Jah v. Vh

FCMC 14350 / 2009
(Consolidated with FCMC No 4402/2010)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14350 OF 2009

(Consolidated with FCMC 4402 as per order of HH Judge Melloy dated 23 June 2010)

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Coram: Her Honour Judge Sharon D. Melloy in Chambers (Not open to public)

Date of Hearing: 9 May 2012

Date of Ruling: 24 May 2012

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RULING
(Injunction, Setting aside)

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Introduction

1.This is an application by the Respondent husband that the order made on the 3 May 2012 in effect for an injunction, be set aside and/or not be re-instated. The wife asks that the original order remain in force until the matter can be heard in full and on its merits.

2.On the 3 May 2012 the parties came before me for a call over.  This arose out of a directions hearing on the 31 January 2012.  The difficulty in essence was that although the parties had entered into a consent summons over a year before, that the order had not been fully complied with.

3.And this was no ordinary order.  To put it into some kind of context I would refer to my summary of the situation as set out at paragraph 6 of my Ruling dated the 19 April 2011. Referring to the mediation agreement which subsequently became the consent order of the 13 January 2011, I said as follows:

This deals with the parties’ very extensive business and property interests, which appear to be mainly based in Cambodia. One interesting feature of the consent summons was that the parties undertook inter alia to transfer a series of properties to each other within 12 months of the date of the mediation agreement i.e. by the 22 December 2010. These transfers were only expressed in the form of undertakings. They were not expressed as an order. Presumably this was because an order can only take effect upon the pronouncement of a decree absolute whereas an undertaking is binding on the parties in the form of the undertaking given. In Hong Kong a breach of a financial undertaking can be enforced either by contempt of court proceedings and/or by a judgment summons.  It was also agreed and each party undertook to enter into a Letter of Promise. The husband also undertook to pay the wife a lump sum of US$8 million, the first instalment of US$3 million to be paid within 14 days of the date of the order and the remaining instalments of US$3 million each to be paid on the anniversary of the first payment. The first instalment was eventually paid and on the 10 February 2011 the wife’s solicitors acknowledged receipt of the same. There were also undertakings given in relation to other matters.

4.The other matters included the transfer of a number of properties/shares in Cambodia, plus an Australian property, to the wife. The properties are held either in the name of the husband or in the name of companies that appear to be held in whole or in part by him.  As at the 31 January 2012 the wife had complied with all of her obligations under the order save for the transfer of a property known as the “EP Property” (“EP”), and the transfer of shares in a company known as the MC Company Limited (“MC”). As at the 31 January 2012 the wife had signed all of the requisite documents necessary to effect the transfers and her solicitors were holding these pending the husband complying with his obligations under the order. At that stage it seemed that the husband had not complied with a number of his undertakings in the order. This was summarized by the wife’s solicitors as follows:

The Respondent has not yet complied or fully complied with the following parts of the Order:-

(a)  Paragraphs G and H – Transfer of the Respondent’s 45% shareholding (out of his 90%) in UTC to the Petitioner

(b)  Paragraphs J and K – Transfer of the Respondent’s 18% shareholding (out of his 68%) in FISB to the Petitioner

(c)  Paragraphs E(a) – Transfer of three sites of UTC Land to the Petitioner

(d)  Paragraph E(b) – Transfer of FISB Building to the Petitioner

(e)  Paragraph E(d) – Transfer of one outstanding site of Riverside Property to the petitioner

(f)  Paragraph E(e) – Transfer of Hospital Land to the Petitioner

(g)  Paragraph L – Transfer of the existing customers, loans and assets of CHC Limited (“CHC”) to FISB

(h)  Paragraph P – Transfer of the benefit and/or net proceeds received of the Respondent’s Merrill Lynch and AIA life insurance policy accounts to the Petitioner

5.I was then taken through the status of each of these transactions. In round figures I was told that the husband’s non compliance was worth somewhere in the region of US$20 million whereas the wife’s non compliance was worth less than a quarter of that sum at c US$4.5 million. Clearly it was of the utmost importance to the wife that the order should be complied with fully, notwithstanding the fact that most of the assets were outside the jurisdiction of Hong Kong.

