Cly Formerly Known As Chy v. Cfm and Others
Read the full judgment text of FCMC 2797/2017 on BabelCite. This Family Court judgment was delivered on 26 June 2020 before Deputy District Judge Thelma KWAN.
Matrimonial proceedings – Ancillary relief – Joinder of third parties – Order 15 rule 6(2)(b) RHC – Beneficial ownership of matrimonial home and Lot 8XX – Whether joinder necessary to determine assets pool – Wife satisfied test – Joinder granted – Costs order nisi – Preliminary issue hearing fixed
Legal issues: Joinder of third parties under Order 15 rule 6(2)(b) RHC
Outcome: Application for joinder granted; 5th and 6th Respondents joined as parties.
Cites 8 cases
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FCMC 2797/2017 [2020] HKFC 129 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 2797 OF 2017 ----------------------------
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------------------------------------------------------------ J U D G M E N T ------------------------------------------------------------ 1.By a Summons dated 2 August 2019, the Petitioner wife (“wife”) asked for two more matters to be determined by preliminary issues hearing, namely:
2.To that end, wife therefore asked that GPIL and USDL be added as the 5th and 6th Respondent respectively, for the determination of the above preliminary issues. 3.This matter was set down for hearing on 6 February 2020, but subsequently by an Order of Court made on 9 April 2020, the application for the joinder were directed to be dealt with by way of paper disposal. Background 4.The parties were married on 1 February 1996, the wife is age 51, she is now unemployed. The 1st Respondent husband (“husband”) works in the family business together with his two brothers, and runs a real estate and land development company called LFEA. The wife had also worked at LFEA until September 2016. There is one child of the family, who is now 22 years of age. 5.The wife petitioned for divorce on 8 March 2017, Decree Nisi was granted on 15 March 2018. 6.The husband has not turned up for any court hearing to-date, there had been history of substituted services on the husband; and it was only on 21 November 2019 when the husband filed a Form A with the court, he appeared to be acting in person. However, the wife has since discovered that husband has lodged the Form A on two properties owned by her with the land registry, which was done by the lawyers representing the intended 5th Respondent. It is the wife’s case that the husband has all along been aware of the proceedings but chose not to appear. Previous preliminary issues and joinder applications 7.The wife had previously initiated proceedings regarding another set of preliminary issues on 2 October 2018. This involved the 2nd Respondent, LCEL. It was her contention that following an argument with the husband in round January 2017 (after which the husband left the former matrimonial home), the husband had diluted the shareholdings in LCEL and transferred 99% of it to his brother CFC, the 3rd Respondent, on 23 January 2017. Sometime between 23 January 2017 and 6 October 2017, the husband transferred his remaining 1% in LCEL to CFC, who then in November 2017, transferred all his shares in LCEL to CHS, the 4th Respondent. The 4th Respondent resides in China and has, to date, not appeared at any court hearing either. 8.By an Order dated 14 November 2018 from HHJ CK Chan, the 2nd and 3rd Respondents were joined in these proceedings to determine by way of preliminary issues, and inter alia, whether the shares in LCEL and the assets therein are the husband’s financial resources, and whether those shares and assets are matrimonial properties. The 4th Respondent was likewise joined by an Order dated 3 April 2019. Directions for the preliminary issues hearing were made on 12 April 2019. The present preliminary issues and joinder application About the former matrimonial home 9.In her various affirmations relating to this application, the wife’s stated the following series of events:
