Ch v. Tthm
Read the full judgment text of FCMC 8214/2011 on BabelCite. This Family Court judgment was delivered on 5 February 2024 before His Honour Judge S. Lo.
Matrimonial causes – beneficial ownership – trust – section 17 MPPO – adverse inference – costs indemnity – Husband claimed properties held on trust for children from former marriage – Wife claimed transfers to defeat claims – Court found Husband failed to prove beneficial ownership – Adverse inference drawn for failure to call witnesses – Authenticity of trust documents rejected – Properties owned by Husband – Section 17 orders made – Indemnity costs awarded.
Legal issues: Adverse inference for failure to call witnesses · Beneficial ownership of Disputed Properties · Costs on indemnity basis
Outcome: Disputed Properties found beneficially owned by Respondent; W's section 17 summons orders made; Costs indemnity basis against H.
Cited by 2 cases · Cites 4 cases
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FCMC 8214/2011 [2024] HKFC 17 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 8214 OF 2011 ----------------------------
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----------------------- JUDGMENT ----------------------- 1.This is the trial in respect of :
2.By letter dated 18 January 2024 from H’s solicitors, H requested to lodge and serve his closing submissions by 1 February 2024. Up to the date of this judgment, H has not lodged with the court his closing submissions. Introduction 3.The crux of these two summonses essentially concerns the beneficial ownership in respect of the following 7 landed properties (collectively “Disputed Properties”):
4.H purchased Unit 407 in his sole name in 2006 and then transferred in its entirety to Well Bond Property Management Services Limited (“Well Bond”) ie the 1st Intervener, in 2011. 5.Well Bond was incorporated in Hong Kong on 19 January 2009. At the time of its incorporation, H was its sole registered shareholder and sole director. Thereafter, the shareholding of Well Bond was changed as follows:
6.Further, on about 15 February 2012, H transferred 30% ownership of Rialto Mansion (which was purchased in July 1997 and registered in his sole name) to Desmond and 30% ownership to the 3rd Intervener (“Clarissa”), who are H’s son and daughter of his former marriage. 7.Pursuant to the Order made by DDJ Tse Ching (as she then was) on 2 June 2017, Well Bond, Desmond and Clarissa were joined as the 1st, 2nd and 3rd Interveners respectively for the purpose of W’s section 17 application. 8.Pursuant to the Order made by DDJ Tse Ching (as she then was) on 3 November 2017, Pamela Mei Ting Tsang and Evelyn Sook Yin Tsang (another 2 children of H’s former marriage) were joined as the 4th and 5th Interveners respectively for the purpose of H’s application for preliminary issue. 9.Presently, the registered owners of the Disputed Properties can be summarised as follows: -
10.H claims that the Disputed Properties represent “trust” assets he has been holding for the benefit of the 2nd to 5th Interveners pursuant to a Consent Order allegedly made by a court in Canada and a Trust Agreement allegedly executed between H and his former spouse. 11.The main issue is therefore whether H can prove to the satisfaction of the Court that the Disputed Properties belong beneficially to the 2nd to 5th Interveners as alleged. Relevant factual background 12.H is now about 74 years old and W is about 50. 13.On 12 May 1976, H married Madam MY Mar (“Madam Mar”) with 4 children of the family, namely Desmond, Clarissa, Pamela and Evelyn (ie 2nd to 5th Interveners). 14.On 3 July 1997, H purchased Rialto Mansion with his own funds. 15.On 29 April 2001, H and Madam Mar were divorced by an order of the Supreme Court of British Columbia, Canada. 16.H claims to have settled his marital financial disputes with Madam Mar by way of a Consent Order dated 6 February 2003 (“the Alleged Consent Order”). He alleges that pursuant to the Alleged Consent Order, a family trust called “The Agnes M.Y. Tsang Family Trust” (“the Alleged Trust”) was set up by Madam Mar on 2 March 2004. 17.On 30 May 2002, H and W married in Zhanjiang City, PRC. There is no child of the family of H and W. 18.In these proceedings, H claims that his marriage with W was a sham to assist W’s immigration to Canada by H in his professional capacity as an immigration consultant. As such, the parties entered into an alleged Pre-Nuptial Agreement (“the Alleged PNA”) to outline the purpose and boundaries of the parties’ relationship. 