Audrey Smith v. Ernest Bernard Smith and Others
Read the full judgment text of CACV 11/1977 on BabelCite. This Court of Appeal judgment.
1. Before Briggs, C.J. in chambers the Applicant (to whom I shall refer hereinafter as "the wife") sought under S.15 of the Matrimonial Proceedings and Property Ordinance variation of a maintenance agreement, under s.8 an order for reasonable maintenance and under s.17 the avoidance of two dispositions of property made by the 1st Respondent ("the husband"). The 2nd Respondent ("C.P.A.") was the employer of the husband. The husband and the wife separated and on 19th December 1974 a maintenance ag
Cited by 1 case
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CACV000011/1977
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----------------- Coram: Huggins and Pickering, JJ A and Leonard, J. Date of Judgment: 24th May 1977. ----------------- JUDGMENT ----------------- Huggins, J. A. 1. Before Briggs, C.J. in chambers the Applicant (to whom I shall refer hereinafter as "the wife") sought under S.15 of the Matrimonial Proceedings and Property Ordinance variation of a maintenance agreement, under s.8 an order for reasonable maintenance and under s.17 the avoidance of two dispositions of property made by the 1st Respondent ("the husband"). The 2nd Respondent ("C.P.A.") was the employer of the husband. The husband and the wife separated and on 19th December 1974 a maintenance agreement was executed. On 1st October 1975 the Applicant applied to vary that agreement. On 7th February 1976 it became known that in November 1974 the husband had received a sum of US$80.000.00 from the Lockheed Corporation of the United States of America in connection with the promotion of sales of their aircraft. A number of similar payments to other persons all over the world had also come to light and although the Lockheed Corporation maintained that such payments were in no way improper there was a substantial body of opinion to the contrary. There was therefore a grave possibility that when it became publicly known that one of C.P.A.'s staff had received a payment the company would come in for adverse criticism. The judge made no findings as to precisely what happened over the two days following the breaking of the news of this payment but it is clear that the husband was interviewed by the Managing Director of C.P.A. and that he was eventually given the option of paying to C.P.A. US$80,000, intended for repayment to the Lockheed Corporation, or of being dismissed from his employment. The husband agreed to pay the money and to authorize that the payment be made by deduction from his entitlement under the company's provident fund scheme. This agreement was reached on the evening of 9th February 1976. Shortly afterwards the Managing Director spoke to an officer of the Independent Commission Against Corruption, who in turn telephoned to the husband. We have only the husband's version of that telephoned conversation and he says that at the end of it the officer of the Independent Commission Against Corruption said that everything appeared to be in order. Thereupon the husband telephoned the Managing Director of C.P.A. and protested at the fact that a report had been made to the Independent Commission Against Corruption. On the same night the husband left the Colony in haste. Before leaving he sold a motorcar to a member of the staff of C.P.A. for what was alleged to be an under-value, but that is now only indirectly relevant: this was the second disposition which the wife sought to avoid but she has now abandoned that part of her application. She appeals against the refusal of the judge in chambers to avoid the transaction under which the husband paid US$80,000.00 to C.P.A. 2. It was argued on behalf of C.P.A. that to hand back the "Lockheed money" to the husband would be to hand back to an employee (or former employee) money which he ought not to be allowed to keep, which should be taken from him and which should be given to his master. This was a proposition which seemed to the Chief Justice to override the provisions of s.17 altogether. Since he therefore held that s.17 did not apply to the disposition in the present case, I think it is logical to deal with this point first. To my mind the argument involves an over-simplification of the position. It was based upon Reading v. The Attorney General 1951 A.C. 507. In that case Lord Porter cited with approval part of the judgment of Denning, J., the trial judge:
