Tan Li Hui Cheng v. Tan Kian Chee

Case No.HCMC 6/1997[1997] 4 HKC 94

Court

High Court CFI

Date17 Nov 1997

Judge—

Case Document

100%Judiciary

HCMC000006/1997

1997, No.DJ6

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

(DIVORCE JURISDICTION)

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BETWEEN
	TAN LI HUI CHENG	Petitioner
	AND
	TAN KIAN CHEE	Respondent

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Coram: The Hon Mrs Justice Le Pichon in Chambers

Dates of Hearing: 14 and 17 November 1997

Date of Decision: 17 November 1997

Date of Reasons Handed Down: 26 November 1997

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REASONS FOR DECISION

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1. On 15 October 1997, Deputy Judge Day continued an ex parte injunctions granted on 29 September 1997 and 3 October 1997 on the application by the Petitioner ("the wife") to restrain respectively the Respondent ("the husband") from disposing of the net proceeds of sale of the matrimonial home situated at Flat H, 39^th Floor, Goldwin Heights, 2 Seymour Road, and the Respondent's solicitors from delivering to the Respondent the net proceeds of sale, save that the sum of S$400,000 or HK$2 million was to be released from the net proceeds of sale to the OCBC Bank in payment of the overdraft in Account No.503-061111-001 which is the account of the Respondent's Singapore company, Shye Lian Manufacturing Pte Ltd. The matters then before the Family Court, including interlocutory injunction and divorce proceedings, were transferred to the High Court. By a Consent Order made on 29 October 1997, the Petitioner's two summonses for the continuation of the ex parte Orders against the Respondent and the Respondent's solicitors respectively, and the Respondent's summons to discharge those ex parte Orders were adjourned and came on before me on 14 November. At the conclusion of the hearing on 17 November, the interlocutory injunctions granted to the Petitioner were continued and the Respondent's summons to discharge them dismissed. The reasons appear below.

Background facts

2. Whilst many disputed issues arise, which cannot be resolved in this application, what is common ground is set out below.

3. The Petitioner is Korean by birth but she has given up her Korean nationality. She is thus not entitled to live in Korea but only to visit not more than twice a year for periods of up to 15 days each. She holds a Taiwanese passport having been adopted by her Taiwanese godmother but has never actually lived in Taiwan. She met the Respondent in late 1989/early 1990 in Korea whilst she was a student at the university there and acted as an interpreter for the Respondent who was on a business trip. She began making visits to the Respondent in Hong Kong from late 1990 and a serious relationship developed between them. The Petitioner first came to Hong Kong on a visitor's visa and subsequently obtained an employee's visa through the Respondent's Hong Kong company and has remained in Hong Kong on that basis for just under 7 years. She married the Respondent in June 1992 and their son was born some seven weeks later, on 11 August 1992.

4. The Respondent used to have a business here known as Shye Lian (HK) Manufacturing Co Ltd which was incorporated in Hong Kong in 1987. He is Malaysian Chinese and became a citizen of Singapore in 1994. The Respondent also has business interests in the Dominican Republic where he has invested in a lottery business.

5. The commencement of the relationship between the parties coincided with the Respondent's plans for an eventual removal from Hong Kong to Singapore. Certainly, by the time of the Petitioner's marriage to the Respondent, the Respondent was in the process of acquiring, and shortly thereafter did acquire, a residence in Oxley Walk in Singapore as well as office premises at Cititech Industrial Building, Singapore. Since late 1992, the Respondent has been spending increasing amounts of time in Singapore and in fact that is where he currently lives and where he has been living since about 1995. The Oxley Walk property was sold and a house in Valley Road was purchased in late 1994 for S$2.9 million.

6. The marriage has been far from smooth: without going into the contentious issue of how it came about, the fact is that on 6 October 1992, less than four months after the marriage, the parties entered into a Deed of Separation. A few days later, on 10 October 1992, the Petitioner left the Respondent and their baby son of about two months, returning only in early January 1993.

