Kcma v. Abc
Read the full judgment text of HCMC 1/2019 on BabelCite. This High Court CFI judgment was delivered on 21 November 2019.
1. These are matrimonial proceedings and presently before this Court is a summons issued by the petitioner wife (“ W ”) for joinder, interlocutory injunction and disclosure against the husband (“ H ”) and other non-parties as set out below (“ Summons ”).
Cited by 1 case · Cites 3 cases
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HCMC 1/2019 [2019] HKCFI 2822 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MATRIMONIAL CAUSES NO. 1 OF 2019 ________________________ BETWEEN
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________________________ D E C I S I O N ________________________ 1.These are matrimonial proceedings and presently before this Court is a summons issued by the petitioner wife (“W”) for joinder, interlocutory injunction and disclosure against the husband (“H”) and other non-parties as set out below (“Summons”). 2.The application for joinder (“Joinder Application”) is to join :
3.The application for injunctions (“Injunction Application”) is sought by W respectively against H, the Trustee and K restraining, amongst other things, each of them in dealing with the disputed assets under the US Trusts and/or the Indian Apartment. 4.The application for specific discovery (“Discovery Application”) is sought by W against (i) H and the Trustee for various information/documents including the trust accounts of the US Trusts, and (ii) H and K to account for and to provide information including trust accounts of the Indian Trust now holding the Indian Property. 5.This decision is on the Joinder Application only. 6.Counsel Mr Richard Todd appeared at the hearing for W and Mr Robin Egerton appeared for H and his father K. Mr Leon Ho appeared for PBB in his capacity as the Trustee of the Family Trust only. PBB in his capacity as the Trustee of the Education Trust had no legal representation and was absent at the hearing. Brief Background 7.H and W met in August 1999 and were married in October 2001. They separated in late 2016. There are three children of the family, the eldest being a boy now aged 15, and the two younger children being girls, now aged 13 and 9 respectively (collectively “Children”). 8.W is a full time housewife and has not worked since 2000. The Children now live with W in a property at South Bay Close, Hong Kong. 9.It was W’s case that in about 2006, the parties bought the Indian Apartment with their family funds and that the Indian Apartment was purchased in H’s sole name by reason of him being an Indian national. Subsequently, on 12 September 2016, H transferred the Indian Apartment into his father K’s name, and later on 30 August 2017, K settled the apartment into the Indian Trust. The Indian Apartment is said to be worth about US$2.3m. 10.On the other hand, it was H’s case that the Indian Property was a co-investment by him and his father K and that it was initially purchased in H’s name as they could take advantage of his non-resident Indian status and to obtain preferential mortgage lending rates from local Indian banks. It is further H’s case that K had contributed towards the expenses and that the apartment would be made available for the use of H’s parents. According to H, there was considerable delay in construction and handover of the Indian Apartment and eventually it was on 12 September 2016 that the title was conveyed into H’s name and on the same day it was further conveyed by H to K. As said earlier, K later transferred the Indian Property to the Indian Trust. The Children, K and K’s wife (H’s mother) are named among the 5 beneficiaries. Both H and W have been excluded. 11.It was not disputed that H had set up two BVI companies which shall simply be referred to as (i) Intero and (ii) Bremen respectively on 2 July 2009 and on 3 July 2012[1]. At the time, H was the sole shareholder holding one share in each company and he was the sole director of each company. Intero was said to have been set up to facilitate a capital injunction into an investment management company of which H works as a “Partner” and H is said to hold an interest in the holding and/or related companies through Intero. Bremen was set up to hold 3 pieces of land in St Thomas in the US Virgin Islands. 12.According to a “Trust Structure” produced by H, there was also a trust set up by him in 2013, with W and the Children as beneficiaries, which I shall simply call “Insurance Trust”[2]. There is not a subject matter of the Summons. 13.In 2015, the marriage went into difficulties. According to W, on 6 July 2015, H transferred a total of HK$7.5m from his personal account to Intero[3]. 14.The parties underwent marriage counselling between September 2015 until March 2016 and it was during this period that H set up the two US Trusts, according to W, without her knowledge and/or consent. 15.The Family Trust was set up by H on 1 November 2015, initially as a New Hampshire trust. 16.Upon setting up the Family Trust on 1 November 2015, H transferred his one share (100% shareholding) in Intero to the then New Hampshire trustee of the Family Trust[4]. This was followed by H transferring HK$2.2m from his personal bank account to Intero[5]. 17.It would appear on 1 November 2015 that H also transferred his one share (100% shareholding) in Bremen to then new Hampshire trustee of the Family Trust[6]. On 1 July 2016, H formally set up the Education Trust, also initially as a New Hampshire trust. On the same day, the one share in Bremen was transferred to the Education Trust[7]. 18.Further, on 1 July 2016, the Family Trust entered into a sale and purchase agreement to “sell” the 100% shareholding in Intero to Bremen. Bremen then borrowed a sum of US$10.5m from the Family Trust for the “purchase” and Bremen issued a promissory note dated 1 July 2016 for US$10.5m to the Family Trust (“Promissory Note”). The maturity date of the Promissory Note is 31 December 2026 and Bremen agreed, amongst other things, to pay interest to the Family Trust on the unpaid principal amount at the rate of 5% compound annually until the date such accrued interest is repaid in full. 19.In short, as a result of the above transactions on 1 July 2016, the assets of the Family Trust comprised of primarily the Promissory Note, whereas 100% of the shareholding in Intero is now owned by Bremen, and in turn 100% of the shareholding in Bremen is owned by the Education Trust of which H and W are not beneficiaries. Bremen’s assets are said to be worth about HK$93m, consisting of[8]:
20.W issued the divorce petition in November 2016. 21.According to W, it was only when she received H’s Form E filed on 1 February 2017 that she discovered H’s setting up of the US Trusts and the transfers into the US Trusts and also the Indian Apartment being transferred into K’s name. She had pointed out that Intero and Bremen had been held by H in his personal name for over 6 years until the respective transfers into the US Trusts which were effected as said earlier, after the parties attended marriage counselling in September 2015. 22.Shortly before H filed his Form E, the Family Trust and the Education Trust were relocated by H from New Hampshire to Nevada USA in January 2017. 23.In so far as the Family Trust is concerned, a trust deed was executed on 1 January 2017 under the Nevada law, with H as the initial “Settlor” and PBB as the Trustee (“Trust Agreement”)[9]. The Trustee acknowledged receipt of property received from the prior trustee and agreed to administer that property and all other property received in accordance with the provisions of the Trust Agreement. The Family Trust is said to be irrevocable. 24.H is named as the sole “Investment Director” as well as the “Trust Protector” in the Trust Agreement. Section 4.3 sets out that the successor Trust Protector shall be a committee comprising of H’s father K, H’s brother, H’s “Spouse”, and two of H’s friends. 25.“Beneficiary” is defined in Section 5.1 to be (i) H, (ii) W, (iii) the descendants of H and W, (iv) certain charitable organizations as contingent beneficiaries, and (v) any person whom the Trustee adds as a “Beneficiary” under the Trust Agreement. Section 5.2 provides for the distributions of the “Trust Property” by the Trustee. Further, under section 5.4, the Trustee has the power to add or exclude “Beneficiaries” and the Trustee has the power to exclude irrevocably any person (other than H or W) as a “Beneficiary”. The spouses of the “Beneficiaries”, save H and W, are “Excluded Persons” 26.As for the Education Trust, according to a summary produced by W[10], the “Investment Director” is H and the “Protector” is also H with power to appoint, failing which, a committee comprising of (i) H’s father K, H’s brother, and a friend. The “Beneficiaries” of the Education Trust are (i) H’s descendants, (ii) W’s descendants (by name) including those born after divorce. Thus, the Children are “Beneficiaries” and both H and W are “Excluded Persons”. 27.On 29 August 2017, W issued a Notice of Application (“Notice”) for, amongst other things, (i) an avoidance of dispositions order under section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (MPPO) (“s17 Application”); (ii) a variation of nuptial settlement under sections 6(1)(c) and (d) of the MPPO (collectively “s6(1)(c) Application”). 28.By the s17 Application, W is seeking to set aside, amongst other things, the following dispositions made by H[11]:
29.By the s6(1)(c) Application, W is seeking, amongst other things:
30.In the Notice, W has invited the Children, Bremen, Intero, PPB as the Trustee and H’s parents to intervene, and the Notice also includes an application for an injunction against H. 31.It was H’s case that he first contemplated estate protection and financial planning as early as 2009 with regard to the set up of efficient financial structures for the family, and that he had discussed with W the setting up of trusts. It was further H’s case that the US Trusts were primarily set up for succession planning, tax mitigation and asset protection and that W was aware of the setting up of the US Trusts, but this was denied by W. 32.W had referred to a letter from the Trustee to W dated 16 May 2018 referring to the Trust Agreement being forwarded to her “last year”, which meant that the Trust Agreement was only first provided to W in 2017[12]. 33.H has denied that his transfer of the shares in Intero and Bremen to the US Trusts was made to defeat W’s claims for ancillary relief, pointing out that in respect of the Family Trust, W is one of the two beneficiaries. 34.However, it is not really disputed that the legal effect of the H’s transfers of his shareholdings in Intero and Bremen into the US Trusts is that whatever rights and entitlement that W had in sharing the family assets held by Intero and Bremen are now being subject to the discretion of the Trustee of the Family Trust and the Promissory Note, and further that H, as the sole Investment Director, has the exclusive duty and power to invest and otherwise manage all of the “Trust Property”. As pointed out by W, in effect, about HKD93 million worth of family’s assets held by Intero and Bremen were injected into the Education Trust of which she is not a “Beneficiary”. 35.Further, as pointed out on behalf of W, the “Borrower” stated in the Promissory Note, ie Bremen, is not required to pay interest or principal before the “Maturity Date”, ie 31 December 2026[13]. W has in fact raised a number of issues in relation to the Promissory Note. 36.PPB had filed an affidavit in his capacity as the Trustee of the Family Trust to oppose the joinder. He has explained that the Family Trust is a “directed trust” meaning he does not make investment decisions and H, as the Investment Director, is conferred the exclusive duty and power to invest and otherwise manage all of the “Trust Property”. He has further pointed out that it is stated in the Trust Agreement that H, as Investment Director, has the duty to provide information of investment of the “Trust Property” to the Trustee[14]. 37.Thus, it would seem that the role of the Trustee for the Family Trust is very limited, only making discretionary distributions. The Trustee does not appear to have any knowledge, much less control, over any of the Trust Assets. 38.As mentioned earlier, PBB as the Trustee of the Education Trust was not represented at the hearing and there was no affidavit filed by PBB on behalf of the Education Trust and thus there was no information provided by PBB in his affidavit relation to the Education Trust. For the present application, W’s case is that the same information provided by PBB for the Family Trust should also apply to the Education Foundation, of which H is also the sole Investment Director. 39.As H is the sole Investment Director of both the US Trusts, it is W’s case that H has retained complete control over all the assets held by Bremen and Intero notwithstanding the transfers into the US Trusts. 40.The Notice was fixed for hearing before Judge Melloy on 29 August 2017, and as the Notice contains an injunction, at the hearing, H offered a signed written undertaking that he would not personally take steps to change the then status of the Family Trust and the Education Trust, save with the agreement of W or with leave of the Court (“1st Undertaking”)[15]. 41.On 21 November 2018, W issued the Summons. Subsequently as seen in a judgment handed down by Judge Melloy on 11 December 2018 (“Melloy Judgment”)[16], she accepted in substitution for and upon the discharge of the 1st Undertaking and without prejudice to H’s position and the position of the other parties, a further undertaking from H that he will not make or cause to make any distribution from the US Trusts in his personal capacity (but not in his capacity as director of Bremen and Infero to make follow on investment as may be required or interest distributions pursuant to the directions of the Trustee) (“2nd Undertaking”)[17]. It was also on 11 December 2018 that, Judge Melloy made the order transferring the Notice, the Summons, and W’s application for ancillary relief to the Court of First Instance. 