Mr. Litton submits that C.P.A. would have no such claim against the husband here because the money was obtained by the husband not by taking advantage of his service but solely in reliance upon his personal expertise and independently of his employment. The Chief Justice implicitly found that the position which the husband held was the real cause of his obtaining the money, and to strengthen the foundation for his submission Mr. Litton attacks that finding. He concedes that possibly the husband's expertise had "a greater seal of authenticity" as a result of his having risen to the positions of Director of Flight Operations and Director of the Board of C.P.A., but he contends that the husband made no use of any "property" of his employer in obtaining the money. There was evidence that the husband had been encouraged by C.P.A. to promote the Lockheed Tristar aircraft among other airlines in the region and he was clearly authorized to do that as Director of Flight Operations of C.P.A. I think therefore, that the judge was entitled to find as he must have done on this issue. However, Mr. Litton still contends that even if C.P.A. would have had a cause of action against the husband in respect of the money received by him from the Lockheed Corporation that did not mean that the money was the company's money or that s.17 of the Ordinance had no application to the disposition sought to be set aside. He points out that the company have sought (unsuccessfully) to pay the money to the Lockheed Corporation and that there is evidence that it might eventually go to the Community Chest. In my view this can be of no relevance to any matters we have to decide. As I understand him Mr. Jackson-Lipkin went so far as to suggest that the money, while in the hands of the husband, was at all times the property of C.P.A., so that the "payment" of it to C.P.A. was not a "disposition" but merely a transfer of custody. I agree with Mr. Litton that Lister & Co. v Stubbs (1890) 45 Ch. D.1 is an answer to that contention. Where a servant receives a payment from a third party in circumstances which make him accountable to his master, he merely becomes a debtor of his master, who has no right of property in the money. The US$80,000.00 was not paid to the husband as a trustee for C.P.A..: no doubt the Lockheed Corporation expected him to keep it for himself, although I would hold that he was in law not entitled so to do. The payment of a debt necessarily involves a "disposition" by the debtor. Is it nevertheless a kind of disposition which is wholly outside the ambit of s.17? No authority has been cited to us which persuades me that it is. It may be a disposition which comes within subs. (2) of that section, but I see no reason to think that the Legislature intended to exclude any kind of disposition other than those coming within subs. (2). 3. Section 17 is a complicated provision of which the first subsection reads as follows:
It is common ground that proceedings had been brought which enabled the court to entertain an application under the section. It is also common ground that if the wife was to succeed it could only be because she had brought herself within paragraph (b) of subs.(1). First she had to establish that the disposition was one to which paragraph (b) could apply and, by reason of subs.(2), that involved showing that it was not
The learned judge held that there was no "evidence that the payment was made for consideration". By a Respondent's Notice C.P.A. attack that conclusion and they submit that it was not proved either that they did not act in good faith in relation to the disposition or that they had notice of an intention by the husband to defeat the claim for financial provision. 4. Mr. Jackson-Lipkin contends that there was ample evidence that the payment to C.P.A. was for valuable consideration and he points to the evidence that C.P.A. promised to permit the husband to resign and to forbear from dismissing him, that they accepted liabilities which, If they dismissed him, they would not have, and that they impliedly promised to forbear from suing him. Mr. Litton submits that there was no bargain of any kind between the husband and the company and that for that reason there was no valuable consideration for the disposition. In other words he says that the payment and the resignation were two totally unrelated events. If that was the view taken by the learned judge then, with respect, I am unable to agree with him. Mr. Litton declined to argue that C.P.A. knew very well that they had no ground for dismissing the husband and I think it is clear that Mr. Bluck, rightly or wrongly, believed both that there was a ground for dismissal and that if the husband were dismissed he would lose at least part of his provident fund. The evidence that the payment and the resignation were inter-dependent seems to me overwhelming. 5. That brings us to the question whether the wife established that C.P.A. did not act in good faith in relation to the disposition or had notice of an intention by the husband to defeat her claim for financial provision, As to these matters the judge, having decided that there was no evidence of consideration for the disposition, made no findings. We are invited to make good the omission. What is said is that the staff of the company knew of the bitter matrimonial dispute and the wife has alleged that they took sides with the husband against her in that dispute and that when they became aware of his plans for a hasty departure from the Colony and his arrangements for the disposal of his provident fund they must have realized that he was trying to defeat her claim. It was never suggested to Mr. Bluck, the Managing Director, that even assuming that the husband did have an intention to defeat his wife's claim, the company knew of that intention or that it acted in bad faith and I do not think the evidence could possibly have supported a finding that the company either knew of the husband's intention (whatever it may have been) or that it acted otherwise than in good faith Mr. Bluck obviously believed that the husband's right to the provident fund was directly bound up with the company's right to dismiss him and, again, it matters not whether he was right or wrong. 