7. However, within about seven weeks after the Deed of Separation, by 30 November 1992, the Respondent "married" one Qian Jing in Shanghai. The Petitioner learnt of and tolerated that relationship to the extent of agreeing to Qian Jing living with them in Hong Kong in the fall of 1993. The menage a trois lasted for about three months during the later stages of Qian Jing's pregnancy. This lady bore the Respondent a son who was born on 10 December 1993 in Singapore. Until about a year or so ago, Qian Jing lived in Singapore with the Respondent and their son.

8. At the end of 1993, whether or not it had anything to do with the three-month arrangement, the Respondent purchased a workshop in Kwai Chung at the cost of $3.1 million for the Petitioner. The Kwai Chung property is mortgage free and currently yields a rent of $15,000 a month. It is the Petitioner's principal if not only asset of any substance. Shortly thereafter, in February 1994, the Deed of Separation was cancelled.

9. Whilst over the years since 1987, the Petitioner has, directly or indirectly, via his Hong Kong company owned residential and/or office premises, it is common ground that as of June 1997, the only property the Respondent owned in Hong Kong was the Goldwin Heights flat. That has been the parties' matrimonial home since late 1995.

10. On 3 June 1997, the Petitioner entered into a sale and purchase agreement of the matrimonial home as the Respondent's attorney. The sale price was just under $13.5 million and completion was scheduled to take place on or before 30 September 1997. In the early part of 1997 the Petitioner acceded to the Respondent's repeated requests to move to Singapore, the cost of living being lower there and the Respondent being a citizen of Singapore was in a position to sponsor the applications required for the Petitioner and their son. The Petitioner said that she agreed because she believed that her relationship with the Respondent could stabilize and improve, Qian Jing being no longer on good terms with the Respondent. It was also the parties' intention that the net proceeds would leave Hong Kong: according to the Petitioner, it would be used to buy a new home in Singapore for the family; according to the Respondent, they would be used to repay the OCBC Bank since he already owned a home at Valley Road in Singapore.

Recent events

11. I now turn to deal with the events which led to the applications for interlocutory relief by the Petitioner.

12. In mid September, some two weeks prior to the scheduled completion date, the Respondent returned to Hong Kong. According to the Petitioner, when asked about the status of the applications for migration to Singapore, the Respondent apparently changed his stance: he would take the Petitioner to Singapore only if she agreed to divorce him without asking for any financial provision. He also intimated that he would return to Hong Kong on completion to collect the balance of the proceeds of sale. The Petitioner states that this caused her to realise that the Respondent had made a calculated attempt to sell the matrimonial home and to take the proceeds of sale out of the jurisdiction so as to defeat any claim by the Petitioner for financial provision in matrimonial proceedings.

13. On 25 September 1997, the petition for divorce was filed based on the Respondent's unreasonable behaviour. The Respondent did not respond to the Petitioner's request made on 26 September that the balance of the net proceeds he paid into a stakeholder's account. On 29 September, the Petitioner made her ex parte application based on section 17(1)(a) of the Matrimonial Proceedings and Property Ordinance ("the Ordinance") to "freeze" the net proceeds of sale pending determination of her application for ancillary relief. Completion was delayed and on 3 October, the Petitioner obtained an Order restraining the Respondent's solicitors from delivering to the Respondent the net proceeds. At the hearing of the inter partes summons on 15 October, the injunctions were continued save that S$400,000 (or HK$2 million) from the net proceeds were released to settle an overdraft of the Respondent's company in Singapore with OCBC. There is therefore approximately HK$3.8 million left of the net proceeds which is now subject to the Orders made.

14. Both parties have filed lengthy affirmations.

15. There are disputed issues of fact which as noted above cannot be resolved on affidavit. In summary, the Respondent's case is that the ex parte injunctions ought to be discharged because of material non-disclosure on the part of the Petitioner at the time she made her ex parte applications. Irrespective of the question of non-disclosure, the Respondent's stance is that the Petitioner has not shown that she has an arguable case and/or she has not made out a case appropriate or sufficient for an injunction to be granted.

Should the injunctions be continued?

