K v. K
Read the full judgment text of FCMC 5641/2001 on BabelCite. This Family Court judgment was delivered on 6 August 2003.
1. This is the Petitioner Husband’s application under s.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 to set aside the dispositions made by the Respondent Wife of her interests in 2 elderly home business to third parties in the course of their divorce proceedings which he believes were made with the intention to defeat his claims for financial relief after the divorce. The parties are now already divorced, but for convenience purpose I shall refer to them as Husband and Wif
Cited by 1 case
|
IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES SUIT NO. 5641 OF 2001 _________________ BETWEEN
Coram : H.H. Judge Bruno Chan in Chambers Date of Hearing : 2 – 13 January, 20 March – 4 April, 14 – 16, 29 – 30 May, 3 June & 9 July 2003 Date of Handing Down of Judgment : 6 August 2003 _________________ J U D G M E N T _________________ 1.This is the Petitioner Husband’s application under s.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 to set aside the dispositions made by the Respondent Wife of her interests in 2 elderly home business to third parties in the course of their divorce proceedings which he believes were made with the intention to defeat his claims for financial relief after the divorce. The parties are now already divorced, but for convenience purpose I shall refer to them as Husband and Wife in this judgment. Background 2.The parties were married on 21st December 1977 in Guangzhou, China where they were then residents. It was the Husband’s 2nd marriage after his first wife died of cancer the previous year. There are 4 children of the family, 2 daughters from the Husband’s 1st marriage, and 2 daughters from this marriage. All of them are now adults, but the younger 2 are still studying in university in California, USA. 3.The parties settled in Hong Kong shortly after their marriage and their 2 daughters were born here. The Husband who studied music when he was in China, could only work in the factory in Hong Kong, while the Wife worked as a nurse. In 1987 an elderly home business was set up by the parties at Shau Kei Wan which was subsequently named ST Home for the Aged (“ST”) with the parties registered as partners in the business registration. This business formed the main source of income for the family in the subsequent years and enabled them to invest in the stock markets and to own numerous real properties in Hong Kong and overseas. 4.In the early 90s the Husband was allowed to immigrate to the US where he stayed until he obtained his residency green card when he then returned to Hong Kong. 5.In 1996 a second elderly home known as RG Home for the Elderly (“RG”) was set up with the Wife and her elder brother Wang registered as the partners in its business registration. It is however disputed by the Husband that he was in fact a beneficial owner with the Wife whereas her brother was registered in name only. 6.In 1995 the parties’ daughters E and J went to the US to further their studies. In 1997 the Wife also went to California to stay with the daughters in one of the properties purchased in the parties’ joint names, whilst the Husband remained in Hong Kong to run the 2 elderly homes together with the staff. 7.In early 2000 the Wife returned to Hong Kong to take over the business from the Husband. There were soon major disputes between the parties with each accusing the other of stealing money from the business, and the Wife also accusing the Husband of having an affair with one of the staff of the elderly homes and of trying to force her to give him a divorce. 8.In September 2000 the Husband issued a petition for divorce against the Wife based on her behaviour and for ancillary relief including periodical payments, lump sums and transfer of property order. The petition became contested when the Wife filed an answer and also cross-petitioned for divorce on his behaviour. These proceedings were subsequently replaced by the present one after the parties had agreed to a consensus divorce based on their separation for 1 year since 1999. The decree nisi was subsequently granted on 4th June 2002 and has since been made absolute. 9.On 16th April 2002 the Husband filed an application for maintenance pending suit on the ground that the Wife, having taken over the elderly home business, had prevented him from drawing money from the business accounts for his living expenses, as he used to do so in the past, and had also terminated all auto-payments for the mortgage instalments and utilities of their former matrimonial home at Taikooshing where he has been residing. 10.In her affirmation of means filed on 18th May 2002 in response to the Husband’s application, the Wife disclosed that as she no longer wished to run the 2 elderly home businesses, she had already transferred her interests in RG to her said brother Wang sometime in December 2000, and ST to her 2 daughters E and J in June 2001, and hence she had no means to pay the Husband any maintenance. This naturally came as a surprise to the Husband who promptly issued the present application on 21st May 2002. 11.Leave was then granted to the Wife’s brother and 2 daughters to intervene in the proceedings, and as the 2 businesses have since the transfer been incorporated into RG Home for the Elderly Limited (“RG Ltd”) and ST Home for the Aged Limited (“ST Ltd”) respectively, a director of both companies, Mr Young was also allowed to intervene on behalf of the companies. 12.Both the 2 daughters and Young have acted in person throughout the proceedings, whilst the Wife’s brother Wang who normally resides in Australia, was represented by Messrs. Oliver C.M. Chan & Co. The Wife was also legally represented during the initial stage of the divorce proceedings up to the hearing of the maintenance pending suit, but chose to act in person in this application until the middle of the hearing in March 2003 when she decided to be represented by the same Messrs. Oliver C.M. Chan & Co. who at about the same time obtained an order to discharge themselves from acting for Wang on the basis that they were unable to obtain further instruction from him. 13.All the parties as well as their witnesses have filed substantive affirmations and have given extensive oral evidence at the hearing except Wang. As the 2 daughters had to attend school in the US and could only come to Hong Kong for the hearing during their school holidays, the hearing dates had to fit into their schedule and they were also allowed to give their evidence first. 14.The matter was further complicated when the evidence revealed that the Wife’s brother Wang had sometime in the course of this application transferred his shares and interests in RG Ltd to yet 2 other persons known as Ms Sha and Ms 陳 both of whom resided in Shenzhen, China, according to the Company Registry records. As a result the Husband issued a further S.17 application for an order to set aside this disposition by Wang which has been consolidated with the first application for hearing, but neither Wang nor these 2 persons have since taken part in these proceedings. The Law 15.S.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192, provides : -
16.There is no question that the Husband has applied for the relevant financial provisions in this Ordinance when he set out his financial claims in his petition issued on 6th June 2001. Nor is there any dispute that the Wife did, without valuable consideration, make the dispositions as follows : -
17.It is also clear that as both dispositions did take place less than three years before the date of the Husband’s application, if the Court is satisfied that they would have the consequence of defeating the Husband’s claim for financial provision, it shall be presumed, unless the contrary is shown, that the Wife disposed of the 2 businesses with the intention aforesaid. It is therefore for the Wife to show that there was no such intention. In the case of K v K (Avoidance of Reviewable Disposition) [1983] 4 FLR 31, 36 – 8, relied on by the Husband, in which the English Court of Appeal examined the standard of proof required in a similar application by a wife to set aside 2 deeds executed by her husband by which he disposed of his half share of the matrimonial home in favour of the 2 children of his former marriage shortly before the breakdown of the second marriage in question, Ormrod LJ said : -
