Lsm v. Swcr and Others

FCMC 2161/2015

[2025] HKFC 102

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2161 OF 2015

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J U D G M E N T
(Third Party Interest)

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

1.This is the Petitioner’s (“the Wife”) application for determination of the following preliminary issues:

1)  The 1 share in Fast Team Cxxxxxxxxxx Lxxxxxx (“Fast Team”) was and is at all material times held by the 3^rd Respondent (“R3”) and subsequently the 4^th Respondent (“R4”) on trust for the benefit of the Respondent (“the Husband”).

2)  The said 1 share of Fast Team (“the Share”) was and is at all material times beneficially owned by the Husband.

3)  The Share forms part of the matrimonial assets.

4)  The disposition of the Share by R3 to R4 be set aside pursuant to s.17 MPPO.

5)  Alternatively, a declaration the disposition of the Share by R3 to R4 was and is a sham transaction.

BACKGROUND

2.The Wife was 18 years old and the Husband was 23 years old when they started dating. Within a short time of dating, they began cohabiting. A few years after they cohabitated, they established an interior designing company together. They soon became very successful and business expanded to Macau, China and Taiwan. They got married on 29 January 2005. According to the Wife, she discovered the Husband had an extra marital affair with R3 in or around 2014. Eventually the Wife filed for divorce. As at the date of the hearing, the Husband and R3 have 2 children together.

3.Though R4 was properly served in these proceedings, R4 remained absent throughout and did not file any documents for the purposes of these proceedings.

4.I set out the salient dates as agreed between the parties as per the Agreed Chronology in the table below.

5.Rays Cxxxxxxxxx and Rays Cxxxxxxxxxxx shall be collectively referred to as Rays.

Date	Event
1993	Wife and Husband began dating and shortly thereafter started cohabiting.
14 September 1998	Wife and Husband incorporated the company known as Rays Dxxxxx.
8 February 2002	Wife and Husband established another company, known as Fast Hxxxxx, to hold their assets including their matrimonial home at the time in Marina Cove.
4 December 2002	Wife and Husband incorporated Rays Cxxxxxxxxxx.
29 January 2005	Wife and Husband got married.
13 December 2010	Wife and Husband incorporated another company known as Rays Cxxxxxxxxx.
June 2011 – December 2011	The Wife left Hong Kong to pursue her studies in the UK.
30 December 2011	Rays Dxxxxx was dissolved.
2012	The Wife returned to Hong Kong. Though the Wife remained a shareholder and director of Rays, she became a housewife after her return to Hong Kong.
2014	The Wife discovered the Husband was having an extra-marital affair with R3.
27 October 2014	Wife and Husband separated.
18 February 2015	The Wife petitioned for divorce.
16 May 2016	R3 incorporated Fast Team and became the sole director and sole shareholder of the same.
30 September 2016	The Husband’s solicitors sent a letter to the Wife inviting the Wife to consider closing down Rays.
22 January 2018	R3 incorporated R4 in the British Virgin Islands.
12 February 2018	R3 transferred her share in Fast Team to R4.
15 November 2019	R3 resigned as the sole director of Fast Team.
19 February 2020	Fast Team appoints new director.
In or around June 2020	R3 sold and transferred shares in R4 to an unknown 3rd party for the sum of $100,000.
July 2020	The Husband established a health care business relating to antibacterial coating. This is not admitted by the Wife.
2021	The Husband became a consultant to a company known as Wxxxxxxxx Decoration. This is not admitted by the Wife.

6.I shall elaborate on the parties’ respective case on the specific issues in the relevant sections below.

7.In summary, the Wife claims the Husband and R3 established company known as Fast Team for the purposes of absorbing all of Rays’ clients, projects and its important employees. The Wife claims that by reason of various circumstantial evidence, the court should draw the inference the Husband and R3 had the common intention to establish a constructive trust whereby R3’s shareholding in Fast Team was held on trust for the Husband. The Wife mainly relies on documents she and her sister collected from Fast Team’s garbage disposal to make good her case.

8.The Husband and R3 deny the Wife’s allegations and specifically deny there was any constructive trust as alleged by the Wife.

THE ISSUES

9.The following are the issues of this case:

1)  Whether the documents collected by the Wife and her sister in Fast Team’s garbage disposal are admissible and what weight the court should give such documents.

2)  Whether there was a common understanding between the Husband and R3 that R3 would hold the Share on trust for and on behalf of the Husband.