About Lot 879 DD100 10.In the Points of Defence of the 3rd Respondent, it turned out that LCEL had sold Lot 8XX DD 100 (“Lot 8XX”) to USDL in June 2017, at $700,000. 11.The wife therefore took out the present Summons for determination of the abovementioned additional preliminary issues, and to join the intended 5th and 6th Respondent. 12.By their affirmations on 16 October 2019, the intended 5th and 6th Respondent disputed the wife’s joinder application. The wife’s case 13.The wife had produced a company search which showed the husband to be one of the shareholders of GPIL in 2006 together with his two brothers CFW (shareholder of GPIL) and CFC (3rd Respondent, and shareholder of LCEL, the 2nd Respondent). 14.The wife contends that the husband’s family business deals in land development and real estate in the area, and he operated this business with his two brothers. They held and invested in properties through corporate vehicles, and subsequently segregated shareholdings in the companies to diversify risks. 15.It is her case that she, together with husband, has negotiated the purchase of the Original Lot and a wooden structure thereon; and thereafter applied for permit to renovate the wooden structure to become their former matrimonial home. She claimed that they have paid for the renovation and all expenses relating to the property. 16.It is therefore her case that GPIL was holding the former matrimonial home on behalf of the husband and herself. 17.She challenged the authenticity of the rental agreement on many fronts, inter alia, why was this tenancy, purportedly commencing in January 2017, created over a piece of land which only came into existence after the subdivision in June 2017; and why would the husband enter into a rental agreement with GPIL in September 2017 when he had already left the matrimonial home in February 2017. 18.She challenged that the sole shareholder of USDL, CCK is known to the husband and his brothers, as he had dealt with LFEA for a long time; that as an experienced land and property investor he could not have purchased the land subject to the tenancy without making enquiries on the property on the land; that the price of HK$1,000,000 was undervalue; that the whole transaction between GPIL and USDL was contrived, and CCK could not be a “bona fide purchase for value without notice”. 19.Wife was surprised when she found out, only from the Statement of Defence of the 3rd Respondent, that LCED has disposed of its underlying asset Lot 8XX to USDL; and she claimed that this sale was undervalued. 20.The wife contends that the subdivision of the Original Lot, the subsequent rental agreement, and the sale of Lot 3XX I and Lot 8XX to USDL, driving herself and their son out of the former matrimonial home, were all actions taken by the husband to avoid her claim in this ancillary relief proceedings. The Intended 5th Respondent’s case 21.The 5th Respondent USDL is represented by its sole shareholder and director CFW, who is one of the brothers of the husband. According to his affirmation, from the time of the incorporation of GPIL to January 2006, the 3 brothers, namely the husband, the 3rd Respondent and himself were the shareholders of the company. Then in January 2006 the brothers decided to go separate ways, and the husband and 3rd Respondent transferred out their shares at a nominal value, leaving CFW to be the sole shareholder and director of the company. However, it was not until 2008 that the change of shareholding was reflected in the company registry. It is his case that the husband had not been involved with GPIL since the share transfer. 22.CFW claimed to have negotiated the purchase of the Original Lot himself, and GPIL paid for the land and the wooden structure thereon for a total of $180,000 in around May 2008. 23.He then claimed that the husband approached him to rent the wooden structure for storage, but later decided to convert the wooden structure to a squatter house and asked to rent it at a low price. CFW claimed to have paid the husband $200,000 for renovating the wooden structure and then signed a tenancy agreement with him for a term of 8 years, which commenced from 1 January 2009, and received from the husband $192,000 being $2,000 monthly rental for 8 years. 24.He clearly disputed the wife’s allegations that the husband had paid for the renovation and other expenses relating to the property. 25.In or around end 2016, he claimed to have the intention to sell the whole of the Original Lot and have offered the husband to buy the land upon which the former matrimonial home stands, which was refused. He then with a view to selling the land subject to the tenancy, revised the rental to market level at $14,000 with the husband’s consent; and thereafter proceeded to engage a surveyor to subdivide the Original Lot. 26.CFW claimed to have received a deposit and monthly rental payment from the husband from January 2017 up to October 2017, this arrangement was subsequently captured in the September 2017 rental agreement after the subdivision. 27.CFW sold the Lot 3XX I subject to the tenancy to USDL in September 2017 at $1,000,000, he said that USDL was introduced to him by the 3rd Respondent. 