6.In answer to a suggestion made by the husband’s solicitor that the wife should immediately comply with her own undertaking and release the documents relating to the transfer of the EP Property and MC shares I said that  

COURT: Well, what I would say is that you should both be in a position to proceed with your part of the bargain and …

…

And that that can be looked at when you come back in 12 weeks’ time.  And I would expect by then [for] everything else that hasn’t been complied with, to be at a stage when it can be.

7.It was therefore on this basis that the matter was supposed to come back before me on the 3 May 2012. I was to be updated on progress to date. I had given the parties time to sort out the existing impasse with a view to each complying fully with their obligations under the order. They were supposed to report back to me on the progress made by the 3 May, i.e. after a period of over 3 months. This was notwithstanding the fact that the husband had said that he would infact need six months to resolve some of the outstanding issues.

8.It is then against this background that the wife issued the summons of the 30 April 2012. The summons sought the following relief:

1. The Respondent, whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from pursuing any form (whether criminal, civil or otherwise) of proceedings in Cambodia against the Petitioner or any of her assets including but not limited to properties, shares, investments, or personal possessions or chattels;

2. The Respondent, whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, encumbering, alienating, pledging or disposing of or otherwise howsoever dealing with all his interests, either directly or indirectly held by him or held through nominees or other third parties, of the following assets, without leave of the Court or the Petitioner’s prior written consent :-

(a)  the property registered in the Respondent’s name situated at Properties No. X and No. Y located in Cambodia;

(b)  the property registered in the name of the company, UDTDC, situated at Property No. XXXXXX located in Cambodia;

(c)  the property registered in the name of TSL for and on behalf of the Respondent, situated at Property No. XXX, #XX, Street XX & XXX,  Cambodia;

(d)  the property registered in the name of TSL for and on behalf of the Respondent, situated at Property No. XXXXX (CxXXXX), located in  Cambodia;

(e)  S Development Company Limited, the registered owner of a property situated at Title no: XXXXXXXX-XXXX, Cambodia;

3. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, UDTDC without leave of the Court or the Petitioner’s prior written consent;

4. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, S Development Company Limited, without leave of the Court or the Petitioner’s prior written consent;

5. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing or the whole or part thereof of his interest in the company, CH Company Limited, without leave of the Court or the Petitioner’s prior written consent;

6. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, FISB Limited, without leave of the Court or the Petitioner’s prior written consent;

7. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, EP Limited, without leave of the Court or the Petitioner’s prior written consent;

8. Time for service of this Summons be abridged;

9. Such other directions as the Honourable Court deems fit; and

10. Costs of and incidental to this application be to the Petitioner.

9.Mr Coleman, who appeared for the wife, did not proceed ultimately with the application under items 6 and 7. An interim holding order was made in relation to items 1, 2 3, 4, 5 and 8 subject also to an undertaking by the wife not to seek to enforce this order or the order of the 13 January 2011, in Cambodia or elsewhere without first returning to the court for further directions. I also ordered that the matter be adjourned for full argument and that time for service be abridged. Directions were given for the filing of affidavits. Costs were reserved. The matter then came back before me for a call over on the 9 May.

10.One of the first issued to be raised by Mr Clough for the husband at the return hearing was whether or not this was in reality an ex parte application on notice, as opposed to an inter partes summons where time had been abridged? He said that the effect was practically the same – i.e. the husband had not been given sufficient time to prepare an adequate response and had effectively been ambushed in order that the wife might gain some form of litigation advantage. I was referred to a number of authorities including Seapower Resources International Ltd v Lau Pak Shing HCA No. A10715 of 1993 (unreported) 15 December 1993, Brand, Farrar Buxbaum v Samuel-Rozenbaum Diamond, (unreported) HCA 5191 of 1998, 8 May 2002, L v C, (unreported) CACV 333 of 2003, 27 April 2004 and Slik Hong Kong Company Limited v Gerald Merlyn Evans and others (unreported) CA 1424/2005, 23 July 2005.  I do of course accept the basic premise of these cases, which can perhaps be best summed up by the Hon Mr Justice Rogers in Seapower Resources International Ltd when he said that:

Ex parte application should only be made where either the delay would cause to the Applicant injustice or the Defendant would take action which would nullify the effect of the injunction.  An ex parte injunction goes against the normal way litigation is conducted.  It is an infringement of the rights of natural justice of each party to be heard.  Those making such applications have a duty to bear that in mind and they cannot pass their responsibility to the Court when they do so.