3)  In the event the court finds the Share does beneficially belongs to the Husband, whether the disposition of the Share to R4 is a sham transaction or whether it is a disposition which should be set aside pursuant to s.17 MPPO.

THE LAW

10.HHJ S Lo succinctly and comprehensively summarized the relevant legal principles relating to common intention constructive trust in his judgement of ALDL v FTFC and anor [2024] HKFC 13 (unrep). I set out the relevant principles below:

“21. There is a presumption that the beneficial interest follows the legal interest, and the onus is on the party alleging that the beneficial interest is different: Leung Hang Lin and Another v Lam Mei Yung [2019] HKCFI 2819, §8(1). In the present case, the onus is on W.

22. The relevant legal principles of trust law are explained in Bhura v Bhura (No. 2) [2015] 1 FLR 153 at §8, Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §§46-50, and Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 at §§2.3-2.4.

23. In order to prove a common intention constructive trust, W has to establish that (a) there was a common intention of H and R2 that H would be the beneficial owner of the Landed Properties, (b) H had altered his position in detrimental reliance upon the common intention, and (c) it would be unconscionable for R2 being the registered owner to assert full ownership in reliance on her legal title to the Landed Properties: Liu Wai Keung’s case at §46.

24. For the question of common intention, W has to show either (1) an express ‘agreement, arrangement or understanding’ between the parties (ie H and R2) that the non-legal owner (ie H) was to have a beneficial interest or (2) that such an ‘agreement, arrangement or understanding’ is to be inferred from the parties’ conduct: Mo Ying v Brillex (CA), [5. 8]; Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327 (CA).

…

27. Presumptions of resulting trust and presumption of advancement may only be resorted to where the intention is not expressed. In Lui Kam Lau & Others v Leung Ming Fai [1994] 3 HKC 477, the court said that:

“Where a property is purchased in the name of one but with the money of another, the Court must ascertain the true intention of the parties as to whether it is the former or the latter who should have the beneficial interest in the property. Where there is admissible evidence of the actual express intention of the parties, the Court will act on such intention accordingly. But where the intention is not expressed, the Court must ascertain the intention of the parties objectively. In so doing, the Court will resort to two tools: the presumption of resulting trust and the presumption of advancement.”

28. W has the burden of proof of the resulting trust as she alleged. In Re Superyield Holdings Ltd [2000] 2 HKC 90, at 91F, the court held:

“..… (3) The burden of proof of a resulting trust fell upon the party asserting that the equitable right was not consistent with the legal title.”

29. It is also a well-established principle that ownership of an asset vis-à-vis a spouse and a third party should be ascertained by reference to the general law of property. In Prest v Petrodel [2013] 2 AC 415, Lord Sumption JSC said, at §37:

“Courts exercising family jurisdiction do not occupy a desert island in which general legal concepts are suspended or mean something different. If a right of property exists, it exists in every division of the High Court and in every jurisdiction of the county courts. If it does not exist, it does not exist anywhere. ”

…

32. I am of the view that in these preliminary issue proceedings, this court has the task to make finding of the primary facts and is entitled to draw the necessary inferences concerning the common intention of H and R2 at the respective time of the acquisitions of each of the Landed Properties, but not necessarily to draw adverse inference against H and R2 if they fail to furnish credible evidence as to their true intentions. In Jones v Kernott [2012] 1 AC 776, §§34-36:

“… As Lord Diplock also put it in Gissing v Gissing [1971] AC 886, 906:

“As in so many branches of English law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.”

The point has been developed by Nick Piska, “Intention, Fairness and the Presumption of Resulting Trust after ”Stack v Dowden (2008) 71 MLR 120. He observes, at pp 127-128:

“Subjective intentions can never be accessed directly, so the court must always direct itself to a consideration of the parties’ objective intentions through a careful consideration of the relevant facts … It is not that the parties’ subjective intentions are irrelevant but rather a finding as to subjective intention can only be made on an objective basis.”

In the meantime there will continue to be many difficult cases in which the court has to reach a conclusion on sparse and conflicting evidence. It is the court’s duty to reach a decision on even the most difficult case … The trial judge has the onerous task of finding the primary facts and drawing the necessary inferences and conclusions, and appellate courts will be slow to overturn the trial judge’s findings. ” [Emphasis supplied]”

WHETHER FAST TEAM SHOULD HAVE BEEN JOINED AS A PARTY TO THE PRESENT APPLICATION

11.Counsel for the Wife, Mr Leung, made extensive submissions on why Fast Team was not joined as a party and why it was not necessary to join Fast Team. In summary, Mr Leung submitted since the Wife is not seeking any relief against Fast Team and because Fast Team as a company has no competing claim to the Share, there is no need to join Fast Team. Mr Leung emphasizes the Wife merely seeks a determination as to who is the true beneficial owner of the share.

