W, Lt v. Gwh also known as Hgw
Read the full judgment text of FCMC 12735/2015 on BabelCite. This Family Court judgment was delivered on 16 July 2021 before Her Honour Judge Sharon D. Melloy.
Matrimonial Proceedings and Property Ordinance – Section 17 – Ancillary Relief – Disposition – Inherited Property – Painting – Family Heirloom – Intention to defeat claim – Financial provision – Summons dismissed – Costs to Respondent
Legal issues: Setting aside disposition under s.17 · Intention to defeat claim for ancillary relief · Financial provision if disposition set aside
Outcome: Summons dismissed; Costs to Respondent
Cited by 1 case
|
FCMC 12735/2015 [2021] HKFC 142 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO 12735 OF 2015 ----------------------------
------------------------ Coram: Her Honour Judge Sharon D. Melloy in Chambers (Not open to public) Dates of Trial: 8 – 11 December 2020 Single Joint Expert’s report dated the 22 March 2021 and submitted to the court on the 25 March 2021 Written closing arguments submitted: 1 April 2021 Written closing replies submitted: 15 April 2021 Date of Judgment: 16 July 2021 ----------------------- J U D G M E N T (Section 17 application) ----------------------- Introduction 1.This judgment arises out of a summons initially filed by the Petitioner wife on the 31 January 2018 in the following terms:
2.The issue of joinder was dealt with first and on the 7 December 2018 a short ruling was handed down in that respect. The court declined the wife’s request to join the husband’s father, namely SH as a third party in these proceedings. Reference should be made to that Ruling as necessary. It is of note, however, that SH resides in XXXXX and that the painting in question is also located in XXXXXXXXXXX. SH also told the court that he had no wish to be joined in the proceedings or to participate in them in any way. 3.The court is therefore currently only concerned with paragraph 2 of the wife’s summons i.e. an application to set aside a transfer of ownership of the painting, from the Respondent husband to his father SH, in May 2011. As indicated above, the painting in question is known as the “XXXXXXXXXXXXXXXXX” and was painted by the celebrated artist, XXXXXXXXXX. 4.In essence the court is asked to consider the issue of the transfer of the painting back to SH, in circumstances, where, it is acknowledged that the parties had both a tumultuous and an unconventional relationship. Further it is clear that there can be no question that the painting in question is an heirloom, in the traditional sense of that term, that has been owned by the husband’s family for over 120 years. 5.It is the wife’s case that the painting was purchased by the husband from SH during the course of the parties’ relationship (although not marriage) and that the purchase was partly made from joint funds. She says that it was understood that this painting was owned by them, although it was always kept at XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. She says that the husband transferred the painting back to the father, when the marriage was in crises and that this could only have been done in part, in order to defeat any potential claim that she might have against him for ancillary relief. The wife only came to learn of the transfer of the painting after these proceedings were instigated. 6.The husband disputes this. In essence he says that these arrangements had nothing to do with the wife, but were essentially family agreements entered into by him and his father SH (and brother E) in order to ensure that the painting remained in the family and was not sold, whilst at the same time providing both his father and mother, and indeed his brother, with much needed financial assistance. In summary he said in his witness statement dated the 28 September 2018 that:
Background to the litigation 7.In the Maintenance pending suit/Interim maintenance and litigation funding judgment dated the 14 May 2019 it was stated inter alia as follows:
The Painting 8.In the husband’s witness statement dated the 28 September 2018, he sets out the background to the painting itself as follows:
9.During the trial, the husband elaborated on this and the stories that have been passed down over the years which explained how the painting came to be in his family’s possession. He also explained that his family were from well educated, but lower middle class stock, his mother being a XXXX and his father a XXXXXX. The painting however, was something unique within their family. He said that his father took great pride in the fact that it had not been sold previously and that he was the custodian of the painting for future generations. In summary Mr. S Marwah, for the husband, explained it thus in his closing submission:
I tend to accept both what the husband said about this in the witness box and the summary provided by Mr. Marwah in that respect. Further relevant background 10.The parties met in London in July 2002 and commenced a long distance relationship. They became engaged in August 2004 and, as indicated above, they married in XXX on the 20 August 2005. It is the wife’s case that prior to the wedding they set up a joint bank account. During this period, the existing evidence shows that the there was some discussion between the husband and his family concerning the transfer of the painting, which had been valued by Sotheby’s in October 2003 for between GBP1 – 1.5 million, but was subsequently valued by Christie’s in February 2004 for a much reduced sum of approximately GBP400,000 – 600,000. In any event these discussions, eventually culminated in two agreements both dated the 2 May 2005, the first between the husband and his father SH and the second supplemental agreement between the husband, the husband’s brother, E, and SH. It is of note that these agreements were drawn up by the family lawyer in XXXXX. The agreements 11.The first agreement states as follows:
12.The second agreement added as follows:
13.It is not disputed that the husband paid the sum of XXX4,000,000 on or about the 10 May 2005 and that he arranged for the painting to be insured at a much increased figure. This was prior to the marriage in August 2005. The first instalment payment of XXX200,000 was paid after the marriage. The husband did not pay the second instalment due on the 1 May 2010 and on the 15/18 May 2011 the painting was allegedly transferred back to the father under the terms of the following third agreement:
Although this agreement states that the original agreement had been breached, it is of note that at this stage, the husband only owed XXX 200,000 (i.e. the payment that had been due on the 1 May 2010) as the remainder of the purchase price was not due and owing at this stage. To state that the husband had breached the agreement and that XXX800,000 was outstanding is therefore not an accurate statement. 14.In any event, it seems that the husband stopped insuring the painting from that time onwards and to all intents and purposes the painting was regarded by him as belonging to SH. It is of note that under the terms of this third agreement the husband did not physically receive back any of the funds (i.e. the XXX 4,200,000) that he had originally paid for the painting, but that the consideration was by way of a transfer of a debt that was owed by the husband’s brother E to his father and a gift of money to his father. In addition, SH entered into an interest free loan arrangement with the husband for the remainder of the money. It is of note that payment of the outstanding XXX800,000 was also formally forgiven. Negotiations prior to the agreements 15.The husband has produced three documents, one e-mail from his mother dated the 11 January 2004, a letter from his father dated the 1 February 2004 and a further letter from his mother dated the 25 October 2004. These documents are approximately 17 years old and all relate to the original agreement and the supplemental agreement. The husband has been unable to produce any documents leading up to the third agreement. The wife complains about this and accuses the husband of only producing documents that will assist his case. However, with respect, it seems to me that he has done well to produce what he has, given the fact that this all happened a very long time ago. I also tend to accept his evidence that the parties spoke over the phone in the run up to the signing of the third agreement and that this was then formally drawn up by the family lawyer as before. 16.The letters show that the mother did not accept the husband’s original offer to purchase the painting, which was then simply a straightforward commercial transaction. She was also clearly concerned about the relationships within the family. In her e-mail dated the 11 January 2004 she states as follows:
17.In other words, the mother had considered her son’s offer to purchase the painting and had decided that, from her perspective, his offer was not satisfactory. I accept that she was concerned about both preserving the painting as a family heirloom and of ensuring fairness by way of inheritance between her two sons in due course. These themes are reiterated in SH’s letter dated the 1 February 2004, which was also concerned with the husband’s original offer:
18.In the last letter from the mother dated the 25 October 2004, it seems that an agreement had been reached in principle and there is a discussion about a payment plan for the painting – XXX5.5 million in total, paid in three instalments. She adds as a P.S – that it might be too much to expect the husband to take over the painting given that he had worked hard for his money. 19.All in all, I accept that this correspondence, which is contemporaneous, should be given significant weight. I further accept that it is clear from these letters that this was not a normal straightforward commercial transaction for money or monies worth. Rather it was a family arrangement that was entered into so that the child who was seemingly the more financially secure (i.e. the husband) could step up and assist the family by buying what was a significant family heirloom, which was also seen as a form of an advanced inheritance to the husband and which, in turn, enabled his parents to move on and buy a home for their retirement, whilst at the same time ensuring that the painting remained within the family. In doing so the husband was taking on the role of the custodian of the painting. It was also understood that there should, as far as possible, be equality between the brothers with respect to their inheritance of all items in due course. (This included the painting and XXXXXXXXXXXXXXXXXXXXXXXXXXXX). The marital situation at the time of the transfer 20.It would be fair to state that the transfer of the painting back to SH took place at a time of increasing difficulty within the marriage. In the husband’s Form E dated the 13 April 2016 he states inter alia as follows:
21.On the 22 August 2010, 9 months before the transfer, the wife issued her first divorce petition in Hong Kong. On the 8 April 2011, just over one month before the transfer, the parties agreed to a 6-month divorce moratorium. 22.In the husband’s Form E, he added as follows:
23.The parties continued to live apart for most of the time, but in April 2012 they purchased a property together in Hong Kong, held under a corporate name. The husband also purchased a property for one of his mistresses in Manila in May 2013 and another with his current partner in June 2015. 24.The wife for her part says that she wanted to have a baby, that her biological clock was ticking and that she could only receive medical assistance in Hong Kong, if she was married. She filed her second petition on the 5 October 2015, when C was just over three months old. By that time, it is the husband’s case that he had decided that he wanted to end the marriage. 25.A constant theme throughout the marriage and indeed the proceedings, seems to have been the husband’s constant infidelity. The wife says that he is a sex addict and that he is in need of treatment. Not so says the husband, whilst acknowledging at the same time that he let the wife believe this rather than own up to his behaviours. The communication between them seems to range from the overtly affectionate, with pet names and in-jokes, to open hostility within relatively short periods of time. This is a pattern that is repeated, even during periods of obvious difficulty. They also met up and went on trips together and for a long while the husband continued to commute between Singapore and Hong Kong. The transfer of the painting back to SH in 2011 26.According to the husband he transferred the painting back to his father, not because of anything to do with his marriage, but because the time frame in the supplemental agreement was about to expire. The husband was not allowed to sell the painting, save with the consent of his father and brother up until May 2012. After that date he had free reign to deal with it as he saw fit. However, the husband says, as set out in the original correspondence from his parents, that that had never been the original intention. There was no desire to sell the painting. Rather the underlying agreement was to try to retain the painting and to keep it within the family and to prevent it from being sold to third parties. Time had also moved on and the husband’s parents had moved into a new home and they no longer needed the remaining instalments due and owing under the terms of the original agreement. The husband’s position had also changed and he says that he no longer wished to retain the painting. He was by that stage living in Singapore on a permanent basis and it no longer held the appeal for him that it once had. It was therefore agreed that the painting would be returned to the father. Following the signing of the agreement SH took over the responsibility of insuring the painting and informed the authorities in XXXX that the ownership of the painting had been returned to him. 27.It is the wife’s case that the husband was not in financial difficulty in 2011 and that he could have paid the instalment of XXX200,000 in May 2010 without difficulty. She further states that there was no credible explanation for the transfer and that given that it must have been done with the intention of defeating any claim that she might make in the future for ancillary relief. The issues 28.It is then in these circumstances that the court is asked to consider the following issues:
Setting aside dispositions The law - generally 29.Section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 states as follows:
30.In this instance it is accepted that the presumption referred to in paragraph (3) above does not apply given that the wife’s application was made over three years after the alleged transfer of the painting took place. Thus the burden is on her to show that the husband transferred the painting with the intent of defeating her claim for ancillary relief. This is so, notwithstanding the fact that the wife only became aware of this transfer after the event and once these current proceedings were issued. It is also accepted that the court should try to look at the actual intention of the husband at the time that the disposition was made. It is further accepted that it must be clear that there was an actual intention to defeat the wife’s claim for ancillary relief, although it may not be the only or even the dominant intention of the husband given that “It is enough if it played a substantial part in his intentions as a whole”. (See Kemmis v Kemmis [1998] 1 WLR 1307). 31.In addition, Ms Rattigan for the wife refers to the appropriate standard of proof to be applied in her opening submission where she states as follows:
Discussion 32.I must now turn to consider the issues, the law and the parties evidence as set out in their pleadings, witness statements and Form E’s and as given orally by them during the hearing. For the avoidance of doubt, in so far as the matters set out in this judgment differ from the evidence of the husband or wife, that is because I have preferred the evidence of one of the party’sover the other or it is because I do not find the evidence given credible, or because I consider that the documents produced confirmed my findings of fact. Should the disposition of the painting by the husband back to his father in May 2011, be set aside? Introduction 33.I should say at the outset that I have found this a very difficult matter to determine. However, in the final analysis, and for reasons that I shall elaborate upon below, I have decided not to set aside the transfer of the painting from the husband to his father, SH in May 2011. As indicated above the burden is on the wife to show that on the balance of probabilities the husband transferred the painting because he intended, certainly in part, to try to defeat her claim for ancillary relief. As will be seen ultimately I do not accept that she has been able to discharge her burden in that respect. In considering this matter, could it be said that: a) that the husband transferred the painting to his father, in order to defeat the wife’s potential claim for ancillary relief? 34.It seems to me that although the wife clearly has an arguable case and that there is a “coincidence of dates”, in that the husband transferred the painting back to his father at one of the many crises points in the parties’ marriage, I also accept that this was not done with a view to defeating her claim for ancillary relief. 35.In coming to that decision I largely accept his case as set out above with respect to the painting, its special nature within his family, the reason for the 2005 agreements and the basis upon which it was transferred back to his father in 2011. I further accept, as suggested, that it didn’t really cross his mind that this might be an issue in any event as inherited properties are not included in any division of assets upon divorce in XXXXX and he had not taken full legal advice in Hong Kong prior to 2011, notwithstanding the wife’s first divorce petition. 36.Further and as suggested by Ms Rattigan, the husband did come across in the witness box as being somewhat arrogant. I accept that he genuinely believed that a divorce would not happen until he decided that he was ready to move on. It is also of note that this is infact what happened. The parties remained married, notwithstanding the wife’s obvious distress and anger surrounding the husband’s ongoing infidelities; she did not go ahead with the original divorce and remained within the marriage even after the discovery of a more significant extra marital affair. I accept that she had a number of reasons for doing so including the fact that she obviously cared for the husband very deeply and was not prepared to walk away from the marriage despite its many difficulties. She also wanted to have a baby. However, once the husband had formed a more significant relationship with a third party and once C was born, it seems that the husband was then ready to move on. He then contemplated issuing proceedings in Singapore and began discussing the possibility of issuing a divorce petition in Hong Kong. It seems that the wife issued her second petition once she became aware of this. Thus the current proceedings were instigated to an extent, by the husband’s actions. Although the painting was transferred back to the father in May 2011, after the wife had issued her first divorce petition and following the parties’ agreement to a six-month divorce moratorium, I tend to accept that in the husband’s mind the two things were not inter connected. It is also of note that C had not been conceived at that stage, but nevertheless he did not shy away from the financial commitment that having a child would bring. Further he continued to support the wife financially and paid for the rather costly medical interventions (IUI’s and IVF treatments plus a couple of attempts via surrogacy arrangements). He also purchased a property with the wife in Hong Kong in May 2012. It is unlikely that he would have done any of these things if even part of his motivation had been to defeat the wife’s claim for ancillary relief in a potential divorce suit. The husband puts it thus in his witness statement:
With respect I tend to agree. Would financial provision, or different financial provision, be made by the court for the wife (and possibly the child of the family) if the disposition was set aside? 37.Further, it is not accepted that different financial provision would necessarily be made by the court for the wife, if the transfer of the painting was set aside. It is clear that this is “inherited property” in the classic sense of that term. It does not follow that the wife would be entitled to half of its value or indeed to any of its value in any event. To that end reference should be made to LKW v DD (FACV No 16 of 2008) where Mr Justice Ribeiro PJ said inter alia as follows:
Conclusion 38.Whilst it is accepted that there are no hard and fast rules, it is clear that the painting in question is originally inherited property. It was initially acquired by the husband’s family by way of inheritance and from a source wholly external to the marriage. The original 2005 agreement and the supplemental agreement were both entered into with very specific issues in mind, the central one being that the painting should be preserved and, if at all possible be retained by the family for future generations. I do not accept that this was a straightforward financial transaction or that the painting then became marital property by virtue of this agreement. It is also of note that the purchase took place prior to the party’s marriage and that there would, in any event, be a further argument about this painting being pre-marital. 39.In such circumstances it follows that paragraphs 1 and 2 of the wife’s summons dated the 31 January 2018 shall be dismissed. Costs shall follow the event in the normal way i.e. there shall be an order nisi to be made absolute in 28 days time that the Petitioner shall pay the Respondent’s costs on a party and party basis to be taxed if not agreed. 40.It is further ordered that the First Appointment hearing shall be adjourned to the 2 December 2021 at 9:30 am. Both parties do personally attend that hearing.
Ms. Mairead Rattigan instructed by Stevenson Wong & Co for the Petitioner Mr. Shaphan Marwah instructed by Gall for the Respondent | ||||||||||||||||||||||||||||||||||
Other judgments that cite this case
Further hearings and rulings under FCMC 12735/2015