18.He then sent on to examine the meaning of the phrase “is satisfied” in a number of cases by the House of Lords which would be helpful to set out hereinbelow : -
The Evidence 19.The Wife’s explanation was first set out in her Affirmation of Means filed on 18th May 2002 (Bundle B, p.369) in response to the Husband’s application for maintenance pending suit, the gist of which are :-
20.As aforesaid, the Wife’s explanation was not acceptable to the Husband who promptly brought the present application. In response the Wife filed another affirmation in Chinese on 3rd July 2002 (Bundle C, p.205) while acting in person, in which she went into great details of how she set up the elderly home and managed it all these years and how the Husband had made absolutely no contribution thereto, all of which not entirely relevant to the issue before me, but she did also give further details of the various complaints and court cases involving her and the elderly homes, and more importantly, greater details of the transfer which would be helpful to set them out here : -
21.In her last affirmation filed in these proceedings on 29th October 2002, the Wife summarised her reasons for the transfer as follows :-
22.In short, the Wife submits that she can prove that she had no intention to defeat the Husband’s claim for financial provision, as she had in effect no choice in her circumstances but to transfer the 2 companies, in fact, to preserve the family assets from further depletion as at that time she was no longer physically or mentally capable of managing them, and that no one else, least of all the Husband, were prepared to help or capable of doing so, rather than to deplete the family assets. 23.I propose to consider the Wife’s evidence in respect of the 2 dispositions separately, as they took place at different time and were made to different parties in that RG was mainly transferred to her brother, whilst ST was to her 2 daughters. I shall start with the one first in time, i.e. RG which was transferred in mid-December 2000. It is, however, necessary to first consider the circumstances of its formation, as the relationship of the transferee, i.e. Wang with RG would be a significant factor, in the Wife’s case, for the disposition. RG Home For The Elderly 24.RG was formed on 13th February 1996 and registered in the Business Registry shortly thereafter, with the Wife and Wang named as partners. According to the Husband, RG was established by the parties with profits from ST and monies from the family, and that it had nothing to do with Wang who was then in Australia but his name was registered as a partner solely for the purpose of assisting him in obtaining a work permit for him by way of investment in Hong Kong. For this reason Wang was also named as a partner of ST. Later as his application for the work permit was unsuccessful, Wang therefore returned to Australia and his name was removed from ST, but for some reason at that time the Wife failed to do the same with his name in RG. Nevertheless after the Wife had gone to stay in the US in May 1997, the Husband remained in Hong Kong to run ST, as well as RG, until about mid-2000 without any participation of Wang. This version of the Husband is totally different to that of the Wife’s. 25.I should also mention that Wang had filed an affirmation on 3rd July 2002 in support of the Wife’s evidence while he was represented by her present solicitors. However, despite the fact that he had been in Hong Kong during these proceedings and the Husband’s notice of intention to cross-examine him at the trial, Wang had failed to attend the hearing and I therefore refused to admit his said affirmation in evidence on the basis that he had failed to give any valid reason for his failure to attend the trial and that his absence had deprived the Husband the chance to cross-examine him on the various important issues in his affirmation and to challenge his evidence in general. 26.It is a fact that the Wife did leave Hong Kong for the US in 1997 and I accept that it might well be her intention then to stay there with her daughters. The Husband has acknowledged this in his affirmations, and a house was indeed purchased in San Francisco as her home. The question is, was it then her intention to sell the business of ST to her brother which eventually led to the formation of RG with her brother as a partner, or was RG the parties’ business which has nothing to do with her brother other than to assist him in getting a work permit in Hong Kong as alleged by the Husband ? 27.The evidence seems to support the latter. The letter dated 4th January 1997 from the Immigration Department produced by the Husband (Exhibit “P-1”) in relation to Wang‘s investment application for work permit did refer to not just his involvement in RG, but also in ST. If therefore what the Wife said about Wang not being happy with the Husband as a partner in ST and therefore withdrew his investment therein shortly thereafter to set up RG with her in early 1996 is true, why then did the Immigration Department one year later in January 1997 still require him to produce documents relating to ST which he was supposedly already disinterested ? 28.Furthermore, according to the Business Registration record of ST, Wang was registered as a partner as of 1st February 1996 on 26th February 1996. If indeed he had a falling out with the Husband shortly after joining as a partner and therefore withdrew his investment as alleged by the Wife, why then was he still registered as a partner a few weeks later on 26th February 1996, and why would the Husband still go along with the Wife and Wang to look for new premises to rent for RG after their fall out, and to actually sign his name as one of the tenants in the lease, thereby incurring liabilities under the lease for a business which he was supposed to have nothing to do with ? I find these evidence of the Wife just do not make sense under the circumstances and are totally inconsistent with the documentary evidence before me. 29.I also have difficulty with the fact that the amounts of investment allegedly by Wang on both businesses happen to be the same. His investment of $700,000 for a 1/3 share in ST was supposedly based on the Husband’s assessment of a business which had been on-going for some 10 years. For the same amount to be his half share in the initial start up capital for a wholly new business in RG, however, is in my opinion simplistic and too much to be co-incidental. 30.The most difficult part that I have with the Wife’s evidence, however, lies in how she started first in trying to sell her then only business in Hong Kong in ST for something as much as $1.2 million which she would need, together with her other assets, to support her daughters through colleges, as well as herself for years to come, and to end up not only that she had not sold ST, and hence received no money at all from its sale, but also became involved in another business in RG that required her to put up, not just a substantial sum of money for its start-up capital, but also a significant amount of her time and skills in running it, at least at the beginning, which are totally inconsistent with someone who just wanted to retire and to settle in the US. 31.I have already said that I do not doubt the Wife’s intention at that time to live in the US so as to be with her daughters, but I do not accept her evidence that she had then wanted to sell ST. There is no evidence that she had discussed about it with the Husband, nor was it necessary for her to sell it in view of the fact that the business was obviously generating income to finance her living in the US and her daughters in college, and that she could easily hire someone to manage it in her absence, with long-distant supervision by her from the US, as she subsequently did by getting her sister to take charge of the company’s accounts. 