16. The following facts are not disputed : the marriage of the parties in June 1992, the birth of the son of the marriage in August 1992, the matrimonial home having throughout been in Hong Kong, the presentation of a petition for divorce on the ground that the marriage has broken down irretrievably. Although the accuracy of some of the allegations in the petition has been challenged by the Respondent, such as whether the Petitioner is "domiciled" in Hong Kong, and the allegation in the petition that it was the Respondent who left the matrimonial home in October 1992 is now acknowledged by the Petitioner as wrong, it has not been shown that the petition (which the Respondent proposes to contest) is wholly misconceived in that the Petitioner is bound to fail in limine.

17. Whether or not the Petitioner is domiciled in Hong Kong as she alleges, there can be no doubt that she qualifies to present a petition under section 3 of the Matrimonial Causes Ordinance. Such a petition may be presented based on domicile, habitual residence in Hong Kong for the past three years, or substantial connection with Hong Kong. In any event, the fact that the Petitioner is presently in Hong Kong under a visa granted by the Petitioner's former company does not preclude her from having acquired a domicile of choice in Hong Kong. In a few weeks' time, the Petitioner will have completed a seven-year stay in Hong Kong and will become a permanent resident. She has given up her Korean nationality and she has never lived in Taiwan although she holds a Taiwanese passport. Whilst the Petitioner may or may not be able to make good that she has acquired a domicile in Hong Kong, she is unquestionably in a position to present a petition.

18. The marital history has been chequered, if not tempestuous. Though not raised in the petition, on the evidence before the Court, it is clear that the Respondent has committed adultery.

19. Throughout her association with the Respondent and certainly after their marriage, the Petitioner was totally dependent on him for support. She has not worked other than on a part-time basis as an interpreter for his company when it was in operation in Hong Kong. He has always provided for her and the child of the marriage. Since the sale of the matrimonial home, the Petitioner now lives with her son in Kowloon in a rented room of 100 sq.ft. at the cost of $4,300 a month. Her only source of income is the rent of $15,000 a month from the Kwai Chung property.

20. In those circumstances and given that there is a child of the marriage who is only about five years old, in the words of Fuad V-P in Will v. Will & Anr. Civ App 1992, No.211 (at p.10), "it will surely be extremely unlikely that the spouse ... will not have some legitimate claim to at least a part of the family assets involved."

21. The Respondent has filed lengthy affirmations dealing with his current financial plight.

i)	His investment in the lottery business in the Dominican Republic known as Asean 4D (Games Corporation SA) ("Asean 4D") has been little short of disastrous. There is an affidavit from Mok Kwok-keung filed on behalf of the Respondent. Mr Mok was the internal auditor and accountant for Asean 4D between June and September 1997. He states that the Respondent's investment in Asean 4D "has been a complete failure, with the result that [the Respondent] has suffered losses so far of US$2.2-2.5 million. The business was not operative at any profit at all and had come to a complete standstill" by the end of September 1997. Mr Mok was further of the view that "Unless very substantial time, money and efforts were to be further invested into the business, there was vitually no hope for the business to be operable."
ii)	Shye Lian Singapore has been running at a loss. It owes OCBC Bank some S$3.2 million as of mid October 1997.
iii)	Shye Lian Hong Kong went into liquidation in December 1996. However, it is to be noted that the liquidation was voluntary and not compulsory.
iv)	The Respondent owes a Singaporean by the name of Neo Yu Huat S$800,000 repayable in part on 21 December 1997 and as to the balance on 20 February 1998.

22. As regards his assets, the Respondent says that -

i)	the only assets he has in Hong Kong are the net proceeds of sale of the matrimonial home;
ii)	his residence at Valley Road, Singapore and the office premises at Cititech which were purchased respectively at S$2.9 million and S$1.138 million are charged to OCBC to secure credit facilities and according to the Respondent are insufficient to cover advances made. Moreover the Economic Development Board ("EDB") has a prior interest in the first S$0.5 million of proceeds of Cititech.

Essentially, the Respondent's position is that he is very much "in the red" and heavily in debt.