12.The Husband and R3 take no issue with Mr Leung’s submissions.

13.I therefore accept Mr Leung’s submission that joinder of Fast Team is not necessary to these proceedings. However, as I indicated during the trial to Mr Leung, since Fast Team is not a party to the proceedings, R3 does not give evidence for and on behalf of Fast Team. Mr Leung concedes this must be the correct position. Hence, evidence given by R3 does not represent the position of Fast Team.

DOCUMENTS COLLECTED FROM FAST TEAM’S GARBAGE DISPOSAL

14.The Husband and R3 do not dispute the admissibility of the documents collected by the Wife in Fast Team’s garbage disposal (collectively referred to as “the Discarded Documents”). Moreover, R3 does not take issue with the Wife’s assertion that the Discarded Documents belong to Fast Team. However, the Husband and R3 dispute the accuracy and reliability of the contents of the documents. R3 even confirmed she had tried to ask her staff, May, to give her information to confirm the contents of the documents but May was unable to do so.

15.The Wife has conducted an extensive and detailed analysis in attempts to persuade the court that the Discarded Documents show the following:

1)  Fast Team’s business and clients are the same as that of Rays

2)  Rays’ ex-employees now work for Fast Team

3)  The Husband carries out works for Fast Team’s projects

16.The Wife argues that by reason of the above, the evidence proves the Husband diverted all business and clients to Fast Team. She further argues that given the coincidental timing in which Fast Team was set up, the court should infer Fast Team was set up by R3, upon the Husband’s instructions, to absorb all of Rays’ business and clients.

Weight to be attached to the Discarded Documents

17.Mr Leung submitted that since the Husband and R3 do not dispute the admissibility of the Discarded Documents, the court must give full weight to the same. He relied on Order 27 rule 4(1) of the Rules of the High Court (Cap 4A) and submitted that since the documents are admissible, the court should also accept them as being authentic, thereby placing full weight on the same.

18.Moreover, Mr Leung takes objection to the purported late clarification by the Husband and R3 on their stance regarding the documents.

19.Having considered the parties’ submissions, I disagree the Husband and R3’s stance were unknown prior to trial. It is clear from the Husband’s Defence at paragraph 46 and R3’s Defence at paragraph 14, they both denied the Wife’s pleading relating to the Discarded Documents. Both the Husband and R3 deny the inferences drawn by the Wife from the Discarded Documents. Furthermore, the Husband in his affirmation dated 30 June 2020 had specifically opposed the Wife’s entire affirmation relating to the Discarded Documents. In summary, both R3 and the Husband have all along objected to the contents of the Discarded Documents.

20.I am of the view it is clear the Wife had been put on alert that the Husband and R3 do not accept the veracity of the contents of the Discarded Documents. Since the Wife seeks to rely on the contents of the Discarded Documents, it is for the Wife to prove the contents are accurate and true.

21.Paragraph 27/4/1 of the Hong Kong Civil Procedure 2025 (Vol 1) states:

“Where a document has been covered by a list of documents and no notice under O.27 r.4 has been filed in relation to them, the authenticity of such documents is deemed to have been admitted. However deemed admission does not go to the truth of their contents (Wong Chak Wing v Camelo Investment Ltd [2021] HKCFI 3710[1]).”

22.I agree with the commentary and agree that this must be the correct position in law. Admitting the authenticity of a document is not equivalent to admitting to the veracity of the contents therein because an authentic document can still contain erroneous or even false information.

23.In this case, the Husband had all along indicated he disputed the Discarded Documents. At no time did R3 ever indicate she agreed to the veracity of the contents of the document. The Wife therefore bears the burden of proving the contents of the Discarded Documents are true and accurate in the manner she claims them to be. It is not correct for the Wife to reverse the burden on the Husband and R3 and say they should prove the contents are false.

24.Hence, despite the assumption the Discarded Documents are authentic, the court must still consider whether the contents of the documents are true and what weight should be attached to the admissible heresay contained therein.