11.He went onto point out that an ex parte order was provisional and that

If the judge comes to the conclusion that the Order should never have been applied for ex parte, it is his duty to say so and to right the wrong that has been done.  In so saying I, of course, emphasize that it is always in the Judge’s discretion to order a further injunction.

12.Picking up on this theme in Slik Hong Kong Company Limited, The Hon Mr Justice Lam said

2.  Ex parte applications should be regarded as exceptional and the court should not entertain the same unless there are cogent justifications usually in terms of either extreme urgency or secrecy.  See Bates v. Lord Hailsham of St. Marylebone & others [1972] 1 WLR 1373.

…

4.  It follows that the first thing the court should ask when it is faced with an ex parte application is whether the applicant can show such exceptional circumstances which justify him proceeding on ex parte basis.  If he could not cross that hurdle, the court should not be concerned about the substantive merits of his application.

…

6.  The fact that if notice is given, the defendant might ask for time to response is not a justification for proceeding ex parte.  The court can exercise its discretion in deciding whether any interim relief should be granted in the meantime after hearing submissions from the defendant.

13.In that instance the Judge initially dismissed the ex parte summons but allowed the parties to issue an inter partes summons with an abridgment of time. The defendants were given notice of the subsequent hearing but chose not to appear. He then entertained the application on an ex parte on notice basis.

14.In this case the summons was served, but two clear days notice was not given. There was a public holiday on the 1 May and the matter came back before me on the 3 May 2012. Nevertheless the husband was represented by solicitors on the 3 May. They asked that no orders be given until the matter had been heard in full and the husband had had an opportunity to file an affidavit in reply.

15.In the circumstances it seems to me (and infact this was conceded by Mr Clough) that this was clearly an inter partes summons with an abridgment of time. It was not and was never meant to be an ex parte summons – or even an ex parte summons on notice. I do however accept that in reality there is very little practical difference between an ex parte summons on notice and an inter partes summons with an abridgment of time if, as here, immediate injunctive relief is sought. That is why I gave the parties the ability to come back to court less than a week later. It would also have been possible for the husband to have come back earlier and liberty to apply had been given on an urgent basis in order that he should be able to do so.  

Should the order have been made?

What orders should be made now, if any, in order to safeguard the position between now and the matter being fully argued in the High Court.   

16.Mr Clough argues that given that, the order should never have been made and that the wife was required to show that there were exceptional circumstances necessitating such an application without the husband first having an opportunity to file affidavit evidence.

Did the wife satisfy this basic pre requisite?  

17.The wife’s summons seeks only to secure the assets which, under the terms of the order dated the 13 January 2011, should already have passed to her in any event. She does not seek in any way to interfere with the husband’s legitimate business dealings or assets which under the terms of the order he should hold – save for the EP Property and MC shares. In other words she seeks the court’s protection. She asks that her position be secured – as far as that is possible to do. She says that she is becoming increasingly concerned about the husband’s true intentions. At the hearing on the 3 May I was told that there had been very little progress since the parties had been before me last. A life insurance policy had been sorted out and there had been some progress with respect to the Australian property – that is all. Much more worrying was the fact that the husband had launched criminal proceedings against the wife in Cambodia because, it would seem, she had not handed over the documentation with respect to the E property. This is not withstanding the comments that I made in court in relation to the same. The complaint was dated the 3 February 2012 and was a criminal complaint for breach of trust. The husband did eventually withdraw these proceedings. But the wife said in her affidavit that

Further, I have been advised that the “file without processing order” obtained by the Respondent in Cambodia only brings a temporary close to the criminal proceedings.  It is only a stay of the criminal proceedings but not a complete withdrawal or dismissal.  The “file without processing order” would still allow the Respondent the right to appeal within 2 months from the date of receipt of the order and to revisit the matter.  There is now produced and shown to me marked “JAH-13” a copy of a Notice issued by the Deputy Prosecutor, stipulating the appeal timeframe.  If, during the appeal period of 2 months, the Respondent did not file any appeal the matter will become final.  However, there is nothing to stop the Respondent from appealing the case or from filing a new case or from the prosecutor investigating the case afresh.