32.I believe it was more likely the case that her brother Wang was interested in working and staying in Hong Kong, and that the parties therefore lent their assistance with their business when Wang applied for work permit, but when his application was unsuccessful in 1997, his name was therefore deleted from ST in the Business Registry, but for some reason the Wife had decided not to do the same with RG. Does this mean Wang had in fact become a partner of RG ? I have serious reservation for the following reasons. 33.It is true that $700,000 was paid into the account of ST as Wang’s investment in that partnership and later withdrawn, but there is no documentary evidence of its payment into the RG’s account or how it was spent or invested on that business, and whilst there was a partnership agreement drawn up for his joining of ST, there was no such agreement in respect of RG, and the Wife’s explanation that it was not necessary because they were siblings does not sound very convincing as their relationship with the Husband at that time was also close and yet they still found it necessary to make it formal by having a partnership agreement for ST. 34.My greatest difficulty, however, lies with the alleged agreement in the sharing of the profit of RG between the brother and sister. It is clear in all the Wife’s affirmations as well as her evidence in chief that RG was a equal share partnership with her brother as each of them had invested $700,000 therein. It was also so stated in all the formal documents filed by RG with the relevant authorities such as the Business Registry and the Inland Revenue Department. Yet it was not until the Wife was asked by Mr Lam for the Husband during cross-examination for accounting documents of RG as evidence of their sharing of profit over the years when she disclosed for the first time that as she had to manage the business all by herself after Wang had returned to Australia, it was agreed with him that the business would be “sub-contracted” to her for which she would pay him an annual sum of about $100,000 while she would keep whatever profits the business was able to make. 35.Firstly, there is no formal or written agreement of any such arrangement, nor is there any documentary evidence of the alleged annual payment to Wang, which could have been easily provided if such payments had indeed been made. 36.Secondly, the Wife’s evidence that she made one of such payments in the US to her brother after receipt of the money from Hong Kong by depositing cash into his account in the US while he was then in Australia is, to say the least, far from convincing. Why was the payment made in such a convoluted way when it could have been easily remitted either by the Husband or one of the staff of RG directly from Hong Kong to Wang in Australia ? 37.Furthermore, such a “sub-contracting” arrangement simply does not make any business sense to Wang because it is a fact that between 1997 and 2000 the Wife spent most of her time in the US and did not manage RG by herself, which wholly contradicts the reason for entering into such an arrangement in the first place. 38.Above all, the Wife’s evidence that no formal account of the business was ever shown or produced to Wang when the annual payment was made to him, and without any regard to the profit situation of the business, is simply illogical and incredible. Equally incredible is the Wife’s evidence on how she subsequently put $1 million back into the account of RG after taking over the business from the Husband and discovering that there was no money in RG’s account. Her evidence is that of the $1 million, $500,000 was meant to cover the inmates deposits and meet RG’s expenses, however the fact that $350,000 later went to ST’s account for paying the 1st instalment of its renovation and operation costs does not make accounting sense as it would have mixed up the monies of the business of RG and ST which were, after all, 2 different partnerships according to the Wife. Her excuse that she could not put money into ST’s account anymore because the Husband was stealing money from its account is laughable, to say the least, as surely she could have easily paid money for ST from her own account instead of through RG’s account. Furthermore, if the Husband had indeed stolen large sums of money from both ST and RG as alleged by her, why has she never taken any step or legal action against him for the return of the money, part of which no doubt would have belonged to her brother if he was indeed a partner of RG. All these, together with the facts that the Wife has on many occasions in her affirmations as well as her testimony referred to RG as “my business” instead of “our business” and that there is no evidence that she had consulted her brother and partner about the sale of RG before offering to sell it to Madam Chan Mei See and others, suggest that Wang was never really a partner of RG. 39.I shall next consider the Wife’s evidence on her reasons for the disposition of RG, which can be generally categorised as follows : -
Lawsuits 40.I do not think there is any dispute as to the existence of the so-called 6 “lawsuits” including the divorce proceedings, but distressing it may be, divorce itself can never be a proper reason or excuse to dispose of one’s own assets, otherwise it would have defeated the intention of this particular legislation. The remaining 5 lawsuits no doubt had affected RG, but their impact on the Wife’s decision to dispose of RG appears to have been grossly exaggerated. 41.Firstly, 3 of the lawsuits involving Man Lam, Tso Kong Lai and Li So Mei commenced in proceedings only after the transfer of the business to Wang, and hence the allegation that the Wife “attended court everyday” for the first 2 lawsuits involving Lau Fong Ping and Wong Fung Wan which required her to attend the Labour Tribunal 3 occasions for the former, whilst the latter case was covered by insurance and hence the conduct of the proceedings would have been taken over by the insurance agents or their lawyers, appears to be a gross exaggeration. 42.I of course accept that before the commencement of the last 3 lawsuits, there would have been complaints and / or investigations, and the possibility of them deteriorating into full-blown litigations would no doubt cause concern to any employer, but I do not think they could have as much impact on the Wife’s decision as she claims, as according to the evidence of one of her witnesses Madam Chan Mei See, it was in as early as November 2000 when the Wife first approached her for the sale of RG, at which time the possibility of litigation for those 3 cases had far from materialised. 43.Furthermore, as pointed out by Counsel for the Husband, the case of Li So Mei involved only death inquest, and any personal injuries lawyer would have advised the Wife that any possible subsequent claims by the deceased’s family for damages would not be substantial in view of the age of the deceased. In fact the Wife cannot be said to be inexperienced in handling lawsuits, as evidenced in her affirmation of 3rd July 2002 when she said this in paragraph 9 : - "1989年底因為貼街招的事我突然連續多次被告而要出庭應訊(WKS-11)，我每天從早到晚忙於老人院工作，非常忙碌，上庭雖然只講兩句話：“認罪”、“無話講”，然後罰幾佰元，但我實在無時間，而Petitioner在家沒有甚麼事做，我想叫他代我出庭(結果是他從未出過一次，因還是要告第一股東)，一氣之下便在商業登記上加上了Petitioner名字，這時我已經成功辦院三年並買下多個物業了，這個簡單的原因却種下了我今天麻煩的局面”。 