42.W’s ancillary relief application including the Notice, the Summons and relevant orders and W’s relevant affirmations were duly served on the Trustee on 18 April 2019 by a licensed process server in Las Vegas, Nevada, USA. Further, the Notice, the Summons and relevant documents were duly served on K in India on 15 July 2019. 43.There were no issues raised by the Trustee or K in relation to the mode of service. Proper procedure for service and joinder of non-parties in a variation of settlement application or an avoidance of disposition application 44.In the present case, I find some of the rules and practice directions did not seem to have been followed and for future reference, I will set out what in my view should be the proper procedures for service and joinder of non-parties in variation of settlement/avoidance of disposition applications. There are two aspects, firstly in relation to service and secondly in relation to joinder. The notice of application form 45.Previously, pursuant to rules 68, 68A, 70, 74 of the Matrimonial Causes Rules (MCR), the notice of an application for a variation of settlement order or for an avoidance of disposition order should be made in Form 8 or Form 8B, which are specified forms in the MCR. 46.It is further provided by rule 74(3) of MCR that the notice of the application (whether Form or Form 8B) together with a copy of the supporting affidavit shall be served on the following persons as well as the respondent to the application:
47.As seen above, it is mandatory under rule 74(3) for the trustees and the settlor in (1) and for the disponee of the disposition in (2) to be served with the notice of application and the supporting affidavit. 48.With the introduction of PD 15.11 on the Financial Dispute Resolution Pilot Scheme, rule 84A of MCR came into effect on 29 December 2003, pursuant to which the entire rule 74 has been dis-applied in divorce proceedings issued after that date. Further, the notice of application form, ie Form 8 or 8B referred to in rule 74 has been replaced by a Form 25 in the MCR (or Form A in PD 15.11) (“Form 25”). Service 49.As rule 74 is no longer applicable to proceedings issued after 29 December 2003, pursuant to paragraph 5a (iv) of PD 15.11, the Family Court Judge, upon the filing of Form 25 for a variation of settlement order or an avoidance of disposition order shall have to give directions at the First Appointment Hearing, as to service of all relevant persons to be served under section 6A(5) and s 17 of MPPO and the issue and service of Form F. 50.For some reasons, there is no mention in paragraph 5a(iv) of PD 15.11 of persons to be served under section 6(1)(c) of MPPO, ie in a variation of settlement case. Assuming that this was an inadvertent omission, the clear intention of paragraph 5a(iv) PD 15.11 is for directions to be given in relation to service on all relevant persons, at the First Appointment Hearing or the first available direction hearing. In the present case, there did not appear to have been such directions sought or given although in the Notice, W appeared to seek “leave to invite the persons named to intervene”. It is not clear to the Court as to what “leave to invite” W was seeking, but in any event, the Court was not informed whether such leave was given. At the hearing on 29 August 2017 when the 1st Undertaking was given, the parties acknowledged that W was to be released from her implied undertaking, to “contact the companies and, the trustees named in the Notice”[18]. However, “contact” does not mean “service”. 51.Further, rule 72 of MCR has never been dis-applied. Under rule 72(1), in an application for a variation of settlement, the court, shall, unless it is satisfied that the proposed variation does not adversely affect the rights or interest of any children concerned, direct that the children be separately represented on the application. Rule 72(2) then provides that on any other application for ancillary relief the court may give such a direction as it is empowered to give by paragraph (1). In my view, these rules should equally apply in any application for an avoidance of disposition order which may affect the rights or interests of any children. 52.Again, directions did not seem to have been sought or given under rule 72 of MCR in the present case. 53.As set out above, (i) directions on service of all relevant persons, and (ii) directions for the issue and service of a Form F and (iii) directions under rule 72 of MCR should have been sought by the applicant in a variation of settlement case or an avoidance of disposition case at either the First Appointment Hearing, or at the first available directions hearing. I am also of the view that “all relevant persons” in paragraph 5a(iv) of PD 15.11 should include the trustee and the settlor if living in a variation of settlement application, or a disponee in an avoidance of disposition case and any other persons the Judge may direct, as previously provided under rule 74(3) of MCR. 54.Under rule 109 of the MCR, any document in the matrimonial proceedings may be served outside jurisdiction without leave in accordance with Order 11 rules 5 and 6 of the Rules of the High Court (RHC). Even though no leave is required, the mode of service abroad should follow that set out in Order 11 rules 5 and 6 of RHC. Although Order 11 rules 5 and 6 refer to the service of a writ, ie an originating process, pursuant to rule 3 of MCR, they should apply to service of Form 25 for a variation of settlement/avoidance of disposition order, subject to necessary modifications. Further, after Order 11 rule 5A of RHC has been introduced in 1999, any service in Mainland China should be in accordance with that rule. 55.Order 11 rule 5 has referred to service being accompanied with an acknowledgment of service of the writ form. 56.There is no rule in MCR or in the Practice Directions requiring that Form 25 is to be served on a non-party with an acknowledgment of service, nor has this been the practice of the family practitioners in Hong Kong, in so far as this Court is aware. It is however interesting to note that in the case Wyler v Lyons [1963] P 274, referred to this Court by Mr Ho for the Trustees, the notice for an avoidance of disposition order was served and endorsed with the usual direction to complete the form of acknowledgment of service together with the usual explanation as to what to do[19]. 57.As mentioned earlier, paragraph 5a(iv) of PD15.11 provides for directions in relation to the issue and service of Form F. If Form 25 is to be served on a non-party, it should in my view at least be served accompanied by a Form F, so that the non-party has clear notice of what is being alleged by the applicant against the non-party. There should also be directions given on service of any supporting affidavit. 58.As matters now stand, for service out of jurisdiction under Order 11 rule 5 :
59.Order 11 rule 6 provides for service through foreign governments, judicial authorities and British Consul. 60.Form F reads as follows:
61.Although rule 74(4) of MCR provides that any person served with the notice of application may within 14 days after service file an affidavit in answer, due to the rule having been dis-applied, it seems that there is no such provision as rule 74(4) in Form F any more. 62.Since the non-party, if served abroad, may need more than 8 days to respond, directions should also be sought from the Judge, at the same time as directions are being sought on service, as to the time given to the non-party served with the Form 25 and Form F to respond. Effect of service 63.Order 15 rule 13A of our Rules of the High Court (RHC) has set out the service of a notice of action to non- parties in an action relating (i) estate of a deceased person; or (b) property subject to a trust, as follows:
64.Order 15 rule 13A (4) clearly states that if the person served with the requisite notice acknowledge service within the time stipulated, then that person shall become a party to the action/proceedings, and that in default of such acknowledgement and subject to paragraph (5) therein, the person shall be bound by any judgment given as if he/she was a party thereto. 65.There is no reason why the rule cannot apply subject to necessary modifications to the service of the Form 25 accompanied with Form F in an application for a variation of settlement or an application for avoidance of disposition order which relates to property subject to a trust. In fact, the Court of Appeal at paragraph 25 of its judgment in LLC v LLWA and anor [2019] 2 HKLRD 529, CAMP 143/2018 has referred to Order 15 rule 13A(4) of RHC when discussing preliminary issues hearings in matrimonial proceedings involving third party interests. 66.As has also been pointed out by Mostyn J in DR v GR and Others (Financial Remedy; Variation of Overseas Trust) [2013]1196 (Fam), (an authority which is not on any Counsel’s “list of authorities”), once served, the non-party can file evidence in answer, or they can decide whether to participate only as witnesses or to seek to intervene (ie to be joined) and to be represented, and it is up to them. Mostyn J then went on to say: “But if they have been served in accordance with the rules, and do nothing, then it is clear beyond a shadow of a doubt that any order will be valid and binding on them”[20]. 67.In my view, when directions are being given under paragraph 5a(iv) of PD15.11 in relation to service, such directions may also incorporate, whether in Form F or not, a notice that any non-party properly served shall be bound by any judgment in default of any acknowledgment of service and/or response. Joinder 68.There is no rule that the trustees and/or settlor in a variation of settlement case or the disponee in an avoidance of disposition case or any non-party served with a Form 25 is to be automatically joined. If the applicant in Form 25 wishes to apply to join the non-party who has been duly served, or the non-party duly served wishes to make an application to intervene/join as a party in the application, an application for joinder should be made by issuing an inter-partes summons accompanied by a supporting affidavit. 69.Unlike England, where some of their Civil Procedures Rules have been incorporated into their Family Procedure Rules 2010, there are no specific provisions in the MCR in relation to the procedure on joinder of non-parties in a variation of settlement/an avoidance of disposition case. The relevant provisions are to be found in Order 15 of the RHC. 70.Order 15 rule 4 of RHC is not applicable unless the trustee and/or settlor in an application for variation of settlement or a disponee in an application for an avoidance of disposition is already a plaintiff or a defendant in a separate action/proceedings brought by him or brought against him. 71.The proper procedure for an application for the joinder of a trustee and settlor in a variation of settlement application or a disponee and other non-parties directed to be served in an avoidance of disposition application should be Order 15 rule 6(2)(b) of RHC. 72.Order 15 rule 6(2)(b) provides that:
73.As seen above, there are two limbs in Order 15 rule 6(2)(b), namely (i) and (ii). The supporting affidavit for the joinder should set out whether it is under (i) or (ii), or under both, that the joinder is being sought against the non-party. 74.For Order 15 rule 6(2)(b)(i), the supporting evidence should identify clearly (1) the matter in dispute between a party and the proposed new party and (2) the connection to the main matter in dispute between the parties. 75.For Order 15 rule 6(2)(b)(ii), the supporting evidence should identify clearly (1) the existing question or issue between the proposed new party and any party in the matter and (2) the relief or remedy claimed in the matter out of which the existing question or issue is said to be related to or connected with. 76.The supporting affidavit for the joinder should be concise and in my view it is not appropriate to include lengthy and detailed allegations between the parties themselves, since the non-party may not be related to the parties at all and indeed may be innocent third parties or strangers caught up in the parties’ dispute in the matrimonial proceedings. To join or not to join – the legal principles 77.As said above, upon being served with the Form 25 and the Form F, the non-party may decide to intervene or to join as a party in the application, or the applicant in in the application may decide to apply to join that non-party as a party. 78.Paragraph 15/6/1 of the Hong Kong Civil Procedure Volume 1 2020 sets out the effect of Order 15 rule 6. Paragraph 15/6/6 is in relation to adding or substituting defendants and paragraphs 15/6/7 – 15/6/11 are in relation to interveners. Suffice to say, it can be seen, amongst other things, as follows:
79.Mr Ho on behalf of the Trustee had referred this Court to three “old authorities”, the earliest one in time was the case of Goff v Goff [1934] P 107 in which the New York trustees were seeking to set aside the service on them of the wife’s petition to vary a marriage settlement after decree absolute on the grounds that (i) the service was defective and (ii) that the English Court could not make any effective order against the trustees as although the service was good under the English rules, it was not served in accordance with the requirement of the New York Law and the service should be set aside on the general ground that no effective order could result against the party served. However, although service was set aside on the general ground that no effective order could result against the party served, it was set aside without prejudice to the petitioner’s rights to apply for leave to dispense with service on the trustees. 80.The second case in terms of time referred to by Mr Ho was Brandt v Brandt (No 2) [1960] HKLR 395. The Brandt case was an appeal on whether by reason of section 48(6) of the then Divorce Ordinance or otherwise it was necessary to obtain leave of the court to present a divorce petition intended to be served on the respondent out of the jurisdiction pursuant to the then Order 2 of the then Code of Civil Procedure, and the Full Court held that the issue of jurisdiction was one to be determined in each suit as it arose and that prior leave was not required in that case. It is not clear how this case would help the Trustee, and in any event, the law has gone through some substantial changes since. 