25.When considering the weight to be attached to admissible hearsay evidence, the court may have regard to the matters set out in s.49 Evidence Ordinance (Cap 8). I set out the provision as follows:

49. Considerations relevant to weighing of hearsay evidence

(1) In estimating the weight, if any, to be given to hearsay evidence in civil proceedings the court shall have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.

(2) For the purposes of subsection (1), regard may be had, in particular, to the following—

(a) whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness;

(b) whether the original statement was made contemporaneously with the occurrence or existence of the matters stated;

(c) whether the evidence involves multiple hearsay;

(d) whether any person involved had any motive to conceal or misrepresent matters;

(e) whether the original statement was an edited account, or was made in collaboration with another or for a particular purpose;

(f) whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight;

(g) whether or not the evidence adduced by the party is consistent with any evidence previously adduced by the party.

(Replaced 2 of 1999 s. 2)

[cf. 1995 c. 38 s. 4 U.K.]

26.Having considered the evidence, save and except matters admitted or conceded by the Husband and/or R3, I am of the view that little, if any, weight can be placed on the Discarded Documents.

27.Firstly, there is no evidence from Fast Team to confirm whether those documents belong to the company. Even if R3 confirms the contents of the documents, she gives evidence in her own capacity and not as a representative of Fast Team. Although I accept she is able to give evidence of her own personal knowledge on the documents, her evidence is not given on behalf of Fast Team. Hence, there is simply no evidence from Fast Team confirming the ownership of the documents.

28.Second, by the mere fact the Discarded Documents were gathered from Fast Team’s garbage disposal is telling of the fact that the documents were either erroneous or no longer useful. On the Wife’s own admission, some of the Discarded Documents were torn up and pasted back together. Documents that are no longer useful could be due to a variety of reasons such as being a duplicate, or erroneous. Save and except the documents relating to the Husband, none of the author of the documents were called as witnesses. In such circumstances, the court is unable to determine why and how the remaining Discarded Documents came into existence. In other words, (save and except those documents admitted by the Husband and R3) there is simply no evidence to prove the contents of the Discarded Documents are accurate and reliable in its entirety.

29.Third, in so far as the Wife seeks to rely on the documents purportedly issued by Fast Team, she must persuade the court the following underlying assumptions are correct before the court can place weight on the Discarded Documents purportedly issued by Fast Team:

1)  The Discarded Documents were drawn up by Fast Team’s employees.

2)  The employee whom drew up the document must either have had first-hand knowledge of the matters set out in the Discarded Documents or had received accurate information of the matters set out therein when drawing up the documents.

3)  The contents of the Discarded Documents is an accurate record of the employee’s knowledge on the matter at the time the documents were drawn up.

30.The Wife has simply been unable to adduce evidence to prove the underlying assumptions of the Discarded Documents are correct. Save and except the documents admitted to be drawn up by the Husband himself and the contents contained in the documents as admitted by R3, the Wife is unable to prove the remaining of the Discarded Documents were accurately drawn up or contain accurate information.

31.Fourth, I note the following of the Discarded Documents:

1)  Out of the 429 pages of Discarded Documents, the Husband and R3 have only confirmed 22 pages of either the document itself or the contents of the documents. This means there is no proof that the content of the remaining 407 pages of the Discarded Documents are true.

2)  Having pursued all of the Discarded Documents, I note that the majority of the documents (approximately 148 pages) are unidentifiable (for example, there is no company name on the document, documents purportedly belonging to other companies, incomplete documents etc.). This means it is unclear whether these unidentifiable documents belong to Fast Team.

3)  Some documents are dated before 2019 (e.g., purported Project Lists dated 2016, Projects Lists dated 2017, Project Lists dated 2018, Project Summaries dated 2018 etc.). Hence, not all of the Discarded Documents are contemporaneous.

4)  There are two documents entitled “Rays Dxxxxx and Cxxxxxxx Limited Extra Unbooked income from 2004 – 2015”. There has been no explanation during trial by any party as to why a document dated more than 4 years prior to the Wife’s search through Fast Team’s rubbish was found amongst the Discarded Documents. There is no explanation from any of the parties as why such a document is present. Moreover, there is no explanation why a document purportedly belonging to Rays would be found in Fast Team’s rubbish. This casts doubts over the origin or source of the Discarded Documents.