44.For the reasons aforesaid I agree with the Husband that she has grossly exaggerated the impact of these lawsuits. Complaints and Disturbances 45.Apart from these lawsuits, other types of disturbances allegedly caused to RG were recorded in details in the Wife’s affirmation of 3rd July 2002, specifically in a table from pages 295 to 302 of the bundle. They consisted of various false complaints allegedly made by the Husband, the resultant raids and inspections by various government departments including the Immigration Department, the Social Welfare Department and the Police. On first glance they indeed appeared grave and numerous which if true would no doubt have a serious impact on the Wife’s ability to manage and run the business of RG. However, on close scrutiny they tend to support the Husband’s argument that the Wife has in fact grossly exaggerated the number and effect of such raids. According to the chronology provided by her in the table, there were only 1 raid by the Social Welfare Department and 4 inspections by the Labour Department prior to the disposition of RG in December 2000, averaging 1 to 2 occasions per month over a period of 3 months, involving 1 to 2 officers in most cases attending at the premises asking questions from the staff or simply checking their identity cards, which cannot really be said to be so disturbing or disruptive that the business of RG had to be closed down. After all, routine inspection by government departments of elderly homes several times a year is, as admitted by the Wife, not unusual, and is in fact required by regulations. 46.The same can be said about Mr. Young’s evidence. He was a friend of the parties’ 2 daughters who claimed in his affirmation of 2nd July 2002 that he was hired by Wang to manage RG in November 2000, and that in December he received numerous threatening phone calls from the Husband. He also claimed to have witnessed many raids and investigation of RG by various departments. Basically he supported the Wife’s evidence about the alleged disturbances caused to RG. Like most of the other witnesses of the Wife, he is clearly biased against the Husband with accusations against him which were based on hearsays without personal knowledge, and as he became involved in the management of RG only in the last month before its transfer, his knowledge about all these disturbances must be limited and appears to have also been exaggerated. 47.It is true that apart from these raids and inspections, the Wife and some of the staff had had to attend interviews or interrogation by various departments as a result of the complaints and the lawsuits, thereby causing certain inconvenience to them, a nuisance may be, but there is no evidence that they had actually caused any real problems to the running of the business. 48.The Wife has blamed all these raids and disturbances on the Husband, accusing him of being the mastermind behind a campaign with his mistress Madam Yau and others to ruin her and her business. However, apart from her own words, there is no other evidence, documentary or otherwise, produced by the Wife to substantiate her allegation. In fact, some of the complaints which led to government investigations came from those dissatisfied staff who eventually instituted those lawsuits, and without any evidence in support, it is too far-fetched to say that they were acting on instructions of the Husband or conspiring with him. Furthermore, of the 5 lawsuits, 3 were settled between the parties, 1 was just a death inquest and only 1 was dismissed by the Court, which shows that the majority of the complaints which led to litigation was not without merits, and cannot be said to be deliberately made up as part of a plot to ruin the business of RG. 49.Above all, I am unable to find any reason or motive why the Husband would want to ruin RG. If he had indeed told the Wife that he did not want to manage it anymore as alleged by her, and wanted her to come back to Hong Kong to run it herself, then there is no reason for him to try to ruin it after she had done what he requested. If he had wanted her to support him with the profit or income from RG, there is all the more no reason for him to ruin its business, especially one which he says to be making so much money. It is just like killing the goose that lay the golden eggs. The fact that there is no such evidence from the Wife’s solicitors such as letters to the Husband’s about his alleged disturbances speaks for itself. 50.The only possible motive that I can infer from the Wife’s evidence, is perhaps in her 1st affirmation of 18th May 2002, specifically in paragraph 43 (Bundle B p.381) in which she alleged that the Husband had told her that he had taken $4 million from ST and RG and that he would share it with her if she agreed to divorce him. Even if this is true, and it is denied by the Husband, there is still no evidence that he deliberately caused these disturbances to RG in order to force her to give him a divorce. In fact, as aforesaid, he had already filed for divorce in September 2000 and even though it became contested after she had filed an Answer and cross-petition, the parties were subsequently able to agree to dissolve their marriage on mutual ground, and there appears to be no more reason for him to do as alleged by the Wife, if indeed it was his motive. 51.Lastly, if indeed all these disturbances were deliberately caused by the Husband with an ulterior motive to ruin the Wife and RG, one would have expected the Wife to seek the protection of the police, or to go to court for injunctive or other necessary relief through lawyers. There is not a scintilla of evidence that she had done either, nor can I think of any reason why she had not, other than the fact that there were either no disturbances deliberately caused by the Husband, or that such disturbances were not as serious or numerous as made out by the Wife, or that they were not disturbances but simply proper investigation by the relevant departments. The Wife’s Health 52.The Wife has complained of poor health, both physically and mentally, as a result of the enormous pressure on her from the elements aforesaid that she felt unable to carry on the business of RG. Physically, she claims that her back pain from early years had recurred. There is however no medical evidence to suggest that she was unable to carry out any physical activities and her actions during that period indicate that she was not hampered in anyway to run the business. In fact, although the only medical evidence produced by the Wife, a MR1 Scans Report (Bundle B, p.521 and C – 1, p.280 – 281) suggests there was degenerative disease involving her lumber spine, it is insufficient to show that her physical ability had been severely affected. 53.The mental element, however, cannot be so easily detected and in some cases can exert a much more severe impact. I do not for one second trivialize the stress and pressure the breakdown of a marriage, especially one that was as lengthly as this one, have on the parties, in particularly on the Wife if indeed it was the consequence of the Husband having an affair with one of her own staff. No doubt the stress and humiliation would be terrible, and it was normal for the Wife to require marital or psychological counselling under the circumstances, but there is no documentary evidence such as medical or psychological report to suggest that the Wife was mentally incapable of coping with the situation or to run RG. Even if she was indeed physically or mentally incapable, she could have easily delegated the management to others as she had done during the years when she was in the US, in particularly that by end of 2000 her brother was back to Hong Kong to help, and the fact that Mr Young has since been hired to look after both business shows that the Wife’s health condition could not be said to be a good reason to dispose of the business of RG. Of course even if she was capable of doing so, looking from the business point of view, was there good reason for the Wife in the circumstances to carry on the business ? Not so according to her, based on its profitability at that time. Profitability 54.It is the Wife’s evidence that when she returned to Hong Kong to take over the management of RG in March 2000, there were 100 odd inmates, but due to the disturbances and raids caused to Regent, it was losing some 8 to 10 inmates per month, and although there were also new inmates coming in, they were far less and incapable of making up the losses. In support of her evidence, the intervening director of RG Ltd Mr Young also confirmed in his evidence that the Elderly Home after its incorporation had only about 80 inmates. 