Ak v. Mynt

FCMC16285/2017

[2019]HKFC222

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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D E C I S I O N
(Application for joinder)

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1.On 25 May 2018, the petitioner wife (‘W’) took out a summons pursuant to s.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (‘MPPO’) for setting aside dispositions by the respondent husband (‘H’) of assets worth about US$69 million.  The assets are in the form of overseas trusts held for the benefits of H and his family members.  By the summons dated 7 March 2019, W applied to join the trustees in these proceedings.  Up to date, the trustees have not responded to W’s summons.  Despite that it is accepted by all parties that it is unlikely that the trustees will submit to the jurisdiction of the Hong Kong court, the said oversea trusts being not governed by Hong Kong laws, by consent, an order was made on 30 July 2019 for the joinder of the trustees.

2.This is the hearing of N, A and E’s (‘the intended interveners’) application by the summons dated 4 March 2019 for leave to intervene in these proceedings.  N is H’s youngest sister.  A and E are his nephew and niece respectively.  The alleged interests of the intended interveners under the various overseas trusts are detailed in their supporting affirmations.

3.W opposed the intended interveners’ application.  It is accepted by all parties that the targeted trusts are discretionary trusts.  Mr. Todd QC appearing for W argued that the intended interveners being mere objects of the power have no interest in the trusts as recognised in law or in equity.

4.In contrast, it is Mr. A. Chan SC appearing for the intended interveners’ contention that given there are potential conflicts between H and the other beneficiaries and plainly their interest will be prejudiced by W’s s.17 application, and further considering that the trustees are unlikely to play any role in these proceedings and as a result the interests of the beneficiaries will not be adequately represented and that the court will not have the benefit of submissions from any party interested in the trusts but not a party to the marriage, it is necessary and important that there is independent representation of the trusts from the beneficiaries.

5.Mr. J. Chan appearing for H is neutral to the intended interveners’ application, while he agrees with the interveners that H cannot be expected to take care of the beneficiaries’ alleged interests.  He gave the following example to illustrate H’s position: if W succeeds in varying the trusts so as to provide for her ancillary relief, the more comes out of the trusts, potentially the less H will have to provide out of his assets for W, but the more the other beneficiaries will suffer due to depletion of the trusts.

6.Order 15 rule 6 (2) provides:

Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application—

(a) order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b) order any of the following persons to be added as a party, namely—

(i) any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, or

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.

7.My attention was particularly drawn to the following applicable legal principles.

8.The party to be added should be directly affected in his legal or financial rights, not only by any order made but also by, as widened by sub-para (ii), any question or issue arising out of or relating to or connected with any relief or remedy claimed: Idmiston Ltd v Asian Master [1998] 1 HKC 588 [see at 594H] and there is a need for preventing the same related or connected issues being tried again with possible different results [see at 595F-G]

9.The second limb requires there to be some interest in the matter by the would be intervener which is directly related to the subject matter of the action and a mere commercial interest in its outcome is not enough: Man Whi Chung v Man Ping Nam [2003] 1 HKC 549

21. As regards the alternative basis for joinder set out in O 15 r6(2)(b)(ii) (limb (ii)), which confers on the court a wider jurisdiction to allow joinder, the correct interpretation of this limb has been set out in a passage from Kerr LJ’s judgment in Sanders Lead Co Inc v Entores Metal Brokers Ltd  [1984] 1 WLR 452, 460D-H, as was accepted by the local Court of Appeal in Wong Chun Loong Tony v Ada Ltd [1991] 1 HKC 86, 94D-I:

In my view, the rule requires some interest in the would-be intervener which is in some way directly related to the subject matter of the action. A mere commercial interest in its outcome, divorced from the subject matter of the action is not enough. It may well be impossible, and would in any event be undesirable, to attempt to categorize the situation in which the interests of would-be interveners are sufficient to satisfy the requirements of the rule. The authorities show that the existence of a cause of action between the intervener and one of the parties is not a necessary prerequisite for this purpose. But they also go no further than to show that there must be some direct interest in the subject matter, such as an alleged infringement of a patent, trademark or copyright with which the intervener is concerned (see Tetra Molectric Ltd v Japan Imports Ltd [1976] RPC 547 and Rexnord Inc v Rollerchain Distributors [1979] FSR 119) though even in such cases the interest of the intervener must raise an existing issue and not merely a contingent one: see Spelling Goldberg Productions Inc v BPC Publishing Ltd [1981] RPC 280. Another illustration is provided by cases where the intervener can show that he will in some way be compelled to ‘foot the bill’ depending on the outcome of the action: see Gurtner v Circuit [1968] 2 QB 587, 595, though I bear in mind that the wording of RSC O. 15 r 6(2) was then much narrower than it is now. However, as Mr Hirst rightly conceded, no case has gone so far as to allow intervention by someone who is only a creditor, or alleged creditor, with no more than a creditor’s commercial interest in the outcome of the action, and in my view it makes no difference whatever that the creditor in question is one who has obtained a Mareva injunction whose fate may in some way depend on the outcome.

10.A plaintiff should not have to be vexed against his or its will by having to face more than one opponent at trial, thus adding to the time and expense of action: Chong Kai Man v Kwan Yau Hang [2013] HCA 1298/2011, 30 September 2013, per Hartmann DHCJ

[2] The fundamental purpose of the order is to ensure that, on the one hand, there is not a proliferation of actions arising out of a single cause and at the same time, to ensure that an action brought by a plaintiff should not be overburdened by the adding of layers of a dispute, thereby turning a clearly defined cause of action into something far greater and, in practice, amorphous.

[3] In any application of this kind, a balance must be struck between a plaintiff and the intended intervener as to their proposed interests, it being remembered that a plaintiff should not have to be vexed against his or its will by having to face more than one opponent at trial, thus adding to the time and expense of action.

11.If the court is to have jurisdiction under (b)(ii) it is necessary that the question or issue mentioned in (b)(ii) should be common to (1) the intervener and a party to the cause or matter and (2) the parties to the cause or matter: Wong Chung Loong Tony v Ada [1991] 1 HKC 86              

(1) Order 15 r 6(2)(b)(ii) requires some interest in the would-be intervener which is in some way directly related to the subject matter of the action. A mere commercial interest in its outcome, divorced from the subject matter of the action, is not enough. Sanders Lead Co Inc v Entores Metal Brokers [1984] 1 WLR 452 applied.

(2) For the purpose of O 15 r 6(2)(b)(ii), there must exist between the would-be intervener and any party to the cause or matter a question or issue arising out of, or relating to, or connected with any relief or remedy claimed in the cause or matter which the court considered it would be just and convenient to determine as between the would-be intervener and that party, as well as between the parties to the cause or matter.

12.The existence of a legitimate interest is only a minimum threshold for the making of an order for intervention and it is most certainly not the case that if a legitimate interest exists, an order will automatically follow: Wing Mou Construction Co Ltd (in liquidation) v Cosmic Insurance Corporation Ltd (HCCT 40/2001, 6 June 2002) at §15(4)-(6) per Ma J (as he then was)

15. In my judgment, it is unnecessary, at least in the present case, to try to resolve what theoretical differences there may be between the two sub-rules in circumstances where the relevant party seeking relief is already a third party in the action. However, I make following observations which are pertinent to the present summons :

(1) The object of both Order 15, rule 6(2)(b) and Order 16, rule 4(4) is to ensure that all relevant matters in dispute in the action can be effectively adjudicated upon by the court and that all relevant parties are before it. There is no material difference between the two provisions. Under Order 15, rule 6(2)(b), the court can "on such terms as it thinks just" permit a person to be joined as a defendant thereby allowing that person to participate (to whatever extent permitted by the court) in the action. Under Order 16, rule 4 (4), the court allows a person who is already a third party to participate in the main action between the plaintiff and defendant, again "on terms as may be just" or "as may be just". In this latter regard, a third party may even be permitted to defend the action against the plaintiff either alone or jointly with any defendant.The concern that somehow an application under Order 16, rule 4(4) might be more restrictive than one under Order 15, rule 6(2)(b) is not well-founded. In my view, although I do not have to decide this issue, the court's power is the same and where a person is already a third party in the action, any application to participate in the main action should be made under Order 16, rule 4(4) and not under Order 15, rule 6(2)(b).