32.By reason of the matters set out above, save and except those admitted by the Husband and R3, I do not accept the Wife is able to prove the contents of the remaining Discarded Documents to be reliable, true and accurate. Hence, I am of the view little (if any) weight should be placed on the Discarded Documents that have not been verified and admitted to by the Husband and/or R3.

Inferences to be drawn from the Discarded Documents

33.As set out above, the Wife invites this court to draw the following inferences from the Discarded Documents:

1)  Fast Team’s business and clients are the same as that of Rays.

2)  Rays’ ex-employees now work for Fast Team.

3)  The Husband carries out works for Fast Team’s projects.

34.R3 in her evidence during trial has already admitted that some of Fast Team’s employees are in fact the ex-employees of Rays.

35.R3 also concedes that some of Fast Team’s clients were previously Rays’ clients. Her explanation was that her employees Cathy and Ka Lok brought in the clients to her company.

36.As for projects undertaken by Fast Team for clients who used to be with Rays, R3 denies any knowledge that the projects used to be Rays projects.

37.Both R3 and the Husband deny the Husband works for Fast Team. Although both agree the Husband gave limited assistance in respect of one project, both denied the Husband was in charge of or worked as a designer in any of Fast Team’s projects.

38.I have considered the evidence and submissions of the parties. For reasons given hereinabove, I explained why I place no weight on the Discarded Documents of which have not been admitted and/or verified by the Husband and R3. I am therefore unable to draw the inference the Husband worked for Fast Team from the Discarded Documents. In spite of the Husband’s admission to five documents that belonged to him, I maintain my view this admission alone cannot cause the court to infer he worked at Fast Team. Furthermore, there is nothing inherently implausible or unreasonable about Husband’s explanation for using Fast Team’s copying machine to copy private confidential documents. I therefore do not agree the presence of Husband’s personal documents amongst the Discarded Documents to give rise to the inference the Husband must also be working at Fast Team.

39.Mr Leung relies on an email dated 13 July 2016 sent by Ka Lok to the Husband to show that the Husband was involved in Fast Team’s business. The email reads as follows:

“高sir 呀Ben,

附上david lane x號屋圖紙， 請睇睇，

Francis都想跟您地拎一拎廚櫃備佈局方案, 請看看會否有些建議給他,

稍後會再傳客人要求廚房電器的資料給兩位看看, Thank you”

40.However, there is no context to the email. There is no evidence as to why it was sent, who gave instructions to send the email to the Husband, and what the purpose of sending the email was. The wording of the email seems to be addressed to more than one person and is addressed to “高sir” not to the Husband. The Husband explained 高sir was R3’s license agent and was not a reference to himself. Furthermore, the Husband explained the project referred to in the email was not a project of Rays. He admitted that he referred this project to Fast Team because Rays was not knowledgeable in restaurant projects.

41.Given the lack of context in which this email was sent and there being anomalies in the message itself, I find there to be no evidential basis to draw the inference the email proves the Husband’s beneficial interest or work involvement with Fast Team.

42.As for the assumption Fast Team has the same projects as Rays, I do not accept the Discarded Documents prove Fast Team took up the exact same projects as Rays. I note when Mr Leung showed various project lists amongst the Discarded Documents, R3 did conceded the client names were correct. However, she did not concede to all project names being correct. Furthermore, the project names are mainly the location of the project (e.g. shopping mall location). This in itself cannot prove the project nature is the same as that previously carried out by Rays. Even if the project is located in the same location as Rays’ previous projects for the same client, there is no proof the works carried out by both companies are the same. As further explained below, I am not satisfied the Wife is able to prove Fast Team’s projects are the same projects as Rays.

43.I am therefore of the view there is limited (if any) inferences that can be drawn from the Discarded Documents.

WHETHER R3 HELD THE SHARE ON TRUST FOR THE HUSBAND

44.The Wife does not rely on an express declaration of trust between the Husband and R3. She argues there was a common intention constructive trust.

45.As per established authorities, the Wife must prove there was a common intention between the Husband and R3 that the Husband would be the beneficial owner of Fast Team via the Share.

46.Mr Leung’s closing submissions submitted 4 main reasons why the evidence shows there was a common intention trust created between Husband and R3:

1)  The relationship between the Husband and R3 is one in which there is propensity to create a constructive trust.

2)  There was no legitimate reason why Rays could not continue to operate after 2016.

3)  Fast Team was incorporated for the sole purpose of taking or absorbing all of Rays’ clients.