81.Mr Ho also referred to Wyler v Lyons, supra, which concerned an application by the plaintiff, who was the sole member of the board of a Liechtenstein foundation (ie a trust set up by the husband) administering the trust, to set aside the service on him by the wife of her notice to set aside the dispositions made by the husband to the trust. 82.It was held that as the court could make no order which would be effective against the plaintiff, the plaintiff was prima facie not subject to the court’s jurisdiction and was entitled not to be subjected to its process; further, that as the dispositions sought to be set aside were not made in his favour and, in so far as the property concerned, was not in his personal ownership or possession, he ought not have been served personally and that, therefore the service would be set aside. 83.Sir Jocelyn Simon, President of the division, had pointed out according to Liechtenstein law the foundation was itself a legal entity and that it was the recipient and was itself the owner of the property comprised in the various dispositions which the wife was seeking to set aside, and the foundation could be served with process at the office of an advocate who was appointed as representative of the foundation in accordance with the law of Liechtenstein. Further, the evidence showed that the Liechtenstein courts would not recognize or execute any order of the court in relation to the foundation and there was no reciprocal enforcement of judgments between England and Liechtenstein[25]. 84.Mr Ho relied on the above case to argue that as no order made by this Court would be effective as against the Trustee, therefore, the Trustee should not be joined. However, Liechtenstein is a civil law country where enforcement of a foreign order will depend on its legislation and in my view what the President said had to be seen in that context. 85.Mr Ho had also referred this Court to Hamlin v Hamlin [1986] Fam 11 and this Court’s own decision in LCYP v JEK [2019] HKCFI 237. The Hamlin case concerned an injunction under the English section 37 of the Matrimonial Causes Act 1973 (which is equivalent to our section 17 of the MPPO) obtained by the wife against a villa of the husband in Spain. The judge had refused to continue an ex parte injunction on the ground he had no jurisdiction over a foreign realty. The Court of Appeal (Kerr LJ and Bush J) allowed the appeal and held that there was jurisdiction under section 37 to make an order concerning foreign property although the court would not exercise its discretion to make an order concerning foreign property which could not be enforced. The matter was then remitted to the judge below for the wife’s application to be heard on its merits. I note that Spain is also a civil law country. 86.The LCYP and JEK case concerned the joinder of the trustee company of the Delaware trust set up by the husband in that case and certain funds were injected into the trust by the husband. The trustee did not appear nor had they filed any evidence to oppose the joinder save that the trustee sent a later to the Court stating that the Court had no jurisdiction over the trustee. Although the husband’s legal representative had referred to the case of Hamlin v Hamlin, counsel for the wife in that case had referred this court to T v T and Others (Joinder of Third Parties) [1996] 2 FLR 357. This Court followed what was said by Wilson J (as he then was) in T v T and allowed the joinder application by the wife, as I came to the view that if the husband in that case were to fail to comply with any orders made by the Hong Kong Court, joining the trust company could facilitate the enforcement proceedings which the wife might have to take in the United States. 87.For some reasons, none of the Counsel appearing at the present hearing had referred this Court to T v T. In that case, the trustees of a Jersey settlement applied to set aside an order joining them made by Wilson J at a hearing when a Mareva injunction was continued against Mr T and Mr T alleged that he had no control over the trust assets. 88.Wilson J refused the trustees’ application to set aside the joinder. He had considered Order 15 rule 6(2)(b) of the then English Rules of the Supreme Court and (i) and (ii) thereunder, namely the two limbs which are similar to our Order 15 rule 6(2)(b)(i) and (ii). As said by Wilson J, the reference to ‘justice’ and ‘convenience’ in the second limb (ii) seemed to him to be less stringent than the reference in the first limb (i)[26], but he came to the view in that case, both limbs would be applicable as a crucial matter for his determination would be to evaluate the real control over the assets of the trust and that this matter would be directly relevant to the duty of inquiry the court had under s 25(a) of the Act (ie the equivalent of s 7 of our MPPO). 89.Wilson J had further said that quite apart from the fulfilment of his duty under s 25, he had come to the view that the enforcement of any orders that he might make would likely to be facilitated by the trustees remaining as parties to the proceedings. 90.Wilson J went on to say that he would have had some doubt about whether to have added this consideration (ie of enforcement) into his conclusion about the applicability of Order 15 rule 6(2)(b)(i) and/or (ii) had he not been referred to a decision of Mummery J in TSB Private Bank International SA v Chabra [1992] 1 WLR 231 where a very wide construction was placed upon the ‘justice’ and ‘convenience’ referred to in rule 6(2)(b)(ii)[27]. 91.Wilson J had also referred to the Wyler v Lyons case as being an “old authority” and pointed out that at that time, ie in 1963, there was no inquisitorial duty cast upon the court in ancillary relief proceedings at all: it simply had a discretion to make limited forms of ancillary relief and that the duty has been imposed upon the court since 1971. 92.In fact, on the question of enforcement, what Wilson J had further said was he would also expect and believe that, notwithstanding that there might be difficulties about the automatic enforcement in Jersey of any order that he made in the event that the trustees failed to take an active part in the proceedings, nevertheless their having been made parties to the proceedings would be likely to assist the wife in, if not direct enforcement, the obtaining of an analogous or supplementary judgment in Jersey, and indeed might assist her in putting before the Jersey court, as facts which had been found and from which there should be no escape, facts found by the court at a hearing in which, whether the trustees actively participated or not, the trustees were parties[28]. 