6. It follows from what I have said that I think this appeal must be dismissed on the ground that the disposition was, by virtue of subs.(2), a disposition to which s.17 did not apply. However, as this case may go further I will deal also with the other arguments which have been addressed to us. So far I have assumed that the intention of the husband was, or might have been, to defeat the wife's claim, but now we must consider whether the assumption was correct. By virtue of subs. (4) "defeating the applicant's claim for financial provision" means for the purpose of the present case "frustrating or impeding the enforcement of any order which.....has been made at the instance of the applicant under [ss.8 and 15] of this Ordinance". It was the wife's case that the husband's intention in paying the US$80,000.00 to C.P.A. was to place out of her reach moneys which would otherwise have been available in execution upon the orders in her favour: not only was the US$80,000.00 no longer available, but by reason of the payment the husband obtained access to his provident fund and was able to arrange for its speedy removal from the jurisdiction I accept that these results did flow from the transaction but not that it is a necessary consequence of this conclusion that those results were intended. The learned judge said:
Mr. Jackson-Lipkin submits that this passage includes a finding of fact - which this court ought not to disturb that the husband did not have the intention necessary to found an avoidance of the disposition. Mr. Litton, on the other hand, says that it is an (unjustified) inference rather than a finding of a primary fact and that in any event it is a conclusion which is open to question because of the manner in which the judge approached the case. Although in another part of his argument Mr. Litton set at nought the manner in which the judge formulated his judgment, in the present connection he relies upon the fact that the judge did not mention the presumption provided by subs.(3) until after the passage last cited - and even then merely quoted the subsection without applying it to the circumstances of this case. Therefore, the argument goes the "finding" was made without a consideration of all the material circumstances. It would certainly have been more logical to have mentioned the presumption at an earlier stage, but I have come to the conclusion that in so far as this was a "misdirection" it was not fatal. If there was sufficient evidence to support a finding that the disposition was not made 'with the intention aforesaid" it seems to me that the presumption was ipso facto rebutted and it matters not that the judge considered the presumption out of context. I am not persuaded that the finding was merely an inference which the judge thought must follow from his finding that the intention of the husband in making the payment to C.P.A. was to ensure that he was not dismissed and would be allowed to resign, thus preserving to himself his rights under the provident fund scheme. No doubt there was ground for suspicion that the husband may have had in mind the possibility of defeating the wife's claim, and to the wife the suspicion must appear very strong indeed. The judge, however, had to look at the matter dispassionately and he obviously thought that there were far more-pressing matters occupying the mind of the husband on the night of 9th February. There was clear evidence that if the payment was not made to C.P.A. the husband would have been dismissed and equally clear evidence that the husband believed he could and would be so dismissed and that if he were dismissed he would lose, inter alia, valuable rights under the provident fund scheme. It matters not whether his belief was well founded in law if in fact he held it. If his belief was correct the transaction itself could not defeat the wife's claim. On the contrary its immediate effect would be to increase the amount available to the wife: it was the removal out of the jurisdiction of that increased amount which defeated her claim The reason for the husband's precipitate departure from the Colony may have been entirely unconnected with the reason for the payment to C.P.A. and it would be relevant only if it indicated what was, and what was not, in the mind of the husband at the time he agreed to the disposition, At that time Mr. Bluck had not yet communicated with the Independent Commission Against Corruption and the husband had not yet had his conversation with the officer of the Independent Commission Against Corruption in which the latter is alleged to have indicated that "everything