28.Counsel for GPIL quoted cases which focused on supporting the need for “arguable” bona fide claims, that there need to be triable issues, and that allegations must be credible and believable. Counsel had also gone extensively into various matters which were raised in disputes between the parties to attack the merits of the wife’s case, and to say that she does not have a bona fide arguable case against GPIL. The Intended 6th Respondent’s case 29.USDL is represented by its sole shareholder and director Chum. 30.It purchased Lot No. 8XX DD 100 from LCED in July 2017 and Lot No.3XX I DD 94 from GPIL in October 2017. 31.CCK stated that he commenced investing in land redevelopment and real properties since 1997; used to engage, inter alia, LFEA to source land and properties for him, and claimed to have more than 10 deals through them. 32.CCK claimed to be approached by LFEA to purchase Lot No. 8XX. He said he was interested in purchasing in the area which he believed would be resumed by the government and bring him profit. He bought Lot 8XX from LCED for $700,000. 33.Then two months after in September 2017, CCK claimed to be approached by LFEA again regarding Lot 3XX I, he said he was interested as it was in the same area with a potential for profit. He claimed to have inspected the land, noticed the structure thereon and was conscious that the sale was subject to a tenancy agreement of the structure. He purchased Lot 3XX I at $1,000,000 which sale was completed in October 2017. 34.CCK denied he knew the husband. 35.When no rent was paid by the husband in November 2017, WWL, the wife of CFW offered to assist CCK in recovery of rent and possession of the Lot 3XX I in the abovementioned Lands Tribunal matter. 36.Counsel for USDL argued that on the authority of Y v Y [2019] HKFC 322, which case concerned a s.17 (Matrimonial Proceedings and Property Ordinance) application, it is not necessary to join a third party unless there is a request for a particular order to be made against the third party; and where it is possible to add back the sum disposed to the matrimonial balance sheet, then there is no need to set aside the disposition which is the subject of a s.17 application. Counsel also argued that the wife’s case was tenuous, and that she has not discharged her “burden of proof regarding the joinder application”. The Law regarding Joinder 37.An application for joinder is made pursuant to Order 15 rule 6(2)(b) RHC which empowers the Court to add the following persons as a party at any stage of proceedings in any cause or matter on such terms as the Court thinks fit, namely:
38.I turn to the case of TL v. ML & Ors (Ancillary relief: claim against assets of extended family) [2006] 1 FCR 465, which discussed how disputes between a spouse and a third party as to beneficial interests of property can be adjudicated in ancillary relief proceedings. At paragraph 34 of the Judgment, Mostyn QC sitting as Deputy High Court Judge, had this to say about the task of a judge determining such a dispute and the procedure that should be followed.
39.Subsequently, in the case of Fisher Meredith v JH and PH [2012] EWHC 498 (Fam), Mostyn J quoted his own judgement in TL v ML, and further stated in paragraphs [42] and [43]:
40.This approach was endorsed and quoted in the Hong Kong cases of LWYA v. KYW & others (CACV No.151/2013) and LLP v. LWYA & others (CACV No.152/2013) which affirmed the procedures under TL v. ML; and subsequently in Leung Wing Yi Asther v. Kwok Yu Wah (2015) 18 HKCFAR 605, which case was about the lack of pleadings to identify the issues for the trial on beneficial ownership, Mr Justice Stock NPJ in the Court of Final Appeal at paragraph 29 of the Judgment, said this :-
41.Subsequently in the case of LLC v LMWA and LELP [2019] HKCA 347, the Court of Appeal quoted and acknowledged the approach in TL v ML and Leung Wing Yi Asther v Kwok Yu Wah. And at paragraph [25], stated the following, echoing Mostyn J in the case of Fisher Meredith v JH and PH:
42.In a recent decision of KCMA v ABC [2019] HKCFI 2822, Hon B Chu J summarized the application of Order 15 rule 6 as follows:
43.Armed with these legal principles, I turn to their application to this case. Discussion 44.Contrary to other civil litigation proceedings, this is a matrimonial proceeding in which the court will need to make a decision on the ancillary relief claim of the parties. In order to decide on the issues in the ancillary relief claim, the identification of marital assets of the parties is the first step, LKW v DD (2010) 13 HKCFAR 537 referred. 45.What the wife here is claiming, is that the parties have beneficial interest in the former matrimonial home which was held by a company owned by the husband’s brother. The beneficial ownership of a matrimonial home, being the centre piece of any parties’ marital asset, is clearly an important question to be dealt with in the process of identifying the assets of the parties. 46.Turning to the application of Order 15 rule 6(2)(b) for the former matrimonial home:
47.As for Lot 879, this was held by LCED previously, but was sold to USDL shortly after the husband diluted his shareholdings of LCED but while the husband was still a shareholder thereof. As the beneficial ownership of LCED is already in issue in these proceedings, and yet to be determined in the previous defined preliminary issues, it follows that the disposition of assets held by LCED to a third party must also be examined. 48.As to whether there is a “bona fide claim” and a “proper question to be tried”, I am of the view that the wife has satisfied the court with regard to the basis of her claim. In arriving at this conclusion, I have considered the context of this case, and in particular considered this question against the background of the alleged facts which gave rise to her first two joinder applications. There are clearly substantial factual disputes which could only be dealt with at a proper preliminary issue hearing. 49.I am not persuaded by the 5th Respondent counsel’s submission that the wife’s case is without merits, I am of the view that the full assessment of her and the Respondents’ case can only be determined through a proper hearing, and not a paper examination of the available evidence to date. 50.Counsel for the 6th Respondent sought to rely on the case of Y v Y, to say that the joinder is not necessary as there is no request for an order to be made. Y v Y involved a s.17 application, and HHJ Melloy in that case ruled against the joinder on other basis, that is, she felt the joinder application was made because of the applicant’s concerns pertaining to discovery, and she concluded that this was not the right basis for granting a joinder application; and that the party sought to be joined will be a witness of fact in the s.17 application in any event. Y v Y was also distinguishable from the present case in which the former sought to set aside alleged dispositions, but this present summons concerns determination of beneficial ownership of assets key to defining the extent of the matrimonial pot. 51.The 5th and 6th Respondents have argued that the wife’s case lacks merit, and is “tenuous”. On the issue of merits, I would like to quote Deputy High Court Judge Kent Yee in the case of Wong Shan Shan and Ng Juen Leung v The Incorporated Owners of Yue Wah Mansion and Urban Renewal Authority HCA 1086/2013 [2015] HKEC 156, where it was held by him that there is no requirement for an applicant to show merit of his case under this rule; at paragraph [31] and [32]:
52.I note here that none of the parties’ submissions dealt with analysis and application of the two limbs under Order 15 rule 6(2)(b), nor quoted authorities relating to disputes of beneficial ownership of assets between a spouse and third party in a matrimonial proceeding, save for the case of the above mentioned Y v Y. 53.The purpose of a joinder is to bring all parties to a dispute relating to common subject matter before the court to avoid multiplicity of proceedings, delay and inconvenience, and waste of expenses and time; so that relevant issues can be heard and dealt with effectively and expeditiously. The issue to be considered is whether it is “necessary” or “just and convenient” for the intended party to be joined, the court’s power in this respect is wide. When the relevant issues are defined by proper pleadings, evidence need to be heard in court, tested and challenged, and the court must also have the chance to assess the credibility of the witnesses. 54.Having considered the above, I am satisfied that the wife 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 the intended 5th and 6th Respondent to be joined to these proceedings. In the circumstances, I grant the wife’s application for Joinder. Costs 55.Consequently, there shall be an order nisi to be made absolute in 14 days’ time, that the 5th and 6th intended respondents shall pay the Petitioner the costs of and arising out of her summons on a party to party basis, to be taxed if not agreed. The Order and further Directions 56.I therefore make the following Orders and Directions:
Jerome Liu Cheong Wang instructed by Chow & Ho for the Petitioner Kwok Sin instructed by Wong & Co for the Intended 5th Respondent Lisa Remedios instructed by Ko & Chow for the Intended 6th Respondent |
Cases cited in this judgment
Further hearings and rulings under FCMC 2797/2017