23. But the fact that the Respondent's liabilities may exceed his assets is not, of itself, a reason why the injunction should not or cannot continue. Indeed, his reasons for requiring the net proceeds have an elusive quality about them: having successfully obtained the release of S$400,000 or HK$2 million to discharge the temporary overdraft owed to OCBC, he appears to be saying that the funds are now required for effecting on-line computerisation for Asean 4D. But what are the concrete proposals? What stage has the project reached? What will it cost? How is it to be financed? There is nothing to substantiate his bare assertion which has been left blissfully vague and which does not sit at all happily with Mr Mok's evidence as to the prospects for Asean 4D. Moreover, what amount would be required to turn the business round is not apparent from Mr Mok's affirmation. There is certainly no evidence that HK$3.8 million is what is required or that on-line computerisation is the answer.

24. Then there is the Respondent's other reason, viz. to repay debts to OCBC and Mr Neo about to fall due. If one were to take the Respondent's evidence at face value, the net proceeds that are in issue will meet but a fraction of his liabilities unless the Singapore properties are sold. Cititech was purchased in 1992 for S$1.138 million and Valley Road in 1994 for S$2.9 million. There is a 1994 valuation of Valley Road of S$2.5 million on a forced sale basis. The Respondent says that those values have fallen by another 20% but there is no current valuation to substantiate that assertion. Even with realizing the Singapore properties, the net proceeds of HK$3.8 million will not go very far since debts about to fall due to OCBC and Mr Neo total S$4 million or HK$20 million. On the Respondent's estimate of the value of the properties, after providing for EDB's prior interest, the proceeds together with the HK$3.8 million will hardly be sufficient; there is certainly no question of any "surplus" for any on-line computerisation. The two stated purposes are thus not readily reconcilable.

25. The Respondent's picture of his financial condition is to be viewed with a degree of scepticism. The Petitioner has shown that the Respondent has an account with Citibank in New York in his own name; that as of May 1997, he clearly also had an account with the United Overseas Bank Limited, Hong Kong Branch, from which funds were transferred to his New York Bank; he did not disclose these accounts in his affirmation. Further, when the credit facilities of the S$4.4 million were granted to Shye Lian Singapore in April 1996, OCBC was aware of EDB's interest over Cititech of S$0.5 million. Whilst the facilities were guaranteed by the two directors of Shye Lian Singapore, namely the Respondent and the Petitioner, such facilities are usually made on the strength of the security offered rather than personal guarantees. It is thus unlikely that the Bank would have agreed to a credit limit that exceeded the then values of the properties offered as security after taking into account the EDB's first claim to the S$0.5 million.

26. For present purposes, suffice to say that OCBC was prepared to lend S$4.4 million against the Singapore properties in April 1996 after taking into account EDB's prior interest. As and when realised, they may go a considerable way towards meeting the outstanding debt if not altogether extinguishing it. The Respondent's eagerness to get at the net proceeds is perhaps commensurate with his desire to stave off the realization of the Singapore properties including his current residence which, with a total area of over 3,700 sq.ft. must, on any view, greatly exceed his needs, living as he does on his own.

27. It is against this backdrop that his "zeal" in honouring his debts has to be gauged. Why is the Respondent so eager to remove the net proceeds out of Hong Kong and facilitate the recovery of debts by overseas creditors at the expense of his wife and child, leaving them totally unprovided for and vulnerable? If he has no assets, it may well be that at the end of the day little provision by way of ancillary relief can be made for the Petitioner and/or the child of the marriage. That is a matter that cannot be helped and is not one that can be gone into in the present application. It is quite another to put the net proceeds beyond the Petitioner's reach effectively ensuring that no provision can be made which would be the net result of discharging the injunctions.

28. In any event, I have considerable difficulty in following how "financial calamity" may be "averted" by the Respondent being allowed to make use of the net proceeds. It is not the case that there is evidence to show that if only the Respondent could have the net proceeds (and it must not be overlooked that he has effectively had 30% already), not only would his debts be repaid, his fortunes would change and the businesses in Singapore and the Dominican Republic turned round.

Jurisdiction

29. Section 17 of the Ordinance provides as follows -

"17.