19.On 25 November 2004, H and W purchased Unit 416 of 金地豪園天驪閣in Zhanjiang PRC in joint names (共同共有) (“the Zhanjiang Flat”). The purchase price of the Zhanjiang Flat was RMB 539,800 which was wholly funded by H. 20.On 21 June 2011, W issued the petition for divorce (with claims for ancillary relief) (“Petition”) in Hong Kong. 21.It is W’s case that between 2005 and 2008, W and H stayed at Rialto Mansion as their former matrimonial home when they were in Hong Kong. 22.H and W are registered owners of Wah Hoi Mansion as joint tenants. Between 2008 and 2011, W and H used Wah Hoi Mansion as their matrimonial home when they were in Hong Kong. 23.H obtained mortgage loans in purchasing Unit 217, Wah Hoi Mansion, Chu Kee Building, the Workshop and Hoover Court. In each of these mortgage applications, H represented to the relevant banks that he is the only beneficial owner of these properties, namely Unit 217, Chu Kee Building, the Workshop and Hoover Court. 24.On 31 July 2012, Decree Absolute was granted by the Hong Kong court. 25.On 24 May 2012, H commenced divorce proceedings in Zhanjiang Economic and Technological Development Zone People’s Court (“Zhanjiang ETD Court”) in PRC after W filed the Petition in Hong Kong. 26.At the first instance hearing in PRC, H claimed that the parties married each other after communicating online for 3 months, and they entered into marriage because W was deeply in love with H. H never raised any issue of the Alleged PNA in the Zhanjiang ETD Court. 27.On such basis, the Zhanjiang ETD Court dissolved the marriage between H and W on 12 September 2013 and handed down its ruling regarding division of their finances, including the Zhanjiang Flat. There is no mention about the Disputed Properties in the ruling. 28.H subsequently appealed against the decision of the Zhanjiang ETD Court on division of finances to the Guangdong Zhangjiang Intermediate People’s Court and the Guangdong Higher People’s Court. His appeals were dismissed by the PRC Courts. The Issues 29.H’s case as pleaded in his Points of Claim dated 12 January 2018 can be summarized as follows:-
30.W’s case as pleaded in her Points of Defence and Counterclaim dated 22 March 2018 is that the Disputed Properties all belong to H. 31.According to W’s understanding, H purchased the Disputed Properties with his own funds and is both the legal and beneficial owner of the Disputed Properties. It is W’s case that the purpose of the dispositions in respect of Well Bond (and hence Unit 407) and Rialto Mansion were made by H with an intent to defeat W’s ancillary relief claim and should be set aside pursuant to section 17 of the MPPO. 32.W contests the authenticity (and hence the existence) of a number of documents produced by H, including but not limited to the Alleged PNA, the Consent Order, the Alleged Trust and the Alleged Declaration of Trust. A Notice under Order 27 rule 4(2) of the Rules of the High Court, Cap 4A was issued by W on 12 April 2019 to formally challenge the authenticity and contents of such documents as contained in H’s List of Documents. Absence of the 2nd to 5th Interveners 33.The 2nd to 5th Interveners who H alleges to be the real owners of the Disputed Properties have never come forward to assert their interests, if any. Nor did they make any appearance, file any pleadings, affidavits and witness statements in these proceedings. There is also no explanation from H as to why he does not intend to call any of them to testify in Court. 34.On 21 August 2017, H’s former solicitors, Messrs. Withers, served (i) H’s summons for joinder and (ii) his 9th Affirmation on the 2nd to 5th Interveners by way of registered post to their last known address at “2738 West 22nd Avenue, Vancouver, British Columbia, V6L 1M4, Canada”. 35.W invites the Court to draw an adverse inference against H for his failure to call the 2nd to 5th Interveners to give evidence. 36.Mr Yim for W submitted that the legal principles regarding drawing of adverse inference for failure to call relevant witness was laid down by the English Court of Appeal in Wisniewski v Central Manchester Health Authority [1998] PIQR 3242. The Wisniewski principles were adopted by CA in §27 of Tjang Siu Thu v Profield Construction Engineering Ltd [2015] 5 HKC 22:-
37.The CA said the following regarding the Wisniewski principles at §33 of Tjang Siu Thu: -
38.In South China Securities Ltd v Lam Kwen Yuen [2012] 5 HKLRD 524, DHCJ Lisa Wong SC (as she then was) said at §7 that:-
