Ycwr v. Ycw

FCMC 6604/ 2016

[2024] HKFC 45

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 6604 OF 2016

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DECISION
(Leave to apply for Ancillary Relief)

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Note: For the protection of privacy, the personal information in this decision has been redacted.

Introduction

1.The Petitioner (“the Husband”) applied by way of summons filed on 23 March 2023 for leave to commence ancillary relief proceedings against the Respondent (“the Wife”), some 6 years after decree absolute was pronounced.  

2.Together with the leave application, the Husband sought an order to refrain the Wife from disposing four landed properties. On 4 July 2023, by consent, the Wife gave an undertaking not to dispose two thereof, namely, (i) a unit in Hon Kwong Mansion; and (ii) a unit in Join-in Hang Sing Centre.

Background

3.The Husband and Wife were married in 1979, both of them are now in their seventies. They have had long relationship for almost 40 years with two daughters now over 30 years old. Both of them are brainy merchants, they set up various companies carrying on business in manufacturing and trading optical goods during marriage. The family business flourished and the parties were able to acquire various landed properties for use and investment.

4.The Husband said the family business had begun with a small laundry shop in 1984. Sometime later, the Husband set up MMC (“MMC”) carrying on business of manufacturing optical goods.  In or about 1989 - 1990, they set up MIL (“MIL”) in equal shares. The Wife used MIL to operate on her own optical wholesale business. Both MMC and MIL operated in the same office with all staffs working under the same roof. Their business went well. There were other 4 companies set up which had focused on wholesale, retail and distribution of different brands of optical goods. Both the Husband and Wife co-managed all companies.

5.In 1993, the Wife and her father injected HK$160,000 and HK$1.1 million respectively to MIL. The Wife’s brother joined to work for MIL thereafter.

6.The parties have different perspectives on their involvement of the family business. The Wife said neither did the Husband make important decisions for MIL nor did he involve in MIL’s operation. The Husband was only authorized as a cheque signatory of MIL when she travelled overseas. However, the Husband’s version of events are quite the opposite, he said he had made substantive contributions and was very involved in the running of all companies.

7.Notwithstanding this, the parties agreed they had purchased various landed properties for use and investment.

8.In or about 1987, the couple bought their 1^st landed property in  Block 8 of Nan Fung Sun Chuen. The Husband’s parents funded the purchase and the said property was sold in 1988. With the sale proceeds, they bought another property in Rowen Court (and a carpark space) under the Wife’s sole name.

9.In or about 1990, the Wife sold Rowen Court (and a carpark space). They purchased Kingsford Height (and a carpark space) with sale proceeds of Rowen Court. Apart from this, they acquired another property in Vanta Industrial Centre by MIL which was sold after a short period of time.

10.In or about same time, the Husband developed his own business by establishing a factory in the mainland China. Since then, there came a division of work that the Husband was responsible for packaging, distributing and delivering goods to customers in mainland China whereas the Wife was responsible for sourcing new brands and goods in different cities.

11.In or about 1991, when the Wife started running business in optical wholesaling, she acquired two other properties in So Tao Centre, these premises were used as offices for the family business.

12.In or about 2004, the parties purchased a flat in Bon-Point (with a carpark space) in joint names of which was sold in 2010. Each party pocketed HK$4.2 million sale proceeds.

13.In 2010, the Husband purchased a flat in Block 3 of Nan Fung Sun Chuen (“the Nan Fung Property”), he successfully obtained a mortgage loan with a bank after “adding” their elder daughter (“the Elder Daughter”) as a registered owner. The Husband said it was a common understanding between himself and the Elder Daughter that she would hold her interest of the property in trust for him.  The Husband will retain sole beneficial interest. In doing so, the Husband paid up all down payment including all related expenses and disbursements relating to the purchase.    

14.After the said purchase, the Elder Daughter and her ex-boyfriend cohabited in Nan Fung Property, the Elder Daughter paid rent to the Husband. In 2012, the Elder Daughter moved out from Nan Fung Property, the ex-boyfriend continued to stay in Nan Fung property and paying rent to the Husband until July 2013.  After that, the Husband leased out Nan Fung Property until 2017.