Avoidance of transactions intended to defeat certain claims

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

(a)

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

	.....
	and an application for the purposes of paragraph (b) shall be made in the proceedings for the financial provision in question.
	.....
	(3) Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or to a disposition or other dealing with property which is about to take place and the court is satisfied---

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

	of defeating the applicant's claim for financial provision, it shall be presumed, unless the contrary is shown, that the other party disposed of the property with the intention aforesaid or, as the case may be, is, with that intention, about to dispose of or deal with the property.
	...."

The threshold for a section 17 application is different from an ordinary Mareva application inasmuch as the applicant has to satisfy the Court of the Respondent's "intention of defeating the claim for financial provision": see Will v. Will & Anr. (supra). Although subsection (3) contains a presumption, it was submitted that the Respondent has rebutted that presumption: the common intention in selling the matrimonial home being to transfer the proceeds out of Hong Kong to Singapore. Pausing here, it will be noted that the parties have given divergent accounts of the purpose of transferring the funds to Singapore. If the Petitioner's account of the change in position by the Respondent when he came to Hong Kong in mid September were true, there would appear to be some substance in the Petitioner's submission that it all amounted to a calculated move on the part of the Respondent to defeat her claim to financial provision.

30. For the purposes of the present application, it is unnecessary to come to any conclusion as to whether the presumption in s.17(3) has in fact been rebutted. Apart from section 17, the Court clearly has inherent jurisdiction to grant injunctions in several proceedings to preserve assets. See the English Court of Appeal decisions of Roche v. Roche [1981] 11 Fam. Law 243 and Shipman v. Shipman [1991] 1 FLR 250. In deciding whether to exercise its inherent jurisdiction, the Court is not required to have regard to the many restrictions and safeguards surrounding the use of worldwide Mareva injunction and to assimilate the use of and procedure for injunctions in the Family Division to those in commercial law. In Shipman the learned judge held that the matrimonial field called for a different approach. I respectfully agree.

31. Balancing all the relevant factors, I have little hesitation in concluding that the net proceeds should be preserved by the injunctions being continued.

Undertaking as to damages

32. Such an undertaking was not part of the Orders made although in her supporting affirmation, the Petitioner did offer such an undertaking.

33. Whether an undertaking should be required in applications made by a spouse in matrimonial proceedings was considered by the Court of Appeal in Will v. Will & Anr. (supra). Fuad, V-P concluded (at p. 12) that -

"... good practice does not require that an undertaking in damages be given in applications made by a spouse in matrimonial proceedings unless specifically required by the judge."

At p.14 he said -

"I have not considered it to be either necessary or desirable to attempt to suggest the kind of circumstances in which it would be, and would not be, appropriate for the court to require an undertaking in this kind of case. But I would express the view that the strength of the case put forward, the maximum amount, on a realistic view, the applicant might ultimately be awarded, as well as the impact of the proposed order, would surely all be factors."

The other members of the Court were of the same view. Penlington JA recognised that a section 17(1)(a) order can have very serious consequences to a businessman in Hong Kong in restraining him from carrying out normal financial transactions and may have the effect of creating doubt on his credit-worthiness which can be highly damaging. Nevertheless,

"... in the context of matrimonial proceedings with the bitterness which is often inevitably present, such considerations may not be given full weight."

See per Penlington JA at p.15.

34. In the light of the Court of Appeal's decision and weighing all the relevant factors, in my judgment, it would not be appropriate to require an undertaking as to damages in the present case.

Should the ex parte Orders be discharged?

35. That leaves the question of whether the ex parte Orders ought to be discharged. The Respondent contends that there has not been full and frank disclosure when they were obtained. In a sense, the question has been rendered academic in view of the continuation of the injunctions. Nevertheless, as it may have an impact on costs, I will deal with that issue briefly.

36. In support of his summons to discharge the ex parte Orders, the Respondent contended that the Petitioner had suppressed the following facts which have been ranked by the Respondent in descending order of importance:

(i)	that the Petitioner had been given the Kwai Chung property by the Respondent;
(ii)	that the parties had separated under a Separation Deed dated 6 October 1992, that it was the Petitioner who suggested a divorce and then left the Respondent, the baby and the matrimonial home in October 1992;
(iii)	that the Petitioner has herself guaranteed very substantial sums (namely S$4.4 million) to the OCBC;
(iv)	that the Petitioner is a Taiwanese national who is in Hong Kong under an employee's visa sponsored by Shye Lian Hong Kong which has now gone into liquidation;
(v)	that the Petitioner knew that the Respondent would be using the sale proceeds for paying OCBC;
(vi)	that the Petitioner well knew of the Respondent's financial difficulties.