93.In DR v GR, supra, the wife applied for a variation of settlement. The post-nuptial settlement was a discretionary Jersey trust which owned a Liberian company which in turn owned a UK company which in turn owned two further UK companies, which owned two retirement villages and other assets in the UK. The trustees of the Jersey trust were joined as parties and then later all the companies in the trust were joined also. In neither case was an application made for joinder and further at the time of the joinders, neither the husband nor the trustees nor the companies had any notice of any application for joinder. The trustees had not participated in the proceedings, but the companies made their own application to be dis-joined. 94.Suffice to say, Mostyn J found the procedure adopted in that case “bedevilled him” and he then reviewed various authorities concerning applications for variation of settlement cases, one aspect of which was whether the interposition of companies between the trust at the top of the tree and the assets at its bottom acted as any kind of impediment to making a variation which disposed of the actual assets at the bottom. Mostyn J had considered the procedure aspect and laid down certain guidelines, and he was of the view that a joinder was not an essential pre-condition for the validity of a variation of settlement order. 95.In DR v GR, Mostyn J allowed the companies joined to be dis-joined as he said he saw no good reason why either the trustees or the companies were joined. Mostyn J had referred to the decision of Birt DB in Mubarak v Mubarak [2008] JRC 136, [2009] 1 FLR 664 and Article 9(4) of the Trusts (Jersey) Law 1984 and had said that there was only a very limited extent to which enforcement of the UK court’s order could be achieved in Jersey and that did not depend on whether the trustees were joined to the proceedings or even if they submitted to the jurisdiction. Further, if the assets were sited in UK then a successful applicant would likely seek to enforce a variation directly in UK and would not involve the Jersey courts at all. However, this part of Mostyn J’s judgment may now have to be looked at in light of the subsequent decision of the Supreme Court in Petrodel Resources Ltd & Prest & Ors [2013]UKSC 34, [2013] 2 AC 415. 96.In DR v GR, Mostyn J had referred to T v T and it seems clear that he did not agree with what was held by Wilson J. Mostyn J said he had difficulty in understanding why the factual inquiry referred to by Wilson J would be assisted by the formal joinder of the trustees. In so far as assisting enforcement was concerned, Mostyn J had said the views of Wilson J must, at least as far as Jersey was concerned, be seen in the light of the direction of Birt DB in Mubarak v Mubarak, supra. 97.The only authority Mr Todd had referred the Court to was TM and AH [2016] EWHC 572 (Fam). The issue in that case was whether trustees respectively of a BVI trust and of a Swiss trust should be joined in a variation of settlement application by the wife. Those trustees were not submitting to the jurisdiction and it had also been indicated that they needed to apply to the BVI court and the Swiss court for guidance or direction as to what they should do in relation to the litigation between the husband and the wife, and Moor J had said that was something that was very familiar to the court in such cases. 98.Moor J further said he was not making any comment whatsoever on the effect that joinder might have in either the BVI or Switzerland and he had said it seemed to him that it was irrelevant, but as the wife was applying to make very substantial changes to those trusts, the trustees should be joined so that they could have their say, if they wish to do so, on those very serious applications[29]. Moor J held there was an existing matter in dispute in that case which required for its resolution the joinder of the trustees. 99.Moor J clearly disagreed with the conclusions of Mostyn J in DR v GR. He had said :
100.Thus, one of Moor J’s reasons for joinder of the trustees was for the orders to be binding upon them. There does not appear to be a similar provision in the FPR 2010 as our Order 15 rule 13A of RHC. Although in the English Civil Procedure Rules, there is rule 19.8A which is in fact broader than our Order 15 rule 13A, that rule has not found its way into the FPR 2010. 101.It is noted that both TM v AH and DR v GR are variation of settlement cases and at present there seems to be different views in England on joinder of trustees in such cases. I was informed by Mr Todd that TM v AH was the most recent case on joinder of trustees in a variation of settlement case in England. No recent cases on joinder of a disponee in an avoidance of disposition case had been produced to this Court by counsel. I had mentioned the case Goldstone v Goldstone [2011] EWCA Civ 39 during the hearing, in which joinder of a foreign transferee in s37 proceedings was upheld by Court of Appeal although the main issue in that case was what should be the applicable rules for the joinder. 102.The transferee in the Goldstone case was not a trust or trustee. However, it was accepted by both sides therein that the court could only order the transfer of assets in name of the transferee if satisfied that in reality they were owned by the husband in that case[31]. The Court of Appeal decision would be an indication of the approach of the court towards joinder in s37 proceedings in England[32]. 103.To join or not to join a non-party served with the notice of an application for variation of settlement/avoidance of disposition will depend on the circumstances of each case. I now turn to the present case. Whether the Trustee should be joined in the present case W’s reasons for joinder of the Trustee 104.Mr Todd submitted in his Skeleton Submissions that “Plainly the trusts(sic) and H’s father are properly to be joined to this ancillary relief” and he then referred the Court to TM v AH. In reply to submissions made by Mr Ho for the Trustee during the hearing, Mr Todd submitted on behalf of W that she was seeking orders against the Trustees in order to get back H’s money and that it must be plainly just and convenient to join the Trustee in order to get back H’s money. The Trustee’s grounds for opposition 105.PBB’s objection in relation to his joinder as the Trustee of the Family Trust can be summarized as follows:
106.There were no submissions made on behalf of PBB in his capacity as Trustee of the Education Trust, but Mr Ho submitted that although no order from the Nevada Court had been obtained by PBB over the Education Trust, there was nothing to prevent PBB from making a similar application and to obtain a similar order from the Nevada Court. H’s position on joinder of the Trustee 107.Mr Egerton informed this Court that he had nothing further to say on behalf of H or to assist, other than his “Note”. There was nothing in the Note to indicate whether H himself was opposing the joinder of the Trustee or not, save that the application to join K should be dismissed as K was not the appropriate person to be joined. Whether the Trustee should be joined 108.PBB had made it clear that he did not wish to be a party in the present proceedings in any form[36] and had not submitted to the jurisdiction of the Hong Kong Court. 109.PBB had produced in his affirmation a copy of the order made on 5 July 2019 by the District Court of Clark County in Nevada[37] (“Nevada Court”) and a copy of the opinion of Mr Rushforth mentioned earlier. 110.In essence, the Nevada Court ordered that:
111.As explained by Mr Rushforth, the Family Trust is a valid Nevada self-settled spendthrift trust settled by H in accordance with the Spendthrift Trust Act of Nevada and that the Family Trust has been administered and domiciled in the State of Nevada from its inception. 112.W had initially responded in the Nevada proceedings with a “Motion to Dismiss” which was only on the ground that she was not properly served. The Nevada Court later determined that she and the Children were properly served and although W was given further time to file a substantive response, she did not do so, and she did not submit to the jurisdiction of the Nevada Court. 113.In so far as this Court can see, W has never challenged that the Family Trust is a spendthrift trust duly set up in accordance with the laws of Nevada, nor has she ever challenged that the Nevada Court has the exclusive in rem jurisdiction over the administration and internal affairs of the Family Trust, nor has she ever challenged that PBB was duly appointed as the Trustee of the Family Trust. It is thus not clear why the Trustee felt it necessary to seek those orders from the Nevada Court. 114.Having said this, I accept W’s case in her 13th affidavit and her 1st affirmation was rather confusing as to her reasons for joinder. The Summons was stated to be under Order 15 rule 4, but as set out earlier, this rule is not applicable since there had not been any separate action brought by or against the Trustee at the time of issue. 115.The Summons was supported by W’s 13th affirmation filed in the Family Court action prior to the proceedings being transferred to the High Court. However, W’s 13th affirmation seemed to have been made in support of the Injunction Application and the Discovery Application[38]. There was no indication as to whether she was seeking a joinder of the Trustee for the s17 Application or the s6(1)(c) Application. In fact, it was only in W’s 4th affirmation filed on 3 September 2019, ie 3 weeks prior to the present hearing and 10 months after the Summons, that she set out clearly her evidence and reasons in relation to the Joinder Application. 116.Further, it was only in W’s 4th affirmation that she made clear that the primary relief sought in the Notice by her is the s17 Application and that if such an order is granted, she does not intend to seek substantive reliefs for the s6(1)(c) Application[39]. Thus, it would seem that the joinder of the Trustee was being sought by W in respect of the s 17 Application. 117.It was however not made clear from W’s 4th affirmation whether she was proposing that the Trustee be joined under rule 6(2)(b)(i) or (ii) of Order 15. She had said that in the event of the disposition of Intero and Bremen being set aside, the companies would need to be returned to H for the parties to share and that it was necessary for her to join the two trusts as the recipients, so that they would be bound by the outcome of her s17 Application[40]. 118.During the hearing, Mr Todd further submitted that once the Trustee is joined then he can elect how he is going to deal with the matter and/or whether to participate, and that W hopes that the Trustee will take the sensible view which is he will accept the order made by this court eventually but if not, then W will have to proceed in Nevada by way of a common law action. Mr Todd has further referred to Order 15 rule 6(2)(b)(ii) and submitted that the Trustee has been involved in a transaction which is going to be subject to this Court’s investigation and that it is just and convenient to have the Trustee joined to deal with that particular issue. The issue between W and the Trustee is whether the assets of the US Trusts are subject to the discretionary disposition of the Trustee. 119.To summarise, the issue is whether it is necessary, or just and convenient to join the Trustee, to allow the Trustee an opportunity to participate in the Court’s investigation of the transactions, to assist the Court’s investigation into the issue whether the assets of the US Trusts remain family assets and/or H’s assets available for W to share and to assist in carrying out any order/s this Court may make in recovering those assets transferred to the US Trusts. Thus, it is also to facilitate her enforcement of any orders made by this Court. 120.As seen from the parties’ Form Es, the assets transferred to the US Trusts formed a substantial part of the H’s assets or the family assets. 121.As mentioned earlier and as seen in the respective “Summary” of the US Trusts prepared by W[41], the primary asset of the Family Trust is now the Promissory Note and the primary asset of the Education Trust is now the shareholding in Bremen. The underlying assets of Bremen are 3 pieces of land in USVI and the shareholding of Intero, which holds various investments and accounts, including, amongst other things, H’s investments in the holding/related companies of the investment management company for which he works as a “Partner”, a Standard Chartered Private Bank account and a Deutsche Bank portfolio account. 122.If the s17 Application were allowed, consequential orders may include an order that the Trustee to effect the transfer of the shares in Intero and Bremen back to H, and joining the Trustee will allow this Court to make an order directly against the Trustee. It may be possible for W to rely on Order 45 rule 8 of RHC if the Trustee fails to comply with such an order, to seek an order that the signing of the necessary documents to effect the transfer by some other person appointed by the Court. Whether such an order will be recognised will in fact depend on the BVI law as Bremen and Intero are BVI companies. 123.The consequential orders may also include a declaration that the transfers of the shareholding of Intero and Bremen to the Trustee were invalid and of no effect and H to remain the sole shareholder of Intero and of Bremen. Again whether such a declaration will be recognised will depend on the BVI law. Further as part of the W’s claim for ancillary relief, there may be a “money judgment” made against H out of the trust assets and a “money judgment”, according to Mr Rushforth, may be recognised by the Nevada Court[42]. It seems that it may also be enforceable under common law[43]. 124.Notwithstanding Mostyn J’s views on what Wilson J had held in T v T, as pointed out by Wilson J, Order 15 rule 6(2)(b)(ii) is less stringent than Order 15 rule 6(2)(b)(i). I share the views of Wilson J that enforcement of any orders that this Court may make is likely to be facilitated by the Trustee being joined as a party to the proceedings, and that the Trustee having been made a party would be likely to assist W in, if not direct enforcement, the obtaining of an analogous or supplementary judgment in either BVI or Nevada and may assist her in putting before those courts as facts which have been found by this Court at the ancillary relief trial in which the Trustee is a party, whether the Trustee will actively participate or not[44]. I am also of the view that there exists between the Trustee and W an issue as to whether the assets of the US Trusts are subject to the discretionary disposition of the Trustee or family assets or assets in reality owned by H, which issue is connected with W’s claim for ancillary relief. 125.Having considered the above, I am satisfied that W has brought herself within both limbs of Order 15 rule 6(2)(b) and that it would be necessary and also just and convenient for PBB to be joined both in his capacity as Trustee of the Family Trust and also as Trustee of the Education Trust. 126.The effect of an order setting aside the transfers of the shares via Intero and Bremen to the US Trusts may mean that the assets of the US Trusts may be diminished or distinguished. Without the primary assets, this means that the US Trusts may have to be dissolved. The Children are “Beneficiaries” of the Family Trust and of the Education Trust. As mentioned earlier, directions should have been sought as to whether the Children ought to be separately represented in the s17 Application and/or the s6(1)(c) Application and whether they ought to be served with the Notice and be separately represented. Further, there is also the question of whether Intero or Bremen should be served with the Notice notwithstanding W has issued a “Stop Notice” in respect of the shares of Intero and/or Bremen in the Eastern Caribbean Supreme Court in BVI (“BVI Proceedings”). 127.I am of the view that W should seek directions on the above as soon as practicable. Whether K should be joined 128.What was submitted in Mr Todd’s Skeleton Arguments for reasons for joinder were the same for the Trustee and H’s father K. 129.Mr Egerton’s “Note” and “Supplemental Note” stated that they were lodged on behalf of H only, although this Court was informed at the commencement of the hearing that Mr Egerton in fact appeared for both H and his father K. 130.Anyway, Mr Egerton had referred to K’s position as set out in K’s affidavit, namely K opposed being joined as a party and that the trustee of the Indian Trust (“Indian Trustee”) had made an application to the Indian Court for a declaratory order in respect of the jurisdiction. Mr Egerton had also submitted there was no basis for joining of K, who was not the trustee of the Indian Trust[45] and that the appropriate person to be joined should be the Indian Trustee, as pointed out in a letter dated 30 November 2018 from H’s solicitors to W’s solicitors[46]. 131.However, the disponee of the s17 Application relating to the Indian Property was K, and not the Indian Trustee, since it was K to whom H transferred or caused to be transferred the Indian Apartment. 132.W’s allegation was that H was the one who had paid for the purchase of the Indian Apartment out of family funds and that H had been paying the mortgage of the Indian Apartment. The justification given by H for such payments is that he has a liability to maintain his parents under the Indian Maintenance and Welfare of Parents and Senior Citizens Act. 133.It is also H’s and K’s case that the Indian Apartment was a co-investment by H and K, and that it is K’s case that he has contributed something in the order of HK$880,000 towards the finishing of the interiors of the Indian Apartment. 134.There is clearly a matter of dispute as to whether H was in fact the sole beneficial owner of the Indian Apartment or it was a co-investment between H and K and that K also had beneficial interest therein before the transfer to the Indian Trustee, and in my view K’s presence before the Court is necessary to ensure that all matters in dispute in relation to whether K had any beneficial interest in the Indian Apartment may be effectually and completely determined and adjudicated upon. There is clearly also a question or issue arising out of W’s claims which in my view it would be just and convenient to determine as between W and K as to whether the entirety of the Indian Apartment would be available for sharing by W in her application for ancillary relief against H. Even though K is now about 86 years old, he is able to make an affirmation in these proceedings which indicates he is capable of understanding what the allegations are against him. 135.Having considered the above, I am of the view under both limbs of Order 15 rule 6(2)(b), H’s father K should be joined. Conclusion 136.In light of above, I order that the following persons be joined in these proceedings for the purpose of W’s Notice, with H re-named as 1st Respondent:
137.Paragraph 6 of the Order of 24 September 2019 shall be varied. The parties are to fix a directions hearing before this court on the first available date (estimated length of hearing: 60 minutes) for directions as to the filing of evidence by the 2nd to 4th Respondents in response to the Notice and directions as to whether there should be service of the Notice on the Children and/or whether the Children should be separately represented), and also whether there should be service of the Notice on the two BVI companies. There is a 2nd notice of application issued by W on 22 February 2019 under s17 of MPPO and directions for service on non-parties of this 2nd notice should be sought at the directions hearing. 138.As for costs of the Joinder Application, this should be costs in the cause of the respective s17 Application against each of the new respondents. 139.I will hand down my decision on the Injunction Application and the Discovery Application separately.
Mr Richard Todd, instructed by Stevenson Wong & Co, for the petitioner Mr Robin Egerton, instructed by Oldham Li & Nie, for the respondent and intended 4th respondent Mr Leon Ho instructed by Robertsons for the intended 2nd respondent The intended 3rd respondent, absent [1] S1:169 (Intero) and S1:208 (Bremen) [2] S2:345 [3] See W’s Chronology at S4:1020 [4] See para 12, S1:59 [5] S4:1020 [6] S1:211 [7] S1:212-213 [8] S4:1022 [9] S2:394-471, S2 [10] S4:1022 [11] S1:7.1-7.6 [12] S2:485 [13] S1:76 [14] See paras 8-9, S1:66 [15] S1:7.8 [16] S2:335-343 [17] S1:8-10 [18] S1:7.1-7.8 [19] At pg 278 [20] At para 22 [21] Para 15/6/1, pg 364 [22] Para 15/6/1, pg 365 [23] Para 15/6/1, pg 365 [24] Para 15/6/6, pg 369 [25] At pg 279 [26] At E, pg 365 [27] At H, pg 365 [28] At B-D, pg 366 [29] At para 11 [30] At para 10 [31] At paragraph 30(a) [32] See paragraphs 69 and 70 [33] S2:533, at para 33 [34] S3:534-784 [35] S3: 541-543 [36] Para 27, S2:482 [37] S2:530-533 [38] See para 2, S1: 15, and para 32, S1:24 [39] See para 19, S1:78 [40] See para 22, S1:79 [41] S4:1021-1022 [42] At para 10 S3:540 [43] There have in fact also been developments as to whether enforcement under common law in a foreign jurisdiction is confined to a “money judgment”. See the Canadian Supreme Court decision in Pro Swing Inc v Elta Golf Inc [2006] 2 SCR 612, [2007] 3 LRC 338 [44] A-C, at pg 366 [45] See para 25, pg 6 of the “Note” [46] S2:332-334 |
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