4)  The creation of the constructive trust can be inferred from the following conduct of the Husband and R3:

a)  95% of Rays’ clients and projects were diverted to Fast Team;

b)  Fast Team used the same contractors and suppliers as Rays;

c)  The key employees of the Rays and Fast Team were exactly the same;

d)  The Husband’s involvement in Fast Team was substantial;

e)  The Husband used assets and funds belonging to Fast Team;

f)  The Husband’s increased standard of living is inconsistent with his claim of impecuniosity;

g)  R3’s lack of involvement and knowledge of the business of Fast Team means she could not have been the true owner of Fast Team; and

h)  R3’s purported sale of Fast Team and the circumstances of the transfer are suspicious and questionable.

47.The Wife’s case can be paraphrased as follows: The Husband diverted all business from Rays to Fast Team, and caused all of Rays ex-employees changed over to work for Fast Team. This diversion of business and employees to Fast Team was pre-mediated and facilitated by the intimate relationship between the Husband and R3. Since R3 does not have any knowledge in design, she would not be capable of taking over the Rays’ projects. Therefore, it must follow that the Husband would work on the projects as Fast Team’s designer. The inference from all the circumstances is that the Husband and R3 planned to set up Fast Team with the intention of taking all Rays’ business and that the true beneficial owner of Fast Team was the Husband.

48.I find the Wife’s reasoning flawed, unsupported by evidence and logically fallacious.

49.Firstly, the Wife’s argument relies on heavily the assumption she is able to prove the Husband has diverted Rays’ business to Fast Team.

50.This court is not asked to adjudicate on whether there has been any breach of fiduciary duties by the Husband to Rays or to the Wife in her capacity as an equal shareholder and/or director of Rays. This court is not asked, nor able, to adjudicate on whether there has been a diversion of a maturing business opportunity by the Husband. This court is simply not in a position to make findings relating to breach of fiduciary duties (if any) and whether there has been a diversion of maturing business opportunities (if any).

51.Whether or not Rays’ business or its projects have been diverted to Fast Team entail detailed and complex proof from the Wife. For the Wife simply to draw an inference because Fast Team also works for the same clients as Rays and may have similar project names is to oversimplify matters. Many of Rays’ clients are international brands with a number of branches in various parts of Hong Kong. Just because they commission Rays to furnish a shop in one shopping complex does not mean they would only commission Rays for the furnishing of all their branches throughout Hong Kong.

52.The Wife claims the industry practice is that such clients would only work with one designer house. However, this is not supported by any evidence except for the Wife’s oral testimony.

53.Furthermore, there is no proof that project lists shown to R3 contain an exhaustive list of all of Fast Team’s clients and/or projects. Even if, for sake of argument, the Wife is able to prove Fast Team has some of the same clients as Rays used to have, there is no proof as to whether these clients make up a large portion of Fast Team’s total client base. I therefore fail to see what inferences can be drawn from R3’s admission that some of the client names are as per the project lists.

54.More importantly, there is no evidence to prove the Husband solicited Rays’ clients to change over to Fast Team. The Husband merely admitted to referring some of Rays’ clients to Fast Team after Rays ceased operations. There is no further evidence on how many clients he referred, in what context he referred them to Fast Team, or under what circumstances he referred them to Fast Team. I note R3 claims the clients were brought over to Fast Team by a few staff. However, there is no evidence to prove the Husband instigated, coaxed or in any way caused the employees to bring Rays’ clients over to Fast Team.

55.There are many reasons which could affect the commercial decision of Rays’ clients to commission Fast Team for various projects. There is simply no evidence to shed light on why these clients commissioned Fast Team for various works.

56.As for the assumption that the Husband diverted the same projects Rays was working on to Fast Team, again there simply is no proof the contents of the projects are the same. I note the project names are generally just references to the location of the project (for example the shopping mall) and the client’s name.

57.Hence, the foundational assumption of the Wife’s argument is unsound and lacks evidential proof.

58.Another assumption the Wife makes in her case is that because R3 has no knowledge in design, Fast Team is incapable of taking on any design projects. The Wife concludes that for Fast Team to take on any design projects, Fast Team must have had the assistance of the Husband.

59.This is not only logically flawed but is also without evidential basis. Not only is the Wife unable to prove what Fast Team’s projects are about and whether any design element is involved, but she is also unable to prove that Fast Team is incapable of taking on projects with a design element. As explained by R3, she has the option of outsourcing the designing element to freelance designers. Alternatively, her staff Ka Lok is a designer himself and able to carry out designing jobs. There has not been any rebuttal evidence from the Wife on the same.