It was submitted that this was material non-disclosure inasmuch as these factors significantly alter the complexion of the Petitioner's claim as portrayed to the Court.

37. Counsel for the Respondent submitted that these matters are plainly relevant to a claim for financial provision under sections 4 to 6 of the Ordinance and are matters to which the Court will have regard under section 7 in deciding what orders to make. They must therefore also be relevant for the purposes of section 17 which is premised on and can only be invoked when there is an underlying claim for financial provision.

38. I accept that at least some of the matters relied on are material to the substantive application for financial provision. However, it does not follow that they are necessarily material to a section 17 application. The objectives are different: one is the substantive application, the other a mere holding operation to preserve assets, pending the determination of the substantive application. In the nature of things, a section 17 application is normally brought on with great urgency and precedes the substantive determination. There is no requirement that an applicant put all facts material to the substantive application before the Court in a section 17 application. Indeed such a requirement would pose practical difficulties and defeat the purpose of section 17.

39. As to the principle of setting aside an injunction because of material non-disclosure, the following passage from the judgment of Slade LJ in Brink's Mat Ltd v. Elcombe [1988] 1 WLR 1350 at 1359 B-E summarises the position:

"Nevertheless, the nature of the principle, as I see it, is essentially penal and in its application the practical realities of any case before the court cannot be overlooked. By their very nature, ex parte applications usually necessitate the giving and taking of instructions and the preparation of the requisite drafts in some haste. Particularly, in heavy commercial cases, the borderline between material facts and non-material facts may be a somewhat uncertain one. While in no way discounting the heavy duty of candour and care which falls on persons making ex parte applications, I do not think the application of the principle should be carried to extreme lengths. In one or two other recent cases coming before this court, I have suspected signs of a growing tendency on the part of some litigants against whom ex parte injunctions have been granted, or of their legal advisers, to rush to the Rex v. Kensington Income Tax Commissioners principle as a tabula in naufragio, alleging material non-disclosure on sometimes rather slender grounds, as representing substantially the only hope of obtaining the discharge of injunctions in cases where there is little hope of doing so on the substantial merits of the case or on the balance of convenience."

40. For the purposes of section 17, matters which go to the very heart of the application for financial provision, such as the existence of a legitimate claim or to the Respondent's intent to defeat the application for ancillary relief, would be material. Non-disclosure of a fact relevant to the substantive application but in no way determinative of or having a real bearing on the strength of the Plaintiff's claim is unlikely to be material. Whether it is so would depend on the actual facts.

41. The matters relied upon by the Respondent, whether taken singly or together, do not, in my judgment, amount to material non-disclosure as would require the ex parte Orders to be discharged. Those facts do not have a bearing on the Petitioner's claim to financial provision.

42. Extensive submissions were made by the Respondent regarding the guarantee to OCBC signed by the Petitioner. Many contentious issues have been raised concerning the circumstances in which the guarantee came to be signed which must be resolved elsewhere. Suffice to say that the Plaintiff may or may not have a valid defence if OCBC sought to enforce the guarantee. But the fact that she may be liable if sued by OCBC is not a reason for the Court to decline to preserve assets pending the determination of the Petitioner's claim to financial provision.

43. The Respondent's application to discharge the ex parte Order is accordingly dismissed.

Order

44. Upon the undertaking by the Respondent's solicitors not to deliver the net proceeds of sale in their hands to the Respondent pending the determination of the Petitioner's application for financial provision, the injunction against them is discharged. The injunction against the Respondent is continued pending the determination of the Petitioner's application for financial provision. The Respondent's summons to discharge the ex parte Orders is dismissed.

45. Costs should follow the event in both cases and I make an order nisi to that effect in favour of the Petitioner.