55.At this number of inmates, the Wife then gave a breakdown of the monthly income and outgoings of RG to show that the business was not making much money. In fact she argues that according to the tax returns of RG from its establishment in 1996 to 1999 all show heavy losses, until the year of 1999 / 2000 when there was a net assessable profit of a mere $1,132, and a slightly better position in 2000 / 2001 with $21,450 which, according to her, was not anything worth continuing with the business after taking into account of all these problems. 56.The Husband, who was involved in the running of both elderly homes for 3 years prior to the Wife’s return in March 2000, insists that the number of inmates in RG prior to his departure was a lot more than what is claimed by the Wife. He says there were more than 110 inmates in late 1999 and that the Wife has deliberately understated the number of inmates or the profitability of RG in order to justify her disposition of the business. 57.During cross-examination of her evidence about the allegation of RG losing 10 inmates each month, the Wife conceded that there were also about 7 new inmates joining RG on average per month, therefore resulting in a net loss of only about 3 inmates, which was, according to the Husband, insignificant. Above all, it is argued by him, that the Wife has failed to produce any daily or monthly records of inmates as evidence, despite her admission that RG should have kept such records as required by the Code of Practice issued by the Social Welfare Department, and that it is just not enough to rely on the tax returns. 58.A business’s tax returns of course do not necessarily show the accurate picture of its financial status, and the fact that the tax returns have been accepted by the Inland Revenue Department and assessment of tax raised upon them does not mean that they must be accepted at their face value, or that they cannot be challenged as to their accuracy in this Court, and I agree that the Husband is right to suspect that the Wife has deliberately chosen not to produce the relevant records of inmates of RG for the relevant periods prior to her disposition of the business, during which she was in full control of the management of RG, and that her excuse as well as that of Mr Young that those records were with the auditors preparing the accounts for the business, which could have been easily retrieved from them for the purpose of these proceedings, is simply incredible. 59.Instead of producing the relevant financial documents and accounts of RG immediately prior to its disposition as evidence of its profitability, the Wife has just produced a few pages of RG’s bank statements (“R-12 to R-14”), and its Profit Tax Assessment for the year of 1999 / 2000 (“R-20”) which are clearly insufficient to show the true picture of the profitability of RG prior to its disposition, and in view of the facts that the burden of proof is on her and the lack of any satisfactory explanation as to why the relevant documents were not produced, I find the Wife’s evidence on this wholly unsatisfactory. 60.One of the most important piece of evidence relied on by the Husband about the profitability of RG, and for that matter, ST as well, is that both business were generating enough profits and income all these years to enable the parties to amass substantial assets including 10 properties in Hong Kong and overseas, large banks deposits as well as putting their daughters through college in the US. Clearly the parties’ standard of living and wealth during the marriage can be good indications of their income, and that even after the Wife had left Hong Kong to live in the US, the total amount of remittances by the Husband to her from Hong Kong exceeded US$920,000, the equivalence of more than HK$7.2 million, which is by any account quite substantial. 61.Furthermore, it is the Husband’s evidence that during his absence from Hong Kong in May 2000, the Wife had withdrawn more than $8.7 million from their joint accounts, and the fact that he himself also had more than $1 million in his disclosed bank accounts at that time all indicate that the 2 elderly home business were all along making good and substantial profits which was the main reason for the parties’ wealth. 62.While denying that she had taken as much as $8.7 million from the joint accounts, the Wife did admit in her 1st affirmation of 18th May 2002 that she had withdrawn more than $5 million, of which $1.3 million odd represented the majority of the total deposits of the inmates of both business, and that during her stay in the US between 1997 and 2000, she did receive substantial remittances in US dollars from the Husband, but she insists that the bulk of her wealth or that of the family including those remittances, in fact came from her investments in the stock and property markets in China instead of from the income of the 2 business. 63.I however find this evidence of the Wife difficult to accept. In her said 1st Affirmation where she tried to give a full history of her marriage and details of the formation and running of the 2 elderly home business, she said this in Paragraph 32 : - "Due to my hard work over the years, ST made healthy profits. From the profits derived from ST and the other old age home “RG Home for the Elderly”, which my brother, Wang and I set up in 1996, and the sale proceeds of some properties I had bought and sold over the years, I invested them all in the property market. The properties that I purchased over the past 15 years are as set out in paragraph 8 of the Petitioner’s affirmation. Although all the properties are in the joint names of the Petitioner and I, the reason for which I will explain below, all the initial purchase monies were paid by me which were derived from either the profits of the two old age homes which profits were made due to my hard work and which could only have arisen due to my initial capital contribution and idea to operate an old age home". 64.In her 2nd lengthly Affirmation of 3rd July 2002 in which the Wife gave more details of the marriage in particularly how she financed the setting up of the elderly homes and the running of the business, she said this in Paragraph 5 and 6 : -
65.The impression that one easily gets from these 2 affirmations of the Wife is that the wealth of the family was mainly the result of the success of the elderly home business and not from any investments in China which were never mentioned in either affirmation, nor in her even more lengthly 3rd Affirmation of 29th October 2002, in which she went into minute details of her achievements, both financially and otherwise, throughout her marriage but not one single word about any investment she allegedly had in China in those 83 paragraphs of her affirmation. 66.Granted that these affirmations were made for the purpose of these proceedings relating to the disposition of the 2 elderly homes, and strictly not her affirmation of means in which she would be required to disclose all her investments, including those she said she had in China, but given the eagerness she had exhibited in disclosing almost every detail of what she had done throughout her marriage in these affirmations, if she did invest in China and made a lot of money which formed the bulk of the family’s wealth, it would indeed be very surprising that she had chosen not to mention it in any of her affirmations, and instead waited only until the hearing when she disclosed for the first time that she had made a lot of money, including those remittances of more than US$900,000 by the Husband to her in the US, from her joint investments with her brother-in-law in properties in Shanghai and stock and shares in Shenzhen. 