60.There is no dispute by the Husband and R3 that the Husband did assist R3 on one of Fast Team’s projects. However, the Husband’s assistance was limited to negotiating terms with the client. In the end, R3 confirmed that Fast Team merely acted as a translator in the project. Again, there is no evidence to show the Husband’s involvement was anything more than that. I am of the view that even if the Husband did assist in one project, one cannot be extrapolated this to mean the Husband must therefore be a beneficial owner of Fast Team.

61.For the sake of argument, even if the Wife was able to prove the Husband diverted some of the clients to Fast Team or that he even diverted some business to Fast Team, it is logically flawed to then directly draw the conclusion he must be the beneficial owner of the Fast Team. It is also logically fallacious to assume that any diversion of business can give rise to the inference the Husband is the beneficial owner of the Share.

62.This is not the case where the Wife was a housewife throughout the entire marriage and her evidential proof was at the mercy of the Husband’s disclosure. The Wife was an equal shareholder of Rays and had equal access to all of Rays’ accounts and documents if she so wished. Her position in Rays is equal to that of the Husband. Therefore, if she is unable to offer any concrete proof that Rays’ existing businesses and clients have been diverted and relies heavily on assumptions which are full of lacunas, the court should be hesitant to draw such adverse inferences based on those assumptions. This is especially so when any consequential adverse inference based on the flawed assumptions require cognitive leaps in logical reasoning to justify the inference.

63.Second, the Wife makes a flawed assumption about Fast Team’s employment of Rays’ ex-employees. The Wife assumes the employees quit working for Rays because they were solicited by the Husband to work for Fast Team.

64.The employees are independent adults with their own free will. To assume they would change over to work for Fast Team just because the Husband asked them to do so is naïve and without evidential basis. The decision of an employee to quit a job is not necessarily related to the reason why they join another company. The employees may have quit Rays for a variety of reasons and may have done so whether or not Fast Team existed. An example of this is the resignation letter purportedly from May. In this resignation letter, May explained the reason she decided to quit working for Rays, despite having worked for the Husband and Wife 15 years, is because she suffered immense pressure from “handling the divorce case between you two.”

65.Furthermore, the decision of Rays’ ex-employees to join Fast Team may involve many considerations including monetary, career opportunities etc. Without any evidence from the ex-employees of Rays to explain why and how they came to join Fast Team, it is too simplistic for the Wife to assume the Husband is the sole reason why Fast Team came to employ Rays’ ex-employees.

66.Third, even if I accept Fast Team was set up by R3 for the purposes of absorbing some of Rays’ ex-employees, this does not equate to Fast Team being set up with the intention of being beneficially owned by the Husband.

67.The Husband does not shy away from admitting he felt sympathy for leaving his ex-employees unemployed. The Husband explained Rays became inoperable due to the parties’ conflict caused by the divorce. He admitted he did mention to R3 she could consider taking the employees on.

68.In so far as R3 seems to have given inconsistent evidence relating to whether Fast Team was set up for the purposes of taking on some of Rays’ employees. I note the R3 gave a different version at trial saying that she actually all along wanted to set up a company, whereas in her affirmation she claims to have set up Fast Team, partly, so that some of the Rays’ ex-employees can continue to work in Fast Team. I reject R3’s evidence in trial which is inconsistent with that in her statement on this issue.

69.However, even if I accept R3 wanted to absorb some of Rays’ employees via Fast Team, the Wife is still unable to prove the connection between setting up the company for the purposes of providing employment to Rays’ employees and R3 intending to hold the Share beneficially for the Husband. There is clearly a gap in the Wife’s logical reasoning and/or argument on this matter. I am of the view that to recommend alternative employment for ex-employees and possibly even recommending clients to a new company is far from intending to own a company beneficially.

70.As for the other reasons set out in Mr Leung’s submissions, I do not propose to deal with each of the remaining submissions. In general, I find some of the Wife’s submissions to be an inaccurate summary of the evidence. For example, the Husband has never claimed to be impecunious. His evidence was that he wanted to stop working and enjoy life. He freely admitted that when Rays stopped operating, he had enough savings to not work for a period of time and to engage in his own hobbies such as diving and motorcycling.