15.In between, in 2012, the Husband and Wife purchased a property in Tai Po (“the Tai Po Property”). They had lived there until early 2014. The   Tai Po Property was sold in 2018 for HK$15.19 million, each of them share HK$5 million sale proceeds.

16.Since 2000, there were some changes to the family business structures. The Husband transferred 40% of his shareholding in MIL to the Wife’s brother. He retained the remaining 10%. In May 2015, for some reason, MIL was wound up.

17.In or about 2013, the Husband resigned from directorship of all other companies held by the Wife[1] and further transferred his shares in these companies to the Elder Daughter. 

18.By the end of 2013, the Wife resigned from directorship of MMC and transferred her 30% shareholding to the Husband and 10% to the younger daughter.

19.In 2014, the Husband closed down his factory in mainland China and at the same time, he moved out from Kingsford Height and lived with his parents.

20.In 2016, the Husband petitioned for divorce on ground of 2-year separation. The parties chose to act in person throughout the entire proceedings. Neither did the Husband seek ancillary relief in his Petition nor did the Wife state she has any in her Form 4. At time of Petition, both children had attained their age of majority and had completed full time education. Decree nisi was pronounced followed by a section 18 declaration. Decree absolute was pronounced on 19 April 2017.

The Husband’s reasons for commencing ancillary relief claim now

21.Since the decree absolute, the Husband has been living in the Nan Fung Property. On 17 January 2023, the Elder Daughter issued a letter to the Husband via her legal representatives claiming she is the sole beneficial owner of the Nan Fung Property and is contemplating to sell the property.

22.The Husband was astonished to learn the Elder Daughter’s plan and because of this, the Husband claimed he had become aware of the disparity of wealth between himself and the Wife. He alleged the Wife has kept all profits derived from the family business and has held the majority of family assets. The Husband then take out the present application.  

23.The Husband explained he was not legally represented at time of the Petition, he was not properly advised on the ancillary relief proceedings and thus was not aware of the impact of not applying for ancillary relief at that time. Without seeking ancillary relief from the Wife, the Husband said he will be deprived of an opportunity to seek disclosure from the Wife of the aggregate family assets accumulated during marriage.

24.The Husband further said the determination of beneficial ownership on Nan Fung Property is relevant to the size of the family assets and his intended claim on ancillary relief. It is the intention of the Husband to bring about an equal and fair distribution of family assets. Upon legal advice obtained recently, the Husband now seeks leave to commence an ancillary relief claim against the Wife.

25.The Husband also submitted in granting leave, the parties could achieve procedure economy by resolving both the beneficial ownership issue of the Nan Fung Property with the Elder Daughter and also the ancillary relief with the Wife together. It is also beneficial to both parties and the Elder Daughter that all three of them could participate in the Financial Dispute Resolution where the parties would be able to resolve all matters amicably.

The Wife’s Opposition

26.To the contrary, the Wife claimed there had been an agreement between herself and the Husband in 2013 both agreed to drop hands by retaining their own assets without ancillary relief claims against each other (“the No-Claim Agreement”).  Although not specifically pleaded, at some point, the Wife blamed the Husband having an extra marital relationship with a female during marriage. The No-Claim Agreement came along because the Husband had emphasized he “just wanted to leave the marriage”.  Such arrangement was also made known to both daughters.

27.The Wife went on to say notwithstanding the Husband has accumulated his assets during marriage, they shared sale proceeds from the sale of Bon-Point Flat and the Tai Po Property, the Wife estimated the Husband has with him some HK$14 million.

Applicable legal principles

28.To start-off with, the Court has jurisdiction to make orders for transfers or settlement of properties on granting a decree absolute or at any time thereafter (See section 6(1) of the Matrimonial Proceedings and Property Ordinance) (“the MPPO”).

29.The relevant provisions for seeking ancillary relief are section 25(1) of the MPPO and rule 68(2) of the Matrimonial Causes Rules, Cap 179A (“the MCR”).