67.Above all, contrary to the details she had given in her affirmations with numerous supporting documents attached thereto including letters written by the Husband to her long time ago or during the early stage of their marriage, the Wife was unable to provide any details of her alleged investments in China, except for 3 properties in Shanghai and a piece of land in Shenzhen, the evidence of which she could have easily obtained from her brother-in-law for the purpose of this hearing, but there is not a single piece of evidence, not even a letter, for example, from her brother-in-law to verify her case or to show roughly how much her share of the profit was. I simply find it hard to believe the Wife’s evidence that it was from such investments in China that contributed to the family wealth instead of from the 2 elderly home business. 68.This of course does not follow that those remittances of more than US$900,000 must have all come from the profits of RG and ST, and that even if so, there is no evidence as to how much were actually from RG as an indication of its profitability. On the other hand, it would be fair to assume part of the remittances must have come from the profit of RG, and even on the basis of the Wife’s evidence that if RG was breaking even or making little profit with about 80 inmates, surely with 90 or more inmates, RG should be able to make a healthy profit. For all these reasons and the Wife’s failure to produce the relevant accounts and documents of RG immediately prior to its disposition, I am not satisfied with the Wife’s evidence as to the profitability, or rather non-profitability of RG. Buyers 69.The Wife claims to have approached 5 to 6 people in the trade for the purpose of selling RG to them, including Madam Chan Mei See who gave evidence for the Wife. Her evidence is that she initially offered to buy RG for no more than $1 million after taking into account of the renovation costs spent on the elderly home, but later withdrew her offer after she visited the home in November 2000 when a police raid occurred at the same time and became very concerned about the disturbances being caused to the business. 70.It is argued on behalf of the Husband that Madam Chan’s evidence should not be accepted because, firstly, she was biased against him as she admitted in cross-examination that she held the view that he had done bad things to the Wife based on hearsay but never sought his clarification, and secondly, she was a close friend of the Wife and had deliberately told lies in order to help her, such as the story of witnessing the police raid and an inmate having a seizure which required emergency rescue, as according to the table of events prepared by the Wife (p.297, C-1), there was no report of such raid on RG in November 2000, and that the only inspection in that month stated in the table was one by the Social Welfare Department regarding a complaint about poor food. 71.Madam Chan is no doubt a good friend of the Wife, and I agree with Mr Lam for the Husband that she appeared to be biased against the Husband as what she heard about him came from the Wife and were obviously hearsay. However, upon hearing her in evidence, I believe that she did make some offer to buy RG from the Wife, that she did visit the elderly home sometime in 2000 for that purpose, and that although there is no record in the Wife’s table about any police raid in November 2000, it is possible that she might have mistaken about the time of her visit, and that she might have witnessed some form of disturbances at the elderly home at the time, but I also suspect that she withdrew her offer not solely because of what she had witnessed on that occasion, but rather because she knew of the disputes between the parties over their marriage as well as their business including RG, and she simply did not want to buy anything which was the subject matter of the parties’ dispute. Furthermore, although she was no doubt experienced in the trade, being the owner of several elderly homes, she was not giving any evidence as to the worth of the business of RG, nor was she in any position to do so. In fact her initial offer of $1 million appeared more like just an attempt to sound out the Wife, and was made without seeing any accounts or financial documents of RG, or viewing the home by herself at that time. For the same reason, her subsequent loss of interest based on simply what she had seen at the premises cannot form any useful or conclusive evidence as to the worth or marketability of RG. 72.Apart from Madam Chan Mei See, the Wife has also called a Madam Chan Kam Tai to testify on her herself of her attempt to sell the business of RG. Like Chan Mei See, she is also a good friend of the Wife who has known each other for nearly 20 years, and she also appeared to be biased against the Husband by accusing him of betraying and framing the Wife without any personal knowledge of what he had actually done. Overall I find her evidence even less useful than Chan Mei See’s in respect of the Wife’s attempt to find buyers from RG. After all, all these alleged complaints, raids and investigations as well as lawsuit were all about labour or compensation disputes with former employees, or management hiring illegal workers which had nothing to do with the quality of the services provided to the inmates, and hence the basic goodwill or reputation of the business could not have been so affected, and potential buyers should surely be able to realise that all these disturbances were directed against the former owner or management and not the new owner. I am therefore not convinced that there was no buyers for RG at that time, and even if it were true, it begs the obvious question : Why not offer to the Husband ? 73.The Wife’s evidence is that she did not think of selling the business to the Husband because he had in the past prior to her return to Hong Kong expressed to her that he was not interested in running the business. It is however argued by the Husband that firstly she had never mentioned this in any of her affirmations, and hence she only made this up later at the hearing, and secondly even if he had expressed no interest in the past, it did not mean that he was still not interested now that the parties were divorcing and their assets were to be distributed. As pointed out by his Counsel, she could have at least asked him directly, or if she said he could not be contacted, then through his solicitors, in particularly when she said she was desperate not to continue with the business, and at the same time she could not close it down either without incurring grave financial losses, the evidence of which I shall next consider. Closing Down 74.In her evidence in chief the Wife explained that it was not financially feasible to close down RG as she would have to repay $700,000 in capital to her brother, $500,000 in rent up to end of the lease on 30th April 2001, $200,000 in severance pay to staff, $200,000 in restoring the premises, and return of deposits to inmates, all of which would amount to more than $1.75 million, and as there were only some $980,000 in RG’s bank account which was not sufficient to meet those costs of closing down the business. 75.It is however pointed out by Counsel for the Husband, and I agree, that her brother was never a real partner of RG and hence the repayment of $700,000 cannot be a factor. 