would appear to be in order". It is implicit in the husband's evidence that the had already decided to leave the Colony, but there is nothing to show that Mr. Bluck knew when he would be leaving or, indeed, that the husband had by then considered that matter. The US$80,000.00 was not to be paid in cash but was to be deducted from the provident fund, so that it could not be argued that the payment to C.P.A. was intended to defeat the wife's claim by reducing the amount of the husband's immediately available cash: Mr. Litton described the US$80,000.00 as "the key" to the provident fund, and I think that is right. Nevertheless the husband regarded it not as a means of obtaining the provident fund more quickly so that he could remove it but as the sine qua non of its being obtained at all. That was the view taken by the learned Chief Justice and I see no ground upon which his conclusion can be successfully attacked. 7. Mr. Jackson-Lipkin contends that the claim must have failed on yet another ground, namely that the wife had not shown that if the disposition were set aside different financial provisions would be granted to the wife. The emphasis on the tense of the verb is his. He submits that if we were to set aside the disposition different financial provision could not be granted to the wife because no application for different financial provision is involoved in this appeal. I agree with Mr. Litton that because the Chief Justice in his judgment dealt with the applications under s.8 and s.15 before he dealt with that under s.17 it does not follow that he would have made the same orders in relation to maintenance regardless of the view he took of the attempt to avoid the disposition. The availability of the equivalent of another $400,000.00 would have been a most material consideration in deciding the applications under s.8 and s.15. If the Chief Justice had set aside the disposition I am satisfied he would have granted a different financial provision. but if we set it aside we cannot do so. The section does not say that an appellate court may make an order setting aside a disposition if the lower court "would have granted" different financial provision or if another court "would grant" different financial provision if a further application for variation were made. It seems to as that, as an application for the purposes of paragraph (b) must be made "in the proceedings for the financial provision in question", it was clearly the intention of the Legislature that the "different financial provision" should be a provision to be granted by the court setting aside the disposition. Therefore, where a court which is asked to make financial provision declines to set aside a disposition, any notice of appeal in relation to the disposition must also ask for a variation of the financial provision or the appeal is doomed to failure from the start. This is a trap for the unwary pleader which this court would, in a proper case, probably unspring by allowing an amendment, but in the present case the appeal must in my judgment fail for the reasons previously stated and we are not prevented from doing substantial justice by a technical defeat in the notice of appeal. 24th May 1977 Representation:
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----------------- Coram: Huggins &Pickering JJ.A. and Leonard, J. Date of Judgment: 24th May,1977 ----------------- JUDGMENT ----------------- Pickering , J.A.: 8. An important issue, indeed conclusive if it be decided in favour of the Respondents, is whether or not the 2nd Respondent (C.P.A.) gave valuable consideration for the payment to them by the 1st Respondent of the sum of US$80,000 and whether, in relation to that sum the 2nd Respondent acted in good faith and without notice of any intention on the part of the 1st Respondent, in making the payment, to defeat his wife's financial claims. For if there was consideration, good faith and no notice the wife would be precluded, by s.17(2) of the Matrimonial Proceedings and Property Ordinance (Cap.192) from attacking the transaction. 9. It is said that the consideration given by C.P.A. was the refraining from dismissing the 1st Respondent and instead permitting him to resign thereby retaining his entitlement to a large sum in his Provident Fund and also acquiring certain other rights such as heavily subsidised air passages and baggage allowances. It is Mr. Litton's contention, for the Appellant, that no right of dismissal existed and that therefore refraining from such action could not constitute consideration. I find myself unable to agree with this proposition. 