(2) All persons who have a legitimate legal or financial interest in the outcome of the matter in dispute are relevant parties. Thus, where the proprietary or pecuniary rights of a person are affected, this is enough. For example, the Motor Insurers' Bureau is sufficiently interested in an action between an injured person and the driver of the relevant motor vehicle where it is at risk ultimately of having to pay in respect of a judgment against the driver (see Gurtner v. Circuit [1968] 2 QB 587; Chu Yuen-wah v. Lee Kwok-kee [1995] 2 HKLR 280) or a surety for the liabilities of another person is also sufficiently interested (see In re Idenden [1970] 1 WLR 1015). A person may be a relevant party even though the plaintiff has no cause of action against him : see TSB Private Bank International v. Chabra [1992] 1 WLR 231, at 237C, 238C-H.

(3) Where a person is already a third party in the action, in most if not all cases, that person will by definition already have a legitimate interest in the outcome of the main action between the plaintiff and the existing defendant.

(4) However, it should be borne in mind that the existence of a legitimate interest in the outcome of proceedings is only the minimum requirement that has to be shown before a court can be required to make an order under either Order 15, rule 6(2)(b) or Order 16, rule 4(4). This I believe to be the effect of these two sub-rules. Both are couched in permissive terms. It is a fallacy to suppose that once a legitimate interest is demonstrated, then it follows that an order under one of these provisions will be made. The court still retains a residual discretion to decide whether or not the order sought should be made.

(5) The exercise of the court's discretion in any given case depends on a number of factors. Of course, the court must first identify exactly the ambit of the order sought before considering what are the relevant factors going towards the exercise of discretion. No exhaustive list of factors can be enumerated but I would suggest the following will regularly feature : the individual prejudice to the parties in the event an order is or is not made, the stage that the action has reached when the application is made, any delay in making the application and any delay that may be caused should an order be made. What weight the court will give to any particular factor will depend on the precise form of the order or orders sought.

(6) Ultimately, the discretion is exercised bearing in mind the object of the two sub-rules I have earlier set out and, as with any exercise of discretion by the court, orders should only be made where necessary, just and convenient.

13.Mr. A Chan did not try to gainsay the above legal principles, but he stressed that the court’s power to join parties is broad and robust, and the court’s attitude to joinder is permissive, to enable an effectual adjudication to be made concerning all matters in dispute, and that all persons who have a legitimate legal or financial interest in the outcome of the matter are relevant parties even though the plaintiff has no cause of action against them, and while a mere commercial interest is not enough, it suffices that the applicants possess some legal interest which is, in some way, directly related to the subject matter of the action.  In his submission, despite that the intended interveners are mere objects of the power, just stepping back and looking at it as a common sense, clearly one can see that the outcome of the section 17 will affect the intended interveners in a real way, inasmuch as if the trusts are set aside, there will be nothing left to be distributed, and therefore the intended interveners must be regarded as having a legitimate legal or financial interest in the outcome of W’s s.17 application.  Mr. A Chan sought to convince the court that going on the test propounded by Mr. Justice Ma as set out in Wing Mou at §15(1)-(2) in the above, the intended interveners are relevant parties as they have a legitimate legal or financial interest in the outcome of the matter in dispute.  Mr. A Chan further referred the court to Tchengguiz-Imerman (Application for Joinder) [2014] 1 FLR 865 as direct authority for the intended interveners’ application in the present proceedings.  In that case, Moylan J decided that the joinder of adult beneficiaries of a trust would assist in the investigation and resolution of the issues in circumstances where the overseas trustees, although joined, were - with the approval of the local court - not participating in proceedings.  He suggested that the present application is also supported by DR V GR (Financial Remedy: Variation of Overseas Trust) [2013] 2 FLR 1534, in which Rule 9.11 of the English Family Procedure Rules 2010 was discussed.