76.As for the mesne profits of $500,000 which the Wife says was payable to the landlord if the lease was to be early terminated in December 2000, it is argued by the Husband that firstly it was self-induced and would not be payable if the Wife was to sell the business to him, and therefore it should not be open to her to rely upon this payment as a ground to justify not closing down the business. Since the Wife’s state of mind at the time of her disposition of the business is in question, I do not think the “prevent principle” relied on by the Husband should apply, however I agree with him that the fundamental question was : why could the business of Regent not be closed down upon the expiry of the lease instead so that no liability of payment of mesne profits would arise ? After all, she had even on her own admission continued to run ST for another 6 months up to June 2001, so she was not prevented, physically or mentally, to do so, and there was simply no reason or justification, no matter how keen she was to get rid of the business, not to continue for a further 4 months until the expiry of the lease thereby saving RG of the $500,000, and with the $960,000 odd still available in RG’s account to meet other expenses, it would no longer be open to the Wife to rely on financial reasons to dispose of the business rather than closing it down. Transfer to Wang 77.Having considered all the said factors claimed by the Wife for her decision to dispose of the business of RG, I do not believe that they were, or could have been, either by themselves alone, or in combination, the real reason for her action. I accept that these factors did exist, albeit in may instances exaggerated, but I am convinced that the Wife could still have continued with the business of RG if she had wanted to. Having seen and heard her in evidence for days, and from the way she described in her lengthly affirmations of how she had struggled from early years and strived throughout the marriage to successfully run 2 elderly homes as well as her family, in many instances all by herself with very little help from the Husband, and whether or not such achievements had been exaggerated, one thing about this Wife which I am certain is that she is a very determined and capable person with a strong will and character, as amply evidenced by the way she ran and expanded the elderly home business, and by the tremendous support and loyalty shown to her by the many testimonies provided by her daughters and friends in these proceedings. I have no doubt that she could have continued with her elderly home business, despite all the adversities and stress and pressure which she said were then bearing on her, had she wanted to. 78.Even if the Wife did have good reasons to transfer the business, as pointed out by the Husband, the fact that the transfer to Wang was voluntary and in return he agreed to assume all the liabilities in connection with the lawsuits is indeed a preposterous proposition, in view of her allegations that the business was not profitable, that it would cost a lot of time and money to close it down, and above all, that the extent of financial liabilities of some of the lawsuits were then unknown, but which were part of the reasons that caused the Wife so much concern that she decided that it was not financially feasible to run the business in the first place. With all these negative factors, plus the possibility that the Husband might have taken large sums of money from Regent as alleged by the Wife and yet no action has been taken to recover them, it is indeed most incredible that her brother Wang would agree to take on this business under the circumstances together with all its liabilities in full. Good sibling relationship between them or not, it just doesn’t make any sense. 79.I am convinced that the real reason for her transferring RG to her brother is that she wanted to put it beyond the Husband’s reach so as to defeat or frustrate his claims for ancillary relief. The intention can be easily found or inferred in both her affirmations and her testimony in Court. 80.Firstly, by September 2000 the Wife would have known of the Husband’s intention to claim for ancillary relief including periodical payment and lump sum against her, the details of which he had set out in the prayer of his 1st petition for divorce issued under the parties’ earlier proceedings. The Wife was then already legally represented and would have been advised by her lawyers about such claims against her accordingly. Interestingly, on 20th October 2000 an Answer and Cross-petition was filed on her behalf in which she prayed for inter alia, the prayer of the Husband’s petition be dismissed and that his interests in both ST and RG be transferred to her. Although the parties subsequently were able to agree to dissolve their marriage on mutual ground, the Wife’s view on the Husband’s financial claims against her can be easily seen in her various affirmations, first in the concluding paragraph of her Affirmation of 18th May 2002 when she was represented by her former solicitors, in which she said : - "…… Accordingly, apart from the fact that the Respondent has sufficient means to maintain himself and that I do not have the means to do so, I should also not be liable to maintain the Respondent simply because he is lazy and refuses to work and earn his own living". 81.In paragraph 18 of her 2nd Affirmation of 3rd July 2002 when the Wife was then acting in person, her view was even clearer : -
82.In her 3rd lengthly Affirmation of 29th October 2002, where the Wife had gone into great details of how she had taken care of the children and the family, a well as built up her business and accumulated the family’s wealth almost all by herself and how the Husband had never helped in any way or made any useful contribution, and how it was so unfair now for him to claim a share of her assets or for her to have to financially support him after the divorce, in particularly when he was the one who wrecked their marriage. The following paragraphs are particularly revealing : -
83.All these accusations were repeated on more than a few occasions by the Wife in her oral evidence at the hearing, often concluding with the bitter comment of “how shameful of him now to want me to support him for the rest of his life”. 84.Although the parties’ divorce was granted on the fact of their separation, and there was never any findings as to the real cause of the breakdown of their marriage, I have no doubt that the Wife firmly believes that the Husband was having an affair with another woman which ruined the marriage and caused the divorce, and that there were a lot of animosity and bitterness in her towards him, so much so that she was willing to do anything to ensure that he would not be able to make any claim against what she believed to be her hard-earned money and assets, and here lies the real reason for her disposition of RG. 85.She could not of course do anything about those real properties which are in joint names with the Husband, but with RG and those monies in the bank accounts which she could, she did take steps to put them beyond his reach. For RG, I believe that by October or November 2000, she first intended to sell it so as to convert it into cash which she could, together with the monies in the joint accounts, bring to the US away from the Husband, hence her approach of Madam Chan Mei See and the others for the sale of its business. But when it fell through, she then discussed her intention with her brother Wang and together they conceived the plan that the business of RG be transferred to him with the excuse that it was not worth anything, who would then incorporate it into a limited company so that RG would become a different entity which the Husband would not be able to claim. This intention can be seen from what the Wife said in her 1st Affirmation as follows : -