30.Section 25(1) of the MPPO expressly states a party to the petition can make ancillary relief claim after filing of petition. However, if such application is not so made, section 25(2) thereof expressly states the ancillary relief application shall be made with leave. The section purposefully states the requirement is to ensure parties to the petition shall inform the other spouse of his or her ancillary relief claim at the earliest opportunity. Section 25 reads:

“25. Commencement of proceedings for financial provision orders, etc.

(1) Where a petition or joint application for divorce or a petition for nullity of marriage or judicial separation has been presented or made, then, subject to subsection (2), proceedings under section 3, 4, 5, 6 or 6A may be begun, subject to and in accordance with rules of court, at any time after the presentation of the petition or the making of the application; but—

(a) no order under section 4, 6 or 6A shall be made unless a decree nisi of divorce or of nullity of marriage or a decree of judicial separation, as the case may be, has been granted;

(b) without prejudice to the power to give a direction under section 26, no such order made on or after granting a decree nisi of divorce or of nullity of marriage, and no settlement made in pursuance of such an order, shall take effect unless the decree has been made absolute.

(2) Rules of court may provide, in such cases as may be prescribed by the rules—

(a) that applications for ancillary relief shall be made in the petition, joint application or answer; and

(b) that applications for ancillary relief which are not so made, or are not made until after the expiration of such period following the presentation of the petition, making of the joint application or filing of the answer as may be so prescribed, shall be made only with the leave of the court.

(3) In subsection (2), ancillary relief (附屬濟助) means relief under any of the provisions of sections 3, 4, 5, 6 and 6A.

[emphasis added]

31.Rule 68(1) of MCR governs the way a party to apply for ancillary relief. Parties to the ancillary relief proceedings shall plead their respective ancillary relief claim(s) in the petition or the answer to the petition. Otherwise, pursuant to rule 68(2)(a) thereof, such claim shall be initiated with leave of Court. The rule reads,

“ 68. Application by petitioner or respondent for ancillary relief

(1) Any application by a petitioner, or by a respondent spouse who files an answer claiming relief, for—

(a) an order for maintenance pending suit;

(b) a periodical payments order;

(c) a secured periodical payments order;

(d) a lump sum order;

(e) a settlement of property order;

(f) a transfer of property order;

(g) a variation of settlement order,

shall be made in the petition or answer, as the case may be.

(2) Notwithstanding anything in paragraph (1), an application for ancillary relief which should have been made in the petition or answer may be made subsequently—

(a) by leave of the court, either by notice in Form 8 or at the trial; or

(b) where the parties are agreed upon the terms of the proposed order, without leave by notice in Form 8.

(3) An application by a petitioner or respondent spouse for ancillary relief, not being an application which is required to be made in the petition or answer, shall be made by notice in Form 8.”

32.Granting leave to commence the ancillary relief claim is of discretionary nature, the following considerations shall be taken into account.

33.In M v. S (FCMC 10790 of 2004, 10 October 2007), HHJ Chu (as she then was) stated the application of rule 68(2) at paragraphs 33 - 35:

“33. It is clear that leave to apply for ancillary relief not made in the petition is not the applicant’s for the asking. In Marsden v Marsden 1973 2 ALL ER 851, it was held that a reason or explanation must be given for the omission of the ancillary relief claim from a petition. In that case, the parties came to an agreement about the custody of the children, and other matters were agreed on the basis that the wife had an interest in the matrimonial home. The husband was then granted a decree nisi and the decree absolute was expedited so that the wife could remarry. After the wife’s remarriage, the husband applied for leave to apply for a transfer of property order and for variation of the settlement. Leave was refused. It was held that since the husband had given no reasonable excuse or explanation for the absence of an application for a transfer of property or variation of settlement order in his petition, and there was no prospect that the orders would be made, the court would not exercise its discretion to grant leave.

34. As set out in paragraphs 16.6 and 17.5 of Rayden and Jackson On Divorce and Family Matters (18th Ed), there is no statutory time limit on when an application for ancillary relief has to be made. It is common practice for such an application to be made at the same time, or shortly after the petition has been issued.