18.The notice is dated the 23 March 2013. Therefore it would seem that the husband has the ability to reopen this matter until the 23 May 2012. Thereafter, on the wife’s evidence he can only appeal or file the case afresh.     

19.It was in those circumstances that I was persuaded on the 3 May that it was appropriate to make an interim order pending the matter returning to court on the 9 May. However, I would accept, in retrospect, that the first order is too wide in any event and that it should be discharged on that basis. Likewise I will release the wife from her undertaking which had served to counter the more extreme aspects of the first order.

What orders should be made, if any, in order to safeguard the position between now and the matter being fully argued in the High Court.   

20.At the hearing on the 3 May I first raised the possibility of transferring this matter up to the High Court. This has now been agreed to by the parties. This application will therefore be fully argued in the High Court. It is not clear when that might be. I have asked that it be expedited. Even so it may be a while before the issues are properly ventilated before the court. The immediate issue before me then is what orders, if any, should be made in the interim?

21.Mr Clough for the husband argues that the application should be heard on its merits and pending that hearing the original order should be set aside or not be re-instated.  He argues that:

i. P has not given any reason for proceeding before R has an opportunity to file evidence and the onus is on her to establish why she should be allowed to proceed.

ii. She has not shown that there is any danger of dissipation

iii. She has not suggested that the assets are not already safeguarded by the terms of the original order.

iv. The nearest to a presentation of merits is the fact that R has not been manipulated into giving an undertaking.

v. Orders with penal sanctions should only be made when good cause is shown and should not be allowed to become part and parcel of “normal” litigation.

22.In reply Mr Lynn for the wife points out that there cannot in reality be any true injustice here. The wife is simply seeking to protect what has already been agreed should be transferred to her. There is no litigation advantage, unless of course the husband wishes to try to reopen the whole matter – which would be extremely difficult to do in any event.  Notwithstanding the fact that the assets are outside of the jurisdiction it seems to me that the wife should have the ability to protect, as far as she is able, what is already the subject of an order from this court, pending a full argument on the issues. The fact that the parties are in negotiations should not detract from the fact that there is already an order in place that should be complied with. It is not clear the extent to which the existing order can be enforced in Cambodia or the procedures in place to enable that to take place. This will no doubt be information that will be provided to the High Court in due course. In the meantime this court must be able to put measures in place that will ensure, as far as it is able, that its own order is complied with.   

23.Consequently the following interim orders shall remain pending a full hearing in the High Court or further order as follows:

1)    The Respondent, whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, encumbering, alienating, pledging or disposing of or otherwise howsoever dealing with all his interests, either directly or indirectly held by him or held through nominees or other third parties, of the following assets, without leave of the Court or the Petitioner’s prior written consent :-

(a) the property registered in the Respondent’s name situated at Properties No. X and No. Y located in Cambodia;

(b)  the property registered in the name of the company, UDTDC, situated at Property No. XXXXXX located in Cambodia;

(c)  the property registered in the name of TSL for and on behalf of the Respondent, situated at Property No. XXX, #XX, Street XX & XXX,  Cambodia;

(d)  the property registered in the name of TSL for and on behalf of the Respondent, situated at Property No. XXXXX (CxXXXX), located in  Cambodia;

(e)  S Development Company Limited, the registered owner of a property situated at Title no: XXXXXXXX-XXXX, Cambodia;

2.  The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, UDTDC without leave of the Court or the Petitioner’s prior written consent;

3.  The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, S Development Company Limited, without leave of the Court or the Petitioner’s prior written consent;

4.  The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing or the whole or part thereof of his interest in the company, CH Company Limited, without leave of the Court or the Petitioner’s prior written consent;

The case shall be transferred to the High Court.

24.Costs shall be reserved. Certificate for counsel.

Mr Andrew Lynn instructed by Messrs Withers for the Petitioner wife

Mr Neal Clough instructed by Messrs Yip, Tse & Tang for the Respondent husband

Please refer to HCMC3/2012 for the relevant appeal(s) to the Court of Appeal.