71.I also find some of Wife’s submissions relating to the conduct pointing to the existence of a common intention to be non-starters. For example, Fast Team’s contractors and suppliers cannot be indicative of whether there is a common intention trust. There is no evidence as to how this is even relevant to the issue. There are many companies in Hong Kong working in the same field whom may share the same contractors and suppliers. It obviously depends on the field of work, the scarcity of the service offered, and the pool of available suppliers or contractors at the material time when the work is required to be done. Sharing of suppliers and contractors on its own is of no assistance to the Wife or to this court without any context.

72.As for the Husband using the Range Rover purchased by Fast Team and having paid for it initially, I note there is no evidence to rebut the Husband’s evidence that Fast Team reimbursed the Husband for the car payment. Again, the Wife claims the Husband should provide proof of the reimbursement but this is reversing the burden of proof. If the Wife’s case is that the Husband has intermingled his finances with Fast Team, it is for the Wife to prove the same. There is no duty on the Husband to disprove the Wife’s theory of events.

73.Moreover, by reason of the Husband and R3’s relationship, I do not find it inherently unbelievable that R3 would purchase a vehicle under Fast Team’s name and allow the Husband to freely use the same. I agree that Husband and R3 have tried to downplay their level of intimacy in these proceedings. However, this in itself does not mean they are incredible witnesses on all aspects of their evidence. I find nothing strange in the Husband having access to R3’s car.

74.As for the Husband’s admission he asked Fast Team not to make a profit on Sxx Yau’s renovation because Mr Yau charged him a low rental for the house in which he live in, I do not find this indicative of any beneficial interest. I do not find it unbelievable the Husband would ask R3 for a favour in taking on a project at cost price, especially when R3 would most probably stay at the house as well. If the Husband had any beneficial interest in Fast Team, there would be no need for him to ask R3 for any favours. He could simply direct the price to be paid for the project.

75.The Wife argues that all matters looked at holistically prove the Husband is the beneficial owner of the Share and that there was a common intention between the R3 and Husband to establish a constructive trust to achieve the same. However, for reasons already set out above, the Wife is unable to prove the facts in which she relies on for the said inferences. Her reasoning as to how she arrives at the conclusion the Husband is the beneficial owner of Fast Team is simply flawed and full of lacunas.

76.Having considered the evidence and submissions of the parties, I am of the view the Wife’s case is weak in evidence (if any) and is logically unsound. I do not accept the Wife is able to prove there was any common intention between the Husband and R3 that Fast Team should belong to the Husband beneficially.

77.Although I agree the Husband and R3 may not have been forthcoming on some areas of their evidence, I do not find them to be inherently incredible in other aspects of their evidence.

78.It is for the Wife to prove to this court Fast Team was set up by R3 with the common intention that the Husband would be the beneficial owner. She simply is unable to do so.

79.I am also of the view the Wife is unable to adduce sufficient evidence from which this court can draw inferences of common intention between the Husband and R3 that R3 would hold the Share on trust for the Husband. I therefore decline to draw the inferences as proposed by the Wife.

80.As for the presumption of advancement and resulting trust, this has not been relied on by the Wife. In any event, since R3 is a third party and not a spouse, such presumptions are not applicable.

81.For reasons given above, I find the Wife unable to prove the Share in Fast Team beneficially belonged to the Husband or that there was a common intention between R3 and the Husband that R3 would hold the said share on trust for the Husband.

82.Since I do not accept the Share beneficially belongs to the Husband, the rest of the Wife’s claims as set out in paragraph 1 of this judgment falls away.

83.I therefore dismiss the Wife’s claim and paragraphs 2 – 4 of her summons dated 17 January 2020.

84.I see no reason why costs should not follow the event. I therefore make a costs order nisi as follows:

1)  The 1^st and 3^rd Respondents’ costs of the Petitioner’s Summons dated 17 January 2020 and the Petitioner’s claim as set out in her Points of Claim dated 18 July 2022 (including all costs reserved) be paid by the Petitioner, to be taxed if not agreed.

2)  There be no order as to costs between the Petitioner and the 4^th Respondent (including all costs reserved).

3)  Unless any party applies to vary the costs order nisi within 14 days hereof, the costs order shall become an order absolute.

Mr Eric Leung and Ms Ema Leung instructed by Messrs Alvin Cheng & Rosaline Choy for the Petitioner

The 1^st Respondent acting in person

Mr T. C. Wong of Messrs T C Wong & Co for the 3^rd Respondent

The 4^th Respondent acting in person