal to be paid by him to the Wife, all costs to be taxed if not agreed. As there has been more than one counsel for each of the parties, there will be a certificate for two counsel. Hon Kwan JA: 33. I agree with the judgments of Cheung JA and Yuen JA.
Mr Kenneth Kwok SC, Miss Diana Cheung and Mr Enzo Chow instructed by Wong Hui & Co for the Appellant (Respondent in the Petition) Mr David Pilbrow SC and Miss Jennifer Tsui instructed by Chaine Chow & Barbara Hung for the Respondent (Petitioner) |
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