39.In my view, the 2nd to 5th Interveners are the parties to the preliminary issues proceedings issued by H. There is no explanation why H is unable to call any of the 2nd to 5th Interveners to give evidence after 6 years of joining them into these proceedings. They are the alleged beneficial owners of the Disputed Properties and H’s biological children. If they are indeed beneficial owners, they should have been most eager to give evidence to resist W’s section 17 application. They are also best placed to support H’s version of events. 40.Furthermore, Desmond and Clarissa are both transferees of 30% interest each in Rialto Mansion. If such transfers were really made pursuant to the Alleged Trust, Desmond and Clarissa are clearly in the best position to give evidence to support H’s version of events. 41.H also transferred 9,900 shares in Well Bond to Desmond. Desmond was subsequently appointed the sole director of Well Bond. Desmond must be able to explain how the transfer happened and why did he suddenly assumed the onerous duties of a sole director of Well Bond, a company which he had no prior involvement. Besides, there is no reason why Desmond could not hold the said shares in Well Bond when it was incorporated. 42.Further, according to H, Desmond pooled his income to pay for part of the purchase price of Unit 407. However, H is unable to testify as to e.g. how much Desmond had contributed, how Desmond could afford to contribute to the purchase price of Unit 407 while working as an intern, and how Desmond paid H. Similarly, Desmond would be in the best position to testify on H’s case. Indeed, no documentary evidence was produced by H. 43.In the circumstances, I conclude that I shall draw an adverse inference against H for his failure to call the 2nd to 5th Interveners to give evidence. Legal Principles relating to Ownership issue and MPPO section 17 44.In Fisher Meredith LLP v JH [2012] 2 FLR 536, Mostyn J made the following observations in §§42-44 & 49:-
45.Lord Walker made similar observations in Jones v Kernott [2012] 1 AC 776 at §52:-
46.It is trite that H is required to show on a balance of probabilities that the beneficial ownerships for the Disputed Properties are different from their legal ownership, which rests with him. 47.On the other hand, W bears the burden of proof for her section 17 application in relation to the transfer of Rialto Mansion and Unit 407. There is no dispute that the dispositions of H’s interest in Unit 407 and Rialto Mansion took place after W filed the Petition on 21 June 2011. H’s defence to the section 17 application is that he was holding Unit 407 and Rialto Mansion on trust prior to the dispositions. Naturally, H bears the burden of proof in respect of the beneficial ownership of Unit 407 and Rialto Mansion. 48.Ms Cheung for H relied on WSW v CKU (unrep., FCMC 3040/2008, 17 March 2008) and argued that the Court is entitled to take a broad-brush approach (without the need to engage in forensic accounting) towards assessing the likelihood of whether landed properties were more likely than not to have been purchased with trust. 49.Mr Yim for W disagree that WSW is applicable to this case on the following reasons:-
50.Mr Yim further submitted that in determining a dispute as to ownership between a spouse and a third party, the Court must approach the issue “on exactly the same legal basis as if it were being determined in the Chancery Division”: see e.g. LWYA v KYW & Or (unrep., CACV 151/2013, 4 December 2014), §30; see also Bhura v Bhura (No 2) [2014] EWHC 727 (Fam) [2015] 1 FLR 153. 51.I accept Mr Yim’s submissions and consider that the approach in WSW is not applicable in the preliminary issue proceedings and section 17 application. Whether H can prove the fund flow from the Alleged Trust into the Disputed Properties (save for Rialto Mansion) 52.On day 2 of the trial, Ms Cheung for H produced a document titled ‘Schedule A “Trust Assets”’ seeking to set out the documentary evidence relied upon by H in showing the flow of funds. 53.It is suggested in Scheduled A that H relies on the following documents to prove that the purchases of the Disputed Properties were funded by assets under the Alleged Trust:-
54.H also relied on an email allegedly written by Madam Mar stating that she refused to release any information related to the respective mortgage loans of all the Disputed Properties. 55.I accept Mr Yim’s submission that none of the above documents can support H’s case. 56.First, all the SPAs (except that for Wah Hoi Mansion) were signed by H himself. The SPA for Wah Hoi Mansion was entered into by H and W as joint tenants. There was no reference to the Alleged Trust in any of the SPAs. 57.Second, the tenancy agreements and bank passbook cannot help H’s case:-
58.Third, the email allegedly written by Madam Mar does not assist H’s case on the following reasons:-
59.Fourth, the three cheques relating to the purchase of Wah Hoi Mansion actually contradict H’s case that the purchase was funded by money from the Alleged Trust. These three cheques were paid out of H’s personal bank account in Bank of China (Hong Kong). There is no evidence that sums of similar amount were transferred into H’s personal account from the Alleged Trust before H purchased Wah Hoi Mansion. 60.H suddenly sought to allege during his oral evidence that Madam Mar injected funds into the Alleged Trust via two cheques in 2008. This is the first time H mentioned that Madam Mar injected funds into the Alleged Trust after it was set up in 2004. The payee of the cheques is simply stated to be “Bank of China (Canada)”. When H was challenged by Mr Yim for W regarding the absence of specific payee account on the cheques, H was unable to provide any satisfactory answer. I have no doubt to reject H’s evidence. 61.In the circumstances, I conclude that H is unable to prove that funds were drawn from the Alleged Trust for purchasing any of the Disputed Properties. 62.Regarding Wah Hoi Mansion which was purchased in the joint name of H and W, if it was indeed purchased with money from and for the Alleged Trust, there is no reason why W has to be named as a co-owner. H did not give any explanation. 63.The Alleged Trust Agreement is dated 2 March 2004 and H only purchased Wah Hoi Mansion as joint tenant on 30 July 2008, ie about 4 years later. However, Wah Hoi Mansion is stated as H’s address in the Alleged Trust Agreement at a time when he had not even acquired Wah Hoi Mansion. 64.H tried to explain that he knew the previous owner, Mr Lau Chi Man. Nevertheless, Mr Lau Chi Man only purchased Wah Hoi Mansion on 14 May 2005 i.e. after the date of the Alleged Trust Agreement. 65.I consider that the Alleged Trust Agreement was only created at a time after he purchased Wah Hoi Mansion. It is more likely than not that the Alleged Trust Agreement was fabricated to suit his case in these proceedings. 66.In addition, despite being tasked to manage the Alleged Trust as trustee, H could not identify the amount, type, and value of stocks under the Alleged Trust. If the Alleged Trust exists and H has indeed managed it, he should be able to identify at least the estimated value of stocks held under the Alleged Trust. 67.In relation to management of the Alleged Trust, H said in cross-examination for the first time in these proceedings that his sister, Florence Tsang, managed the Disputed Properties for him. However, despite her allegedly pivotal role in the management of trust properties, Florence Tsang was not called to give evidence in H’s support. I am entitled to draw the adverse inference against H and consider that his evidence regarding Florence Tsang will not assist H. 68.Turning to the Alleged PNA, it is dated 29 May 2002 and Clause 3 thereof referred to the Alleged Trust. Nonetheless, the Alleged Trust was only set up on 2 March 2004 (about 1 year and 9 months after the date of the Alleged PNA) pursuant to the Alleged Consent Order dated 6 February 2003. I doubt very much about the authenticity of the Alleged PNA. H also fails to explain why there is no mention of the Alleged PNA in the ruling of Zhanjiang ETD Court. 69.As a whole, upon observing his demeanour in court, H is not a credible witness. For all the above reasons, H has failed to discharge his burden of proof to show that the beneficial ownerships of the Disputed Properties (except Rialto Mansion) are different from their respective legal ownerships. Whether H is the sole beneficial owner of Rialto Mansion 70.H’s pleaded case is that Rialto Mansion was to be transferred to his children within 10 years of February 2003 or as extended pursuant to the Alleged Consent Order made on 6 February 2003. 71.However, H’s case is noticeably different in his Opening Submissions, which states that Rialto Mansion is part of the Alleged Trust as well as his oral evidence under cross-examination in the afternoon of day 4 trial. There is no explanation from H as to how and why Rialto Mansion which was purchased as early as in July 1997 (over 5 years before the date of the Alleged Consent Order) is now said to be part of the Alleged Trust. 72.The background leading to W’s section 17 application is that H purchased Rialto Mansion as the sole legal and beneficial owner. On 21 June 2011, W issued the Petition for divorce with ancillary relief claims. One month later, on 25 July 2011, H transferred Unit 407 to Well Bond. Then on 15 February 2012, H transferred 30% interest in Rialto Mansion to Desmond and Clarissa respectively. But he is still hold the remaining 40% interest. There is no explanation from H as to why he did not transferred the entire interest to Desmond and Clarissa, or other children of his former marriage. 73.H’s sole defence regarding W’s section 17 application is that ever since his divorce with Madam Mar, he has been holding Rialto Mansion on trust for his children pursuant to the Alleged Consent Order. The Alleged Consent Order was only made on 6 February 2003, over 5 years after the purchase of Rialto Mansion in 1997. On a balance of probabilities, I reject H’s evidence of trust. 74.W also challenges the authenticity of the Alleged Consent Order vigorously. Ms Cheung for H accepted that the onus is on the party who produces documents and asserts their validity to prove that they are genuine. Mr Yim for W submitted that there are THREE different versions of the Alleged Consent Order. 75.In H’s witness statement filed for this trial, he exhibited a “sealed copy” of the Alleged Consent Order as Exhibit TTHM-3 at Bundle B/252/23. This “sealed copy” can be found at Bundle D/895-898 (“D895 Copy”). 76.Since the authenticity of the Alleged Consent Order is challenged by W, DDJ Tse Ching (as she then was) ordered H to file an affirmation to exhibit the documents related to his divorce with Madam Mar. Pursuant to the court order, H filed his 11th Affirmation dated 26 October 2017 and exhibited a “certified copy” of the Alleged Consent Order as Exhibit TTHM-11-2 at Bundle A/189/6. The “certified copy” can be found at Bundle C/553-555 (“the C553 Copy”). 77.At day 4 of the trial, H produced Exhibit R1 as the original of the C553 Copy during his cross-examination. However, it transpired during re-examination that Exhibit R1 does not represent the C553 Copy. The real original of the C535 Copy was said to be Exhibit R2. 78.Exhibit R1 had never appeared in these proceedings prior to H’s re-examination, some 4 years after H claimed to have obtained it. Also, it is markedly different from the C553 Copy – Exhibit R1 is the only copy which comes with a certificate by the Deputy Registrar claiming it to be the certified true copy of the Alleged Consent Order. 79.I accept Mr Yim’s submission that Exhibits R1 and R2 (allegedly original of the C535 Copy) are different from the D895 Copy: -
80.As I have already rejected H’s evidence of trust, I do not think that it is necessary to consider the authenticity of the Alleged Consent Order. Just for the sake of completeness, I have no doubt to find that H has failed to discharge the burden of proof in respect of the authenticity of the Alleged Consent Order. 81.H further gave evidence in court that H remained in a common law relationship with Madam Mar after their divorce. He tried to explain the tax benefits he would obtain from divorcing Madam Mar and entering into a common law relationship. Nonetheless, it is simply his bare assertion without any proof. Besides, I do not believe Madam Mar would trust him with all her assets with virtually no supervision after their divorce, especially when she chose not to come forward to testify to protect her children’s interest. In any event, such evidence is not relevant to the issues in dispute in these 2 applications. 82.In my judgment, even if the Alleged Consent Order is genuine, H still fails to discharge the burden to prove that Rialto Mansion belongs beneficially to his children pursuant to the Alleged Consent Order. Conclusion 83.For the purpose of determining the beneficial ownership of the Disputed Properties as preliminary issue in the ancillary relief proceedings, I find that they are all beneficially owned by H. 84.I also make an order in terms of para. 1(a), (b) and (c) of W’s section 17 summons dated 26 January 2017. 85.Mr Yim for W asks for costs on an indemnity basis. As I accept that H has been running an entirely false case and that H fails to give instructions to his solicitors for the preparation of his closing submissions to assist the court as per letter dated 18 January 2024 from H’s solicitors, I exercise my discretion to make an order nisi that H do pay W costs of H’s summons dated 5 January 2017 and W’s summons dated 26 January 2017 on an indemnity basis with all costs reserved and certificate for counsel, which shall become absolute unless any of the parties apply to vary by summon with supporting affidavit, if necessary, within 14 days.
Mr Eugene Yim instructed by Chow & Chow Solicitors for the Petitioner Ms Janine Cheung instructed by TC Wong & Co. for the Respondent [1] this account is held in the name of H instead of the Alleged Trust | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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