Tyt v. Tlh

Read the full judgment text of FCJA 3690/2017 on BabelCite. This FCJA judgment was delivered on 28 July 2020 before Deputy District Judge Doris To.

Matrimonial Proceedings and Property Ordinance – Section 17 – Avoidance of Dispositions – Intention to defeat financial provision – Payor/Payee Issue – Injunction – Chabra Jurisdiction – Post-hearing Evidence – Ladd v Marshall conditions – Divorce agreement, transfer of assets to daughter – Whether presumption of intention to defeat rebutted, whether financial provision would be granted to husband, jurisdiction for injunction, leave for evidence – Presumption rebutted, husband ultimate payor, injunction dismissed, leave granted – Section 17 Summons dismissed, Joinder Summons dismissed, Injunction Summons dismissed, Post-hearing Evidence Summons granted, costs orders made

Legal issues: Intention Issue · Payor/Payee Issue · Injunction Jurisdiction · Post-hearing Evidence

Outcome: Section 17 Summons dismissed; Joinder Summons dismissed; Injunction Summons dismissed; Post-hearing Evidence Summons granted.

Cited by 6 cases · Cites 11 cases

Case No.FCJA 3690/2017[2020] HKFC 153[2020] HKFLR 553
Court
FCJA
Date28 Jul 2020
JudgeDeputy District Judge Doris To
Case Document
100%Judiciary

FCJA 3690 / 2017

[2020] HKFC 153

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

JOINT APPLICATION NO. 3690 OF 2017

________________________

BETWEEN

  TYT 1st Applicant
  and  
  TLH 2nd Applicant
  WT Intended Intervener

________________________

Coram: Deputy District Judge Doris To in Chambers
Date of Hearing: 5 June 2019
Date of Post-hearing Application: 4 September 2019
Date of Final Submission: 18 May 2020
Date of Judgment: 28 July 2020

________________________

J U D G M E N T
(Avoidance of Dispositions; Joinder; Injunction)

________________________

1.This is the hearing of the 1st Applicant (“Husband”)’s 3 summonses:

(i)  Summons dated 5 July 2018 for setting aside the 2nd Applicant (“Wife”)’s dispositions to the Intended Intervener, the parties’ daughter (“Daughter”) (“Section 17 Summons”);

(ii)  Summons dated 17 August 2018 for joining Daughter as the intervener in these setting aside proceedings (“Joinder Summons”); and

(iii)  Summons dated 21 August 2018 restraining Daughter from further dissipating Wife’s dispositions (“Injunction Summons”).

2.At the conclusion of this hearing, I dismissed the Injunction Summons with costs to Daughter. Reserved reasons for decision is now given under paragraphs 56 to 71 below. 

3.Pending determination of the Section 17 Summons and the Joinder Summons, Wife by Summons filed on 4 September 2019 sought leave to adduce further affidavit evidence in opposition to the Section 17 Summons (“Post-hearing Evidence Summons”). Husband opposed.

4.Upon filing of affidavits and submissions as directed for paper disposal of the Post-hearing Evidence Summons, I made a ruling on 6 March 2020 whereby Wife was granted leave to adduce further affidavit evidence. Reserved reasons for decision is now given under paragraphs 72 to 100 below; and costs order nisi under paragraphs 101 and 103. 

5.In light of further affidavit evidence being adduced, directions were given for parties to supplement their respective closing submissions on the Section 17 Summons/Joinder Summons. This was only completed on 18 May 2020.  

Relevant Background Facts

6.The joint application for divorce (attaching the divorce agreement dated 3 August 2017) was filed on 3 August 2017 by the parties together with the attendance of Daughter.

7.Under the said divorce agreement, Wife is entitled to (a) cash lump sum of RMB 100 million (to be paid in two tranches, RMB 40 million by 21 August 2017 and RMB 60 million by 21 December 2017); (b) keep the Belcher’s property; and (c) keep the former matrimonial home (“Divorce Agreement”).

8.The dispositions in issue concern a total amount of around HKD 93.34 million, representing exactly Wife’s receipt of payment  under the Divorce Agreement except the said second tranche of cash payment which is not yet paid to date.

9.The dispositions comprised the following:

(i)  On 16 August 2017, Wife received from Husband the first tranche cash payment of RMB 40 million and in turn transferred the same to Daughter (around HKD 48 million);

(ii)  In September 2017, Wife sold the Belcher’s property and transferred the net proceeds of around HKD 22.67 million to Daughter; and

(iii)  In December 2017, Wife sold the former matrimonial home and transferred the net proceeds of around HKD 22.67 million to Daughter.

(altogether “the Dispositions”)

The Law

10.Section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 provides that (emphasis added):

(1) Where proceedings for relief under any of the relevant provisions of this Ordinance (hereafter in this section referred to as "financial provision") are brought by a person (hereafter in this section referred to as "the applicant") against any other person (hereafter in this section referred to as "the other party"), the court may, on an application by the applicant-

(a) if it is satisfied that the other party is, with the intention of defeating the claim for financial provision, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;

(b) if it is satisfied that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property);

(c) if it is satisfied, in a case where an order under the relevant provisions of this Ordinance has been obtained by the applicant against the other party, that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies, make such an order and give such directions as are mentioned in paragraph (b);and an application for the purposes of paragraph (b) shall be made in the proceedings for the financial provision in question.

(2) Paragraphs (b) and (c) of subsection (1) apply respectively to any disposition made by the other party (whether before or after the commencement of the proceedings for financial provision), not being a disposition made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any such intention as aforesaid on the part of the other party.

(3) Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or to a disposition or other dealing with property which is about to take place and the court is satisfied-

(a) in a case falling within subsection (1)(a) or (b), that the disposition or other dealing would (apart from this section) have the consequence, or

(b) in a case falling within subsection (1)(c), that the disposition has had the consequence of defeating the applicant's claim for financial provision, it shall be presumed, unless the contrary is shown, that the other party disposed of the property with the intention aforesaid or, as the case may be, is, with that intention, about to dispose of or deal with the property.

Parties’ respective stance on the Section 17 Summons and the Ancillary Relief Proceedings

Wife’s stance

11.Wife denied the Depositions were made with the intention of defeating Husband’s claim for financial provision. She asserted that the setting aside application is wholly unnecessary and has no bearing on the ancillary relief proceedings at all, because Wife will ultimately be the payee for further financial relief beyond her entitlement under the Divorce Agreement.

12.Wife objected the Divorce Agreement being full and final. She said she was under extreme stress and confusion when being tricked and threatened to sign it.

13.By her Form A dated 12 September 2017, Wife claims ancillary relief against Husband. By a letter dated 18 December 2017 from her then solicitors, Wife also notified Husband that she no longer wished to be bound by the Divorce Agreement.

Daughter’s stance

14.Daughter asserted that Husband will definitely be the ultimate payor, and has no matrimonial claim anyway which is capable of being defeated under Section 17.

Husband’s stance

15.Despite his claim for ancillary relief against Wife by Form A dated 25 June 2018, Husband’s primary stance of the ancillary relief proceedings has never changed. All along Husband’s position is to ask the Court to uphold the terms of the Divorce Agreement as the final distribution of matrimonial assets. At this hearing, Husband through his Counsel confirmed again that this is still his primary stance.

16.On his alternative stance, Husband submitted that upon the ancillary relief trial where the nuptial agreement is only one of the many factors to be considered, Wife may end up being the payor. Therefore, the Section 17 Summons and the Injunction Summons are necessary to preserve the Dispositions for fair division since they form part of the matrimonial pot.

17.Husband’s position sounds out of tune to me. It virtually means to say, while the Court should find in favor of him and make him the payor under the Divorce Agreement, he has to safeguard his interest in case he fails, i.e. the Court makes him the payee.  While Husband asserted that Wife’s assets could be 10 times more than his, he nonetheless has agreed to pay Wife HKD 93.34 million under the Divorce Agreement and still intends to hold Wife to its terms. It is embarrassing for Husband to run this point.

Issues under the Section 17 Summons

18.There are mainly two issues in question, namely Wife’s intention of the Dispositions (“Intention Issue”); and whether financial provision or different financial provision would be granted if the Dispositions were set aside (“Payor/Payee Issue”).

19.On the Intention Issue, an intention to defeat is presumed in the present case. The Court has to determine whether the 3-year presumption of intention under Section 17(3) is rebutted. The burden to rebut is on Wife.

20.On the Payor/Payee Issue, the Court will not at this stage quantify the matrimonial pot nor determine the outcome of financial distribution which are matters for the ancillary relief trial. Therefore, this issue is confined only to whether Wife can demonstrate on balance of probabilities she would be the ultimate payee in addition to her entitlement under the Divorce Agreement. If yes, Husband is bound to fail because it is not shown financial provision would be granted to him.

Discussion

Intention Issue

21.In a nutshell, the evidence of Wife and Daughter is that the Dispositions were made as gift. Upon the transfer, Wife needed not be troubled by the administration of her finances anymore; she could entrust and count on Daughter to look after her and to pay for her expenses.

22.Husband submitted that such explanation was inherently unsustainable and failed to negate the presumption of the intention to dissipate. The following are, inter alia, comment and analysis made on the evidence of Wife and Daughter in order to discredit them:

(i)  There is no rational explanation and is absurd for Wife to transfer such an enormous sum which is the brunt of her wealth to Daughter in order that Daughter could look after her and pay for her expenses which is only around HKD 100,000 per month. There are so many ways Wife can achieve this without the need of giving almost all she has to Daughter.

(ii)  Timing is extremely sensitive. Wife sold the 2 properties (Belcher’s property and the former matrimonial home in the same area) hastily having to pay additional HKD 2.52 million being Special Stamp Duty in selling the Belcher’s property. If Wife was indeed worried about “Feng Shui”, she should have leased them out; she would not have been living at the former matrimonial home and carried out major renovation in mid-2016.

(iii)  There is no explanation why the first tranche cash payment had to be transferred to some third parties in PRC first  before sending back to Hong Kong for Daughter.

(iv)  Wife’s affidavit evidence is inconsistent with her 1st Answer filed in August 2018. In the 1st Answer, Wife said the 2 properties were sold because of poor “Feng Shui”, but this was not mentioned in her affidavit.

(v)  Receipts showed that Wife sometimes paid for her own expenses; this is inconsistent with Wife’s evidence that  Daughter would pay for her expenses.

23.I do not think Wife’s evidence would be discredited by the above challenges.

(i)  In reality, people with different financial management concepts do handle their wealth in different ways of which some may look unnecessary or irrational to others. The objective test of reasonableness is whether the behavior is so beyond logic and comprehension, inconceivable or unimaginable as considered in the factual matrix of the case. In the present case where it is a mother gifting the bulk of her wealth to her daughter whom she relied on and is attached to, I do not think the gifting is inconceivable irrational or inherently unsustainable as Husband suggested.

(ii)  Wife’s explanation of selling the 2 properties due to poor “Fung Shui” should not be read out of context. Wife was saying that she attributed the misfortune of marriage breakdown to poor “Fung Shui”; she sold them so that she could leave the area to start afresh. This explains why she did not continue to own the properties despite having expended on major renovation of the former matrimonial home in mid-2016.

(iii)  There is no evidence on why the first tranche cash payment was transferred to Daughter via PRC, but what matters is to whom the money finally goes. Husband is suspicious about this route of transfer but there is no suggestion of how this infers an intention to defeat.  

(iv)   While the content of Wife’s affidavit and her 1st Answer are not identical, they are not contradictory. The affidavit explains the purpose of the Dispositions; the 1st Answer explained why she decided to sell the 2 properties upon which the net sale proceeds would be gifted to Daughter. 

(v)  The fact that Wife at times paid for her own expenses is not anything so irrational to get surprised with.  Although Wife could count on Daughter to pay for her expenses out of the gifted money, the gifting arrangement need not be seen as creating strict contractual right and obligation between mother and daughter. 

24.After all, it is Wife’s burden to rebut the presumed intention. It is necessary she proves her genuine intention and belief at the time of the Dispositions. The following background facts are highly relevant.

(i)  The Dispositions took place between mid-August and December 2017, shortly after the joint application for divorce was filed. During such time, Wife has filed her Form A on 12 September 2017, claiming against Husband for financial provision beyond her entitlement under the Divorce Agreement; and by a letter dated 18 December 2017 from her then solicitors, Wife notified Husband that she no longer wished to be bound by the Divorce Agreement.

(ii)  Despite Wife’s clear indication aforesaid, Husband took no step to claim against Wife for financial provisions. The Dispositions completed in December 2017.

(iii)  The Dispositions were disclosed by Wife in her Form E dated 21 May 2018 on her own initiative.

(iv)  It was not until 25 June 2018 Husband filed his Form A claiming financial relief against Wife, but only as his alternative stance.

25.At the time of the Dispositions, Husband was not yet a claimant for financial provisions. Although Section 17 covers dispositions before or after the commencement of the proceedings for financial provision, the chronology of events is highly relevant in ascertaining Wife’s belief at the material time.

26.There is no suggestion and indeed nothing points to the fact that at the material time Wife knew or ought to have reasonably known that Husband would come forward as the claimant after a few months such that she would have to defeat his claim by dissipating assets. This is supported by Wife’s frank disclosure of the Dispositions in her Form E.  

27.The steps taken by Wife in the proceedings clearly show her genuine belief that she would be awarded more in addition to her entitlement under the Divorce Agreement. Hence, I accept that the Dispositions were made under her genuine belief that she was simply dealing with assets which were already hers.

28.In such circumstances, I find that the presumption of intention to dissipate is rebutted. Wife has discharged the duty of negating intention.

Payor/Payee Issue

29.This issue is extensively argued. Majority of the evidence including those adduced post-hearing are targeted at this issue.

30.In Wife’s Form E, she disclosed her assets at the sum of HKD 40.9 million. Adding up the sum of around HKD 93.34 million which she had gifted to Daughter, her total asset is HKD 134.3 million.

31.Husband complained about Wife’s material non-disclosure and that her asset was grossly undervalued. He asserted that about HKD 1,500 million worth of assets should be added to Wife’s side of the balance sheet, making a total of HKD 1,650 million.

32.The alleged undisclosed assets include:

(i)  undervaluation of HKD 9.7 million for 12 shops in Shenzhen;

(ii)  undisclosed HSBC account with a deposit of HKD 100 million from securities trading (Note: there was no such sum in the said account at the time when Husband left Wife in 2011);

(iii)  Wife’s receivables of HKD 14.5 million representing her  claims in two High Court proceedings (Note: the Judgment sums are respectively HKD 3,359,190 and HKD 5,475,757.87, making a total of 8,834,947.87); and

(iv)  Wife’s 280,000,000 shares in a Hong Kong listed company (“Shares”) which was once worth HKD 1,388.8 million based on the average price of HKD 4.96 per share in 2007. The Shares were sold in 2007 but the sale proceeds were not accounted for.

33.According to Husband’s Form E, his asset is HK$186.8 million. Husband said Wife could have assets 10 times more than his, therefore he is not necessarily the payor for ancillary relief.

34.Pausing here trying to understand Husband’s position, it is bewildering why Husband up to date still intends to hold Wife to the Divorce Agreement. Husband seeks a court order to pay Wife HKD 93.3 million who has assets in billions as he alleges, leaving himself with only HK$186.8 million. In trying to understand this against Husband’s business background, it appears to be beyond comprehension. Anyway this is a matter for the ancillary relief trial, if unfortunately parties have to fight till the bitter end.

35.It can be seen from above the biggest disputed item is the Shares. In response to Husband’s evidence on the valuation, Wife with leave of the Court has adduced post-hearing evidence to show that Husband’s calculation and valuation is indisputably wrong.

36.Wife said the listed company in about 2017 issued a Public Announcement whereby “The Board proposes to implement the Share Consolidation whereby every eight (8) issued and unissued Existing Shares of HK$0.01 each be consolidated into one (1) Consolidated Share of HK$0.08 each”. In other words, prior to 2017 the Shares were unconsolidated and had face value of HK$0.01 each; whereas after 2017 the Shares were consolidated 8:1 and have face value of HK$0.08 each.

37.Wife said since the Shares were never consolidated shares prior to 2017, even adopting Husband’s formula based on average price of shares in 2007, the Shares could only worth about HKD 173.6 million; the difference being 8 times less than Husband’s alleged figure of HKD 1,388.8 million.

38.The issue of the Shares was first brought up by Husband by sending Wife a copy of his 2nd Questionnaire in November 2018. In the Questionnaire Wife was being described as the beneficial owner of the Shares; she was asked to give an account of the acquisition of the Shares, sale and the whereabouts of sale proceeds.

39.In Husband’s 7th Affirmation dated 9 May 2019, the issue of the Shares was raised again. He only touched on the issue lightly and this time describing Wife as the registered shareholder of the Shares, as opposed to beneficial owner.

40.Shortly before this hearing, Wife filed and served on 29 May 2019 her Answer to Husband’s 2nd Questionnaire. She gave a detailed account on the acquisition of the Shares. Wife said the Shares under her name were acquired by Husband using family funds. The Shares were controlled by Husband and operated by a company staff under Husband’s instructions. In 2007, the Shares were all sold to fund the properties development under the family company. The sale proceeds were transferred to Husband’s designated persons.

41.On 31 May 2019, Daughter filed and served her 3rd Affirmation providing in paragraphs 9 to 14 therein a very detailed account on the Shares. They covered detail background on how Wife held the Shares as nominee for Husband, how the Shares were managed by Husband, and how the sale proceeds were transferred to his designated recipients and ultimately returned to Husband.

42.It is noteworthy Husband abandoned his right to reply to Daughter’s 3rd Affirmation. Not only that, Husband’s beneficial ownership of the Shares can hardly be argued to the contrary.

43.Among the post-hearing evidence, there are two disclosures of interests made by Husband to Hong Kong Exchange and Clearing Limited (“HKEX”) respectively on 10 May 2004 and 30 December 2004 as shareholders of the Shares under Wife’s name. Before this evidence is revealed and exposed, Husband is silent on the said disclosure of interests to HKEX and his ownership of the Shares.

44.In support of the setting aside, Husband submitted that there is a real uncertainty at this stage of the proceedings on who will be the payor or payee; so the Court does not have to come to any concluded view on this issue; it suffices as long as Wife is “not necessarily” the payee. I disagree.

45.The so-called uncertainty includes:

(i)  the disparity of the valuation of the Shares calls for clarification;

(ii)  Husband did not claim his calculation as final, and that actual value and sale proceeds of the Shares are subject to assessment; and

(iii)  Wife’s assets and the size of the matrimonial pot will unfold upon further issue-specific discovery.

46.Regarding item (i) under paragraph 45 above, by the Wife’s 9th Affirmation filed and served on 27 November 2019 in support of the Post-hearing Evidence Summons, the disparity of the valuation of the Shares is clearly explained. The closing price of the Shares on 31 December 2003 was 0.73 (as opposed to Husband’s figure of 5.84 which is exactly 8 times more); the closing price of the Shares on 31 December 2006 was 0.51 (as opposed to Husband’s figure of 4.08 which is exactly 8 times more). Indisputably, Husband has wrongly applied the value of new consolidated shares (consolidated 8 into 1) in calculating the value of old unconsolidated shares. (It is once suggested that expert evidence is required to explain such disparity, sensibly no application is taken out.)

47.Regarding item (ii) under paragraph 45 above, since Wife merely held the Shares on behalf of Husband and the sale proceeds were fully accounted for, no matter how much the actual value and sale proceeds were, the amount the Shares worth of should be added to Husband’s side of the balance sheet instead of Wife’s.

48.On Husband’s valuation, the Shares are worth of HKD 1,388.8 million; adding it to Husband’s side of the balance sheet,

(i)  Husband’s assets would be HKD 1,575.6 million (HKD 186.8 million + HKD 1,388.8 million);

(ii)  Taking Husband’s case to its highest as set out in paragraph 32 above, Wife’s assets would be HKD 252.8 million (HKD 134.3 million + HKD 9.7 million + HKD 100 million + HKD 8.83 million).

49.It is obvious that Wife would get significantly more than HKD 93.34 million; Husband would be the ultimate payor.

50.There is Wife’s evidence to correct the valuation of the Shares to HKD 173.6 million; adding it to Husband’s side of the balance sheet,

(i)  Husband’s assets would be HKD 360.4 million (HKD 186.8 million + HKD 173.6 million);

(ii)  As set out in paragraph 48 (ii) above, Wife’s assets would be HKD 252.8 million.

51.On the equal sharing principle, Wife is entitled to have HKD 306.6 representing half share of the HKD 613.2 million in total (HKD 360.4 million + HKD 252.8 million). Hence, Wife would be paid the difference of HKD 53.8 million; Husband would still be the ultimate payor.

52.Regarding item (iii) under paragraph 45 above, there may well be further discovery for the purpose of the ancillary relief trial, but all parties are content to have the Court determine the 3 summonses by affidavit evidence. The Court is capable of making provisional finding of facts on affidavit evidence in interlocutory proceedings by testing a party’s case against documentary evidence incontrovertible evidence, or evidence which is not in dispute. There is no prejudice.

See: Melvin Waxman v Li Fei Yu & Ors, unreported, HCA1973/2012 (23 August 2013)

53.As discussed above, Wife succeeded on the Intention Issue by rebuttal; Husband failed on the Payor/Payee Issue to show that financial provision would be granted to him. The Section 17 Summons is dismissed.

54.The 3 summonses could have been avoided had Husband sensibly accepted Wife’s undertakings.

(i)  As early as on 20 June 2018 (well before Husband’s Form A and the Section 17 Summons), Wife has already agreed to add back the full sum of HKD 93.34 million to her side of the balance sheet, subject to deduction of living expenses.

(ii)  In Wife’s 2nd Affirmation dated 8 Jan 2019, she again provided an undertaking of adding back the full sum on her side of the balance sheet, subject to deduction of HKD 1.7 million legal costs already incurred and future living expenses capped at HKD 100,000 per month. 

The Joinder Summons

55.The Joinder Summons aims to join Daughter in order to give effect to the order of setting aside. Upon dismissal of the Section 17 Summons, the Joinder Summons must fail.

Reasons for Decision (Injunction Summons)

56.The application is of interim nature pending determination of the Section 17 Summons, in order to preserve assets giving effect to  an order of setting aside.

57.Having dismissed the Injunction Summons on 5 June 2019, I now give the reasons for decision. At the time when the decision was made, there was no post-hearing evidence on the value of the Shares.   

Jurisdiction

58.Both Wife and Daughter disputed jurisdiction because the injunctive power under Section 17(1)(a) is restricted to the parties to the marriage and not third parties. Hence, an injunction cannot be granted against the Daughter who is a non-party.

59.Husband emphasized that he is invoking the inherent jurisdiction of the court. Wife argued that the Family Court’s jurisdiction is not ‘inherent’ per se, but limited by Section 52B of the District Court Ordinance, Cap 336.

60.Husband therefore referred to CYYC v TVKT, unreported, FCMC 14649 of 2014 (21 December 2015) where it is discussed that the procedure or the test applicable under the statutory mechanism (i.e. Section 17 of the Matrimonial Proceedings and Property Ordinance (Cap 192) does not differ from that under the inherent jurisdiction. However, this does not assist Husband on jurisdictional point because the injunctive power under Section 17(1)(a) does not extend to third parties.

61.Husband once boldly suggested that Daughter has become a party by notice of the Section 17 application given on 5 July 2018. This must be wrong. If there is any force in this suggestion, there is no need for Husband to take out the Joinder Summons.

62.Husband further seeks to rely on the “Chabra jurisdiction” i.e. the Court’s jurisdiction to extend the ambit of a Mareva injunction to a non-party.

63.In China Baolo Technologies Holdings Ltd v Orient Equal International Group Ltd, unreported, HCA 1399 of 2016 (12 June 2017), the principles of the Chabra jurisdiction are usefully summarized :

70…. The relevant principles derived from the various authorities cited may be summarized as follows:

(i) The Mareva injunction can be exercised against non-parties : Hui Chi Ming v Kong Wing Yee (unreported, HCA 1479 of 2009 on 1 April 2010)

(ii) Where the court is invited to include the scope of the Mareva injunction assets which appear on their face to belong to a third party, the applicable principles are those enunciated by Lloyd LJ in Masri [1985] 1 WLR 876;

(iii) For the Masri principles to apply, the court must be satisfied that there is “good reason to suppose” (to be equated with a good arguable case: XY, LLC v Jesse Zhu CACV 11/2016 on 5 December 2016 at §24(2)) that the assets are in truth: (a) assets belonging to the defendant; or (b) assets of which the defendant has control, or a right of access or some other right where the Mareva injunction is sought to restrain the disposal/removal of assets held by third parties: Hui Chi Ming at §§27-30.

(iv) It is not necessary for the applicant to demonstrate, at the injunction state, that the assets sought to be frozen belong to the defendant: what has to be shown is good reason to suppose as against a non-party that the assets held by the non-party would be susceptible to a procedure which would lead to satisfaction of a judgment in the defendant’s favour: Dadourian Group International Inc v Azuri Limited [2006] WTLR 239 at §26;

(v) It is unnecessary for the plaintiff to have a cause of action against the third party:see TSB Private Bank International SA v Chabra [1992] 1 WLR 231 at 237B-D.”

64.In light of the above legal principles and authorities, the Court has  jurisdiction to grant injunction against Daughter as a non-party.

Merits

65.Husband said the risk of further dissipation by Daughter is real and imminent. He relied on the following evidence to show the likelihood of the movement or dissipation of assets.

(i)  Daughter acquired a flat in Argyle Street at the consideration of HKD 38,393,000 in October 2017; and

(ii)  Daughter obtained a loan from Bank of China in February 2019, showing that she is in need of money.

66.Husband also submitted that since Wife’s assets are illiquid and there is a likelihood of Wife being the payor, there is good reason to suppose as against Daughter that the assets of or held by her would be susceptible to a procedure which would lead to satisfaction of a judgment in his favour.

67.It is insufficient to show the likelihood of the movement or dissipation of assets, it has to be shown that they are done with the intention of defeating Husband’s claim. Whether Wife has the intention to defeat (if yes, such intention would be imputed on Daughter as Husband suggested) is a crucial factor to be considered whether to grant the injunction sought.

68.As discussed in paragraphs 24-28 above, I accept that the Dispositions were made under Wife’s genuine belief that she was simply dealing with assets which were already hers with no intention to defeat.

69.Further, since Husband has no reply to Daughter’s 3rd Affirmation deposing that he was the beneficial owner of the Shares and sale proceed were fully accounted for, he would be the ultimate payor as discussed in paragraphs 48 & 49 above. Therefore, it is not shown the sum sought to be injuncted is one over which Husband could have a claim.

70.By reason of the aforesaid, there is no good ground to suppose as against Daughter that the assets of or held by her would be susceptible to a procedure which would lead to satisfaction of a judgment in his favour.

71.Hence I have dismissed the Injunction Summons with costs to Daughter.

Reasons for Decision (Post-hearing Evidence Summons)

72.The post-hearing evidence concerns mainly Wife’s valuation of the Shares. Having granted Wife leave on 6 March 2020 to adduce further affidavit evidence, I now give the reasons for decision.

73.At the hearing, evidence on the value of the Shares was adduced by Husband only. He relied on information from Yahoo Finance website. Based on the average price of HKD 4.96 per share in 2007, Husband said the Shares were worth HKD 1,388.8 million when they were sold in 2007.

74.This was an important plank of Husband’s case. Husband was saying that Wife may well be the payor because the matrimonial  pot had more than HK$1,388.8 million back in 2007 which has since disappeared.

75.3 months post-hearing, Wife seeks leave to adduce evidence to show that Husband’s valuation is indisputably wrong. She relied on the publicly available information of HKEX. In about 2017, the listed company issued a Public Announcement whereby “The Board proposes to implement the Share Consolidation whereby every eight (8) issued and unissued Existing Shares of HK$0.01 each be consolidated into one (1) Consolidated Share of HK$0.08 each”. In other words, prior to 2017, shares were unconsolidated and had face value of HK$0.01 each; whereas after 2017 shares were consolidated 8:1 and have face value of HK$0.08 each.

76.Wife said Husband has wrongly applied the value of new consolidated shares (consolidated 8 into 1) in calculating the value of old unconsolidated shares. Since the Shares were never consolidated share prior to 2017, even adopting Husband’s formula, they only worth about HK$173.6 million, the difference being 8 times less than Husband’s figure of HK$1,388.8 million.

77.Wife explained the disparity of the valuation of the Shares and sought leave to adduce further affidavit evidence. She said it is wholly wrong to ask the Court to proceed to determine the Section 17 Summons on the basis that the Shares were worth HK$1,388.8 million back in 2007 when it is indisputably inaccurate.

Legal Principles

78.In Keen Lloyd Energy Limited v Bank of China (Hong Kong) Limited, unreported, HCA 1299/2004 & HCA 1092/2006 (4 January 2008), Poon J (as he then was) referred to 2 different approaches to adducing evidence after hearing but before judgment.

79.One approach is on the English decision in Secretary of State for Trade and Industry v Pauling [2005] 2 PCLC 667. The English Court of Appeal said that the principle applicable to an application to admit fresh evidence after hearing but before judgment is no more instructive than would be applied by the Court of Appeal on appeal from a judge i.e. the Ladd v Marshall conditions apply.

80.The 3 conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 at 1491 (Denning LJ) are that :

(i)  the evidence could not have been obtained with reasonable diligence for use at the trial;

(ii)  the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(iii)  the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.

81.The other approach is to apply the test of whether or not the interests of justice are better served by allowing or rejecting the application.

82.The Court in Keen Lloyd Energy Limited did not have to come to any definite view as to which approach was correct, since both parties agreed that the main consideration was whether the new evidence was relevant to the application and whether it would have an impact on the outcome of the application in that case.

83.In Balram Chainrai v Kushnir Family (Holdings) Limited & Ors [2018] HKCFI 17, unreported, HCA 1462/2014 (4 January 2018), Lisa Wong J held that viewing from the perspective of exercising the Court’s discretion and balancing the competing interests of the parties and the Court, the Ladd v Marshall questions would always be relevant.

84.Lisa Wong J also agreed with the approach of applying Ladd v Marshall with flexibility as held by Deputy High Court Judge Carlson in Mak Kit Ching Kitty and Fu Mee Yuk Shirley, administratrices of the estate of Fu Kwok Kai, Daniel (deceased) v Tsang Yiu Wing, unreported, HCPI 811/1999 (18 October 2006) that the plaintiff needed to show “exceptional circumstances” to justify the calling of additional evidence at such a late stage.

85.In Galsworthy Ltd v Liu Por (appointed to represent the estate of Liu Cheng Chan, deceased) & Ors [2019] HKCFI 2397 (unreported, HCA 560/2017, 30 Sep 2019), Marlene Ng J held that the different approaches are similar in that the Court should consider admitting evidence that were material and/or directly relevant by examining the cogency/relevance of the new evidence, and whether it would have an impact on the outcome, the public interest to do justice by deciding the rights of the parties, and the underlying objectives in Order 1A of the RHC.

86.On the above authorities and principles, I accept that in exercising the discretion of whether leave should be granted, the following are relevant factors to be taken into account and balanced against each other.

(i)  the 3 Ladd v Marshall conditions are relevant considerations;

(ii)  materiality, cogency and relevance of the new evidence as well its impact on the outcome;

(iii)  whether there are exceptional circumstances to justify introducing new evidence at a late stage;

(iv)  underlying objectives in Order 1A including costs effectiveness, expedition as reasonably practicable, proportionality and procedural economy, fairness between parties etc; and

(v)  other relevant factors such as delay, conduct etc.

Husband’s objections

87.Husband complained that the delay is inexcusable. Husband’s calculation of the value of the Shares was disclosed to Wife as early as 16 November 2018. Despite ample opportunities, Wife did not introduce evidence of her own to refute Husband’s valuation. The first time Wife took steps to obtain evidence was 16 August 2019, more than 2 months post-hearing.

88.It is submitted that the 1st condition of Ladd v Marshall cannot be satisfied. Since the new evidence concerns historical records, they did not become available only after the hearing; with due diligence Wife should have obtained the evidence before the hearing.

89.It is also submitted that the new evidence is irrelevant. In considering the Payor/Payee Issue, it is unnecessary to consider the value of the Shares. On Husband’s case, Wife’s assets even without the Shares, have already exceeded Husband’s.

90.Husband submitted that parties’ valuations do not represent the actual value of the Shares or the actual sale proceeds received. They merely represent Wife’s possible proceeds some 13 to 17 years ago, therefore the probative value of such evidence is limited and will not affect the outcome of the application. The Court is not to make a ruling on the precise valuation of the Shares for the Section 17 Summons when discovery is not yet completed.

Discussion

91.In terms of delay and conduct, Husband’s complaints are well-grounded and justified. Wife could and should have obtained the evidence well before the hearing when she had ample opportunities to do so.  It is not fair to accuse Husband of deliberately misleading the court with a wrong valuation by relying on Yahoo Finance website.

92.In terms of relevance, it is strange Husband now says valuation of the Shares is irrelevant when he is the one who first adduced the $1,388.8 million evidence to deal with the Payor/Payee Issue. Central to Husband’s submission is the proposition that Wife could very well be the payor, and this point is premised, inter alia, upon the assertion that Wife is accountable for the Shares which were worth HK$1388.8 million back in 2007.

93.If Husband genuinely considers valuation of the Shares irrelevant, he ought to have agreed to withdraw the argument premised on the original $1,388.8 million evidence. As such, the Post-hearing Evidence Summons can be avoided. However, Husband did not accede to such request of Wife.

94.Therefore, as long as Husband is relying on the value of the Shares, the Court should also have Wife’s version considered to achieve an overall and balance view. Although it remains uncertain whether the Shares sold in 2007 are points permitted to be pursued at the ancillary relief trial, it is relevant to the Section 17 Summons.

95.I note that Wife’s valuation does not necessarily represent the actual value or the actual consideration received for the Shares.  Further, the Court is not to make a ruling on the precise valuation of the Shares. However, Wife’s valuation is not immaterial. As long as it would impact on the outcome, it need not be conclusive.

96.The Court cannot be asked to make a determination based on information which is apparently inaccurate. To assess evidence on the Payor/Payee Issue, no matter how preliminary it is or how general or broad-brush the approach is, available evidence on valuations have to be taken into consideration. This is done as stated in paragraphs 48-51 above.

97.Further, among the post-hearing evidence is Husband’s disclosure of interest to HKEX as stated in paragraph 42 above. As it concerns beneficial ownership of the Shares, it is material and cogent evidence with strong probative value.

98.Despite the aforesaid, I remind myself to be cautious in granting leave post-hearing; and would therefore look for unusual features/exceptional circumstances in deciding whether to  exercise discretion in favour of Wife.

99.Looking at the nature of the new evidence, I am satisfied that there exists an unusual feature. Wife is seeking to correct what is indisputably inaccurate (Husband wrongly applied the value of new consolidated shares in calculating the value of old unconsolidated shares) so that the Court will not be making determination based on wrong facts. This unusual element distinguishes this case from other cases where the applicant is seeking to adduce further controversial evidence to support own case or attack opposite party’s case.

100.Having considered and balanced the factors as set out in paragraph 86 above, I granted leave for Wife to adduce further affidavit evidence.

101.Regarding costs of the Post-hearing Evidence Summons, although Wife is the successful party, I do not think she is entitled to costs. As said, Wife could and should have obtained the evidence well before the hearing when she had ample opportunities to do so.  Costs order nisi is as set out in paragraph 103 below.

Order

102.Both the Summons dated 5 July 2018 (Section 17 Summons) and the Summons dated 17 August 2018 (Joinder Summons) be dismissed.

103.I make the following orders nisi on costs respectively for the Post-hearing Evidence Summons, the Section 17 Summons and the Joinder Summons.

Summons dated 4 September 2019 (Post-hearing Evidence Summons)

(i)  As between the 1st Applicant and the 2nd Applicant, there be no order as to costs including all reserved costs.

(ii)  As between the 1st Applicant and the Intended Intervener, costs including all reserved costs be in the cause of the Joinder Summons.

(iii)  For the avoidance of doubt, costs incurred for the supplemental closing submissions arising from the further affidavit evidence should go towards costs of the Section 17 Summons/the Joinder Summons.

Summons dated 5 July 2018 (Section 17 Summons)

The 1st Applicant do pay the 2nd Applicant’s costs of and occasioned by the application including all reserved costs, with certificate for counsel, to be taxed if not agreed.

Summons dated 17 August 2018 (Joinder Summons)

The 1st Applicant do pay the Intended Intervener’s costs of and occasioned by the application including all reserved costs, with certificate for two counsel, to be taxed if not agreed.

104.Unless there is application within 14 days to vary, the nisi order(s) shall become absolute.

  (Doris To)
  Deputy District Judge

Ms Anita Yip S.C. leading Ms Lily Yu and Mr Caspar Ng instructed by Messrs Kwan & Chow for the 1st Applicant/Husband

Mr. Jeremy S.K. Chan instructed by Messrs Chaine Chow & Barbara Hung for the 2nd Applicant/Wife

Mr Richard Todd leading Ms Theresa Chow instructed by Messrs Wong & Co. for the Intended Intervener