10. The US$80,000 paid to the 1st Respondent by the Lockheed Aircraft Corporation was found by the learned judge to have been paid to him in respect of services rendered to Lockheed in connection with certain Malaysian airlines. It is Mr. Litton's contention that what Lockheed were buying was the 1st Respondent's personal expertise in regard to aircraft and to the TriStar in particular and that the 1st Respondent's capacity as a director of C.P.A. and its Director of Flight Operations, was something distinct from his arrangements with Lockheed. That, as it appears to me, is a highly artificial construction of the situation. The 1st Respondent had acquired his airline expertise very largely in the employment of G.P.A. over more than 20 years and his expertise in regard to the TriStar aircraft exclusively during that employment. In his capacity as a director of that company and as the Director of its Flight Operations, his responsibility was to the company. Assistance to the Malaysian airlines on a consultative basis between those airlines and C.P.A. would have been one thing but assistance to Lockheed in connection with airlines other than his own, given by the 1st Respondent without the knowledge of his company and in consideration of a substantial payment not revealed to that company, was quite another. I have no hesitation in holding on the basis of Reading v. the King(1) that the 1st Respondent was accountable for this sum to C.P.A. and, he having concealed its existence from that company, they were entitled, upon the basis of his terms of employment to dismiss him. Their right so to do arose from paragraph 26(c) of C.P.A.'s "Conditions of Service, Expatriate Flying Staff (Pilots and Flight Engineers)", dated 1st January, 1974 as revised on 1st January, 1975. Para. 26(c) reads:
11. Thus there was a right of dismissal from which action C.P.A. refrained. It would appear that both the 1st Respondent and Mr. Bluck were under the impression that dismissal would have resulted in disentitling the 1st Respondent to the monies in his Provident Fund. That view was probably incorrect since Rule 16 of the Provident Fund Rules provides only for limited entitlement upon dismissal for "fraud or dishonest conduct whereby the Company suffers pecuniary loss" and there is no evidence that the Company suffered pecuniary loss as a result of the 1st Respondent's conduct. That however is immaterial since there was clear consideration from the Company in that their agreement not to dismiss, subject to the payment over of the US$80,000 left the 1st Respondent valuable rights such as heavily subsidised air passages and baggage allowances. 12. It remains to be considered whether C.P.A. acted in good faith in this transaction and without notice that the 1st Respondent's intention was to defeat, in the sense of frustrating and impeding, the enforcement of the orders obtained by the wife. Fundamental to any consideration of that issue is the question whether or not the 1st Respondent himself had, at the time of the transaction, formed such an intention. I think it improbable in the extreme that he had. At that time his professional world was crumbling around him; his acceptance of monies from Lockheed had come to light to the extreme displeasure of his employers and a question mark was hanging in the air as to whether he would face dismissal. Payment of the US$80,000 to C.P.A. was a condition to be satisfied before C.P.A. would refrain from dismissal and permit him to resign; his immediate preoccupation was to avoid dismissal and, as he thought, thereby to preserve his right to the monies in his Provident Fund. In my view the husband, at the time of the transfer of the US$80,000, had not formed the intention of defeating his wife's financial claims. Even if that view be incorrect it would still be for her to show that C.P.A. had knowledge of her husband's intention. It is her contention that members of C.P.A. who were aware of the unhappy matrimonial state of affairs between herself and the 1st Respondent, tended to side with the 1st Respondent and it is her assertion, no doubt genuinely felt, that in pursuance of this general attitude towards her Mr. Bluck was conspiring with her husband to defeat her legitimate claims. I am wholly unable to interpret the situation in that light and cannot consider that any such motive was in Mr. Bluck's mind. He was the general manager of C.P.A. and concerned as to the reputation of that company and as to the appropriate manner of dealing with the 1st Respondent, the revelation of whose conduct in regard to Lockheed had burst upon the company like a bombshell. I am confident that any incidental effect upon the wife's finances of the surrender by the 1st Respondent of the US$80,000 was far from Mr. Bluck's mind. In my view the transaction fell squarely within the exemption contained in section 17(2) of the Matrimonial Proceedings and Property Ordinance, Cap.192 as being a disposition made for valuable consideration to a person who, at the time, acted in relation to it in good faith and without notice of any intention of defeating the wife's claim for financial provision. 13. Finally I agree with the learned President that the Notice of Appeal in this case should also have asked for a variation of the financial provision made for the wife if it was to have any prospect of success. However the appeal fails quite apart from this technicality. Representation: H. Litton, Q,C, & F. Eddis (Fairbairn, Kwok & Wang) for Appellant M.H. Jackson-Lipkin, Q.C. & Miss E. Toh (J.S.M.) for 2nd Respondent. |
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