35. Further, the court ought not to refuse leave to apply in any case in which on the evidence the applicant has or appears to have reasonable prospects of obtaining the relief claimed, or, to put it another way, has a seriously arguable cases (see Chaterjee v Chaterjee 1976 Fam 199).”

34.HHJ Chu (as she then was) cited Marsden v Marsden [1973] 2 ALL ER 851 in this case. In absence of a reasonable explanation of not pleading the ancillary relief claim in the petition (or in the answer as the case may be) and when there is no prospect of granting the ancillary relief order, the Court would not exercise its discretion to grant leave to that party.

35.The same principles are adopted in YWM v. SKB (Application for Ancillary Relief not made in Divorce Petition) [2007] HKFLR 230.  HHJ Chu (as she then was) granted leave to the petitioner. In this case, the petitioner wife sought leave to apply for ancillary relief some 8 ½ years after divorce. The parties are continuingly involved in carrying out business with various companies. Be it there was dispute on financial matters, the parties had believed it could be resolved privately other than by way of ancillary relief proceedings. Apparently, the parties are unable to do so and dispute arose. The wife in this case finally resorted to dispose of the company assets by way of ancillary relief claim. Leave was granted because there were ongoing dealings between the parties in contemplation to deal with their family assets.

36.On question of delay, HHJ Chu (as she then was) further elaborated in YWM that Chaterjee v. Chaterjee [1976] Fam 199 was case on point,

“36. The parties do not dispute the legal principles set out in Chaterjee v. Chaterjee. On the question of delay, Ormrod LJ in Chaterjee v Chaterjee has said that :

“Delay, if it really is delay in the sense of prejudicing the other party, may have an important influence on the justice of the case. So may conduct which can be described as “lulling” the other party into the belief that all claims have already been dealt with. Similarly it may be unjust to interfere with property rights after a lapse of time during which the other party has ordered his or her affairs in a reasonable and proper manner in the belief that the financial consequences of the divorce have been settled”.

37. The court, however, ought not to refuse leave to apply in any case in which on the evidence the applicant has or appears to have reasonable prospects of obtaining the relief claimed, or, to put it another way, has a seriously arguable case.  (see Chaterjee v Chaterjee)”

37.In summary, in exercising discretion to grant leave, the Court has to take into account the following:

(i)     reason(s) that the party seeking leave has omitted to claim ancillary relief in his or her petition (or Form 4 as the case may be);

(ii)    whether there is inordinate delay;

(iii)   whether the other side will be prejudiced if leave is granted; and

(iv)   whether the party seeking leave has a serious arguable case in the intended ancillary relief proceedings.

Issues

38.The issues of this leave application are:

(i)     whether the Husband’s reasons to explain his omission to seek ancillary relief at time of petition are valid;

(ii)    whether there is inordinate delay to apply for leave some 6 years after decree absolute;

(iii)   whether granting leave to the Husband would cause prejudice to the Wife; and

(iv)   whether the Husband’s intended ancillary relief claim can demonstrate he has or appears to have a serious arguable case.

Discussion

Issue (i) - The Husband’s explanation of omission

39.Notwithstanding the scale of family business and wealth, both parties had chosen to act in person in the Petition. Their intentions were well reflected in the Petition and Form 4 when no ancillary relief claim has been asked for. The Husband emphasized in his affirmation[2], which I accept, in doing so, he could maintain an amicable relationship with the Wife. As a father, he cared for the feelings of both daughters. 

40.This is not a case where the Husband disputed the existence of the No-Claim Agreement. Although the No-Claim Agreement was reached sometime in 2013, prior to the actual filing of the Petition in 2016, the parties had acted upon it smoothly before after the divorce. Apart from retaining their own assets, the Wife shared $5 million sale proceeds of Tai Po Property with the Husband in 2018.  

41.The existence of the No-Claim Agreement is well supported by  evidence of both daughters in their affirmations[3]. Both daughters said a family meeting was held in 2014, the Husband informed them he would not claim ancillary relief against the Wife.

42.Notwithstanding the No-Claim Agreement, the Husband said he has not obtain legal advice properly at time of Petition. He was unaware of the importance of applying ancillary relief in time. I am aware both the Husband and Wife are successful business entrepreneurs; it is doubtful the issue of ancillary relief between the parties has never come across the Husband’s mind.

43.That said, the Court is not bound by the No-Claim Agreement. In an ancillary relief trial, it is only one of the evidence that the Court will canvass in accordance with section 7 of the MPPO. The weight of the said agreement will be assessed in light of just and fairness between the parties. One of the factor the Court will take into consideration is whether that party has obtained independent legal advice. (See: Radmacher v Granatino[2010] UKSC 42, [2011] 1 A.C. 534; and SPH v. SA [2014] 3 HKLRD 497)

44.On this point, following Radmacher, the Husband without  obtained proper independent legal advice is more likely than not a reason to have omitted commencing for ancillary relief proceedings in the Petition.

Issue (ii) – whether there is inordinate delay

45.In YWM [supra], HHJ Chu (as she then was) cited Hill v. Hill [1998] 1 FLR 198 to illustrate how inordinate delay could have an impact on granting leave:

“70. In the case of Hill v Hill 1998 1FLR 198, where the wife applied to re-open capital claims following a period of 25 years of post-divorce cohabitation with the husband, Ward LJ had said that the essential question for decision was whether the order made at time of divorce represented a comprehensive financial settlement of the wife’s capital and property claims and concluded in that case that there had been no adjudication of and no disposal of the claim for a lump sum, and held that the court had the jurisdiction to entertain it. Further since the court had jurisdiction to allow a claim for a lump sum order, it was held that as the delay was caused by the fact that the husband and wife had resumed cohabitation, that gave the long delay a different quality, and as such the delay would not prevent the grant of leave.” [emphasis added]

46.Firstly, I remind myself the issue on inordinate delay can be one of the factor to be considered in accordance with section 7 of the MPPO when determining ancillary relief at trial.

47.The issue of the beneficial interest of Nan Fung Property has a bearing in deciding whether there is an inordinate delay in commencing ancillary relief proceedings.

48.The Husband honestly admitted the Nan Fung Property dispute between himself and the Elder Daughter is the triggering event to seek leave to commence ancillary relief against the Wife.  

49.The Wife explained in her affirmation at time of purchase of Nan Fung Property, a common intention of all was the Elder Daughter to be the beneficial owner, such purchase was an attempt by the Husband and Wife, as parents, to plan for the Elder Daughter financially. It was only the Husband, who has procured a sale of the Nan Fung Property in 2021 triggered the Elder Daughter to state her right by claiming she is the sole beneficial owner.

50.On the face of it, the dispute arising from Nan Fung Property has no relevance in the ancillary relief claim here. It is purely a dispute on beneficial ownership between the Husband and the Elder Daughter of which may be resolved in other Court.

51.However, if the dispute arising from Nan Fung Property was resolved in other court and if the Elder Daughter succeeded in obtaining a declaration of sole beneficial ownership of the property, the accommodation needs of the Husband will surface.

52.Speaking of inordinate delay in Hill v. Hill, the wife cohabited with the husband for a period of 25 years after divorce. The Court ruled the delay has a “different quality” even if the wife applied to reopen her capital claim against the husband 25 years after the divorce does not amount to an inordinate delay. 

53.The delay in this application has a “different quality” when time shall count from the moment the Husband was aware of his accommodation needs which may be dealt with by way of ancillary relief. The Husband took out his summons for leave on 23 March 2023, only 2 months from 17 January 2023, at a time when the Elder Daughter wrote to the Husband claiming beneficial interest of the Nan Fung Property. I accept from this perspective, the delay is justified on the part of the Husband to apply for ancillary relief. The Husband’s application for leave does not fall within the inordinate delay category.

Issue (iii) – whether the Wife is prejudiced

54.After reaching the No-Claim Agreement, in 2013, the Husband has acted on it by resigning from directorship of the family companies and transferring most of his shares to the Wife and the Elder Daughter. In 2014, the Husband had moved out from the matrimonial home to live with his parents. Since the pronouncement of decree absolute, the Husband moved in Nan Fung Property.

55.It is also understandable that the Wife had also continued her life with a belief that all ancillary relief matter have been settled. Pursuant to the No-Claim Agreement, the Wife was lulled into the belief that there will be no ancillary relief claim and all financial consequences have been settled privately. 

56.The Wife opposed by saying the Husband has substantive assets with him, she believed he has at least HK$5 million cash; HK$4.2 million sale proceeds from the sale of Bon-Point Property; another HK$5 million sale proceeds from the Tai Po Property. Having shared the sales proceeds with the Husband, she would have suffered prejudice in the ancillary relief proceedings now.

57.However, without taking into account the sale proceeds of Bon-Point Property and Tai Po Property, the Wife still has 2 landed properties registered under her name and were made subject to her undertakings not to dispose of. On the other hand, the Husband has with him some shares in MMC and Nan Fung Property. From what is before me, I see the Court is still able to decide on the ancillary relief on such assets.

58.In this respect, I do not see the Wife is prejudiced to the extent that ancillary relief proceedings should not be heard.

Issue (iv) – whether the Husband has a seriously arguable case on ancillary relief

59.In M v. S [supra], the vital part in the leave application should be whether there are prospects of obtaining an order now pleaded in the ancillary relief claim, the Court ought not to refuse leave if there were one.

60.In this case, the unresolved outstanding matters (or the Husband’s pleaded claim) on ancillary reliefs are (i) the Nan Fung Property issue and (ii) disparity of wealth issue.

61.The Nan Fung Property issue appears to be neutral because the dispute is between the Husband and the Elder Daughter. However, taking a closer look, on the evidence of the Wife and the Elder Daughter, I cannot rule out a possibility that the Elder Daughter may have a fair chance to obtain a declaration from other court that she is a sole beneficial owner of Nan Fung Property. If this had happened, as I have mentioned above, the Husband would have an arguable case on accommodation needs.

62.The disparity of wealth issue is left untouched.

63.I accept the Husband is seeking redress from the Court to rule on these issues. I also accept the Wife has with her landed properties and therefore the Husband is able to establish an arguable case on fair distribution of family assets in the ancillary relief proceedings. For such reasons, the Court should not refuse leave.

The outcome

64.After considering all factors and in all fairness, I shall exercise my discretion to grant leave to the Husband to commence ancillary relief proceedings.

65.The Wife’s undertakings dated 4 July 2023 shall be maintained until further order.

66.I also direct both parties to file their respective Form 8(s) within 14 days from the date of this decision.

Costs

67.I grant an order nisi that the costs of the Husband’s summons shall be in the cause of the ancillary relief proceedings. The costs order nisi is to be made absolute within 14 days in absence of application to vary by way of inter parte summons.   

Orders

68.I make the following orders:

(i)     Leave be granted to the Husband to commence ancillary relief proceedings.

(ii)    The Husband shall file and serve his Form 8 within 14 days hereof.

(iii)   The Wife shall file and serve her Form 8 within 14 days hereof, if so advised.

(iv)   A First Appointment hearing be fixed by the parties upon compliance of paragraphs (ii) and (iii) above.

(v)    The Wife’s undertakings dated 4 July 2023 to refrain from disposing two landed properties, namely (i) a unit in Hon Kwong Mansion; and (ii) A unit in Join-in Hang Sing Centre, be maintained until further order.

(vi)   There be a costs order nisi that the costs of the Husband’s summons be in the cause of the ancillary relief proceedings.

(vii)  The costs order nisi shall be made absolute in absence of application to vary by way of inter parte summons within 14 days from the date of this decision.

Mr Felix Li instructed by Messrs. Vitus Lawyers for the petitioner  

Ms Vivien Leung instructed by Messrs Haldanes for the respondent