14.In addition, I was taken to Lewin on Trusts, 19th ed. §39-073, pp.1889-1890 which provides: -

An object of a discretionary trust or fiduciary power has no right to the present or future entitlement to trust income or capital, where contingent or defeasible, unless and until the discretion is exercised in his favour.  Such an object does, however, have a right to require the exercise of discretion in the case of a discretionary trust and a right to require the consideration of an exercise of discretion in the case of a fiduciary power, and though that right gives the beneficiary no more than an expectation of benefit, it is an expectation which is protected by the right conferred on the beneficiary and to that extent is more than a mere hope.  The traditional approach of the court is to draw a line between discretionary trusts and fiduciary powers.  Objects of discretionary trusts had locus standi to seek a removal of trustees who failed to give due consideration to an exercise of their fiduciary powers, but none to seek any other kind of relief, with possible exception of a claim to enforce an exercise of the power in special circumstances.  In our view, following the decision of the Privy Council in Schmidt v Rosewood Trust Ltd, locus standi does not depend on the distinction between discretionary trusts and fiduciary powers. And objects of both discretionary trusts and fiduciary powers have locus standi to seek relief for the protection of their rights, though the court has a discretion to determine what relief, if any, should be granted.

15.In the premises, Mr. A Chan differed from Mr. Todd’s argument that the intended interveners have no interest in the trusts as recognised in law or in equity.  Despite Mr. A Chan’s able argument to the contrary, I prefer Mr. Todd’s contestation that that the intended interveners may in the trustees’ absolute discretion be given something does not give them any right of value, notwithstanding that they might have a right to require the exercise of discretion.  As expounded in Lewin above, that right gives the beneficiary no more than an expectation of benefit and they have no right to the present or future entitlement to trust income or capital, where contingent or defeasible, unless and until the discretion is exercised in his favour.  After having carefully considered, I do not accept Mr. A Chan’s argument that the intended interveners have a legitimate legal or financial interest in the outcome of W’s s.17 application.

16.After having carefully considered, I accept Mr. Todd’s submissions that Merman (relied on by the intended interveners) is different from the present case in the facts.  I also take notice that the discussion on the Rule 9.11 in DR V GR (relied on by the intended interveners) has little relevance to the present application.  Rule 9.11(1) provides: 

Where an application for a financial remedy includes an application for an order for a variation of settlement, the court must, unless it is satisfied that the proposed variation does not adversely affect the rights or interests of any child concerned, direct that the child be separately represented on the application.

No child was involved in the present application.

17.Even if the intended interveners had an interest, that is only the first hurdle, they have to show it is relevant in the interests of economy of litigation that they should be joined.  The Family Court’s jurisdiction is limited to claims between the parties to a marriage.  The intended interveners’ interest, as opposed to those of the trustees cannot be lawfully invalided by the Family Court.  Their interests in the trusts, if any, are not engaged in these proceedings.  For my part, having taken the view that the intended interveners do not demonstrate sufficient interest which is directly related to the subject matter of the action, I also take the view that the intended joinder is not required in the interests of economy of litigation. 

18.Mr. J Chan argued that the beneficiaries are entitled to tender their own evidence and make representations on issues such as whether or not the trusts are ‘nuptial settlement’ and the nature of the trusts.  Mr. A Chan submitted that as a matter of both common sense and fundamental fairness that these proceedings have to include the perspective the beneficiaries of the trust if they want to be heard. I have taken the view that the joinder of the intended interveners is not required.   Having that said, I take notice that the evidence of the intended interveners can still be tendered as witnesses, despite that both E and A in their affirmations have already deposed that they have only limited information about the trust, if they wish to be heard, even though they are not joined as parties.   

19.In conclusion, it is ordered that the intended intervener’s application by the summons dated 4 March 2019 be dismissed. 

20.Looking at the matter in the round, presently I do not see any reason why costs should not follow the event.  Apparently, W is the successful party.  It is therefore ordered nisi that the intended interveners shall pay W’s costs of this application, with certificate for two counsel, including reserved costs, payable forthwith.  By and large, H is neutral in the proceedings.  I propose to make the order nisi that there be no order as to costs among W, H and the intended interveners.  The above order nisi becomes absolute unless a party has applied for varying the order within the next 14 days.

Mr. Richard Todd QC and Ms. Madeleine Booth instructed by Oldham Li & Nie for the petitioner

Mr. Jeremy Chan instructed by Johnathan Mok Legal for the respondent

Mr. Abraham Chan SC instructed by Howse Williams Bowers for the intended interveners