86.First of all, her explanation that she could not close the business of RG at her own will as she was required to wait for all the inmates to leave as one was not allowed to remove them unilaterally, i.e. to lose them naturally, to use her own words from her oral evidence in Court, meaning that she would have to wait for all the inmates either to leave voluntarily or to die of natural cause, is wholly nonsensical and illogical. As according to her own evidence, elderly home business has been in existence in Hong Kong for some 15 to 20 years and there are hundreds of them being run as a business no different from many other types of business, albeit with its own particular practice and regulations, and while agreeing with her that inmates are not some commodities that can be freely sold off and should be treated with care and dignity, but for her to say that she had to “lose them naturally”, which may mean having to wait for a long or indefinite time before she could close down the business indeed flies in the face of common sense. 87.I accept that it takes time to close down a business, and apart from proper arrangement for the inmates, the Wife would also have to deal with the redundancy of the staff, and there is no question that it would take some months to take care of everything properly and to wind down the business, which would in fact be ideal since the lease would still have several months to go before its expiration on 30th April 2001, which makes it all the more difficult to accept her explanation for her transfer of the business to her brother in December 2000. What was indeed the urgency when she had in fact stayed on to help her brother with the business after the transfer including preparing and signing the tax documents for the period up to at least 30th April 2001, unless the transfer was, as argued by the Husband, merely a sham to put it beyond his reach as quickly as possible, and that she in fact still retained the control of the business ? 88.This suspicion of the Husband is reinforced by the fact that the Wife signed a new lease for RG Ltd on 7th June 2001 for a term of 6 years at a higher rental than the previous one. This action of hers not only contradicts her allegations that she wanted to close down the elderly home and that its business was losing money, it also demonstrates that she was still actively involved in the running of the business more than 6 months after the transfer, and her explanation that the landlord insisted in letting the premises only to her as a tenant notwithstanding that she was not a member of RG Ltd is indeed incredible. Clearly she was surprised when confronted by a copy of the new lease produced by Counsel for the Husband during cross-examination with her name and signature on it, and she just made up that amazing story. 89.Furthermore, the Wife also in September 2001 signed the unaudited accounts of RG for the year ended 31st March 2001, despite her transfer of the business in December 2000, and her explanation that Wang declined to sign the accounts because she was responsible for the early part of the relevant period, and that she continued to be involved because she was still the elderly home licence holder cannot stand on close scrutiny in that if the business was indeed transferred in December 2000, the accounts should then be prepared up to that period and not beyond as there was no longer any RG Home for the Elderly after its incorporation into RG Home for the Elderly Ltd on 15th December 2000. If on the other hand, her licence was needed to enable the business to continue until her brother had obtained a new licence, then the business should not have been transferred until the new licence was issued. This again begs the earlier question : what was the urgency for the transfer in December 2000 ? There is simply no satisfactory explanation from the Wife, and the fact that she had on 2 separate occasions, both after the transfer, on 2nd January 2001 and 26th April 2001 respectively, admitted in her statements to the police and the immigration officers that she was still the person in charge of RG speaks volume for the Husband’s case that she has never relinquished her control of RG after the disposition in December 2000. 90.It is central to the Wife’s case that for various reasons she decided it was not worthwhile, financially and otherwise, to continue to run the business of RG and when she transferred it to her brother for the purpose of closing it down, it was “for nothing as at that time RG was worth practically nothing”. As the burden of proof of all these lies with her, and as I have pointed out before, she has failed, without any satisfactory explanation, to produce the proper accounts of the business, a common and necessary practice in the transfer of business in Hong Kong, and if I may add, irregardless of the relationship between the transferor and transferee, to show that RG was indeed worth nothing at the time of its transfer, and in the absence such evidence of what I see to be the corner stone of the Wife’s case, and for all the fallacies and defects in her evidence including her credibility which I have great issue with having seen and heard her for days in Court, I have no hesitation in concluding that the Wife has failed, and failed miserably, to rebut the presumption that she transferred the business of RG to her brother was with the intention to defeat the Husband’s claim for ancillary relief against her in these proceedings. ST Home For The Elderly 91.Having come to this conclusion in respect of the Wife’s disposition of RG, it would be easy for me to say that it must be the same case with ST. However, the fact that ST was transferred at a much later date, in or about June 2001 and to the 2 daughters of the parties, the obvious questions must be : If it was also the Wife’s intention to put ST beyond the Husband’s reach, why did she not transfer it at the same time as RG, and why not to her brother again instead of the 2 daughters who were then studying in the US with absolutely no experience or ability to run such a business, and which would just add suspicion to such an arrangement ? To get to the answers, it is necessary to consider the evidence. Reasons for Transfer 92.The Wife first gave her reasons for transferring the business to her daughters in her 1st Affirmation as follows : -
Similar Factors 93.Some of the factors relied on by the Wife in the case of her disposition of RG in fact did not and could not have applied to ST as alleged by her, such as complaints, raids and investigations, or lawsuits, as there is simply no evidence that any such matters were affecting the business of ST at that time. Mental Condition 94.While accepting that she might have been suffering from the stress and pressure as a result of the breakdown of the marriage and the on-going divorce proceedings, the Wife has never produced any medical or psychological evidence in support thereof, and the production of the receipts of 2 consultations with a psychiatrist certainly cannot be said to be sufficient evidence to infer that her mental condition was deteriorating to the point that she was mentally incapable or undesirable to manage ST, especially when the receipts show that these consultations in fact came after the transfer. 95.It is also the Wife’s evidence that her mental health was exacerbated by her fear of going to prison after the hearing of one of the lawsuits on 26th February 2001 for interfering with witnesses, and also by her discovery of certain tax documents prepared by the Husband which she suspected to have been forged for tax evasion which might implicate her, and which caused her to eventually decide that she could not carry on. This reason, in my view, again cannot stand on close scrutiny. Firstly the lawsuit on 26th February 2001 was in relation to a former staff of RG and had nothing to do with ST, and whether the Wife was to be charged or not, it would not make any difference with the transfer of ST, and by June 2001 when ST was transferred, there was absolutely no evidence or indication at all that she would be charged. Her concern should therefore have subsided by then, and would not have played any part in her decision making. 96.As regard the effect of possible forged tax documents, since she believed that the Husband was responsible for them and since she was all along in the US at the material time, there is simply no reason why she should be concerned about them, and certainly not to the extent of deciding to give up ST. As pointed out by the Husband, this allegation of forged tax documents and their effect on the Wife’s mental health condition were never mentioned in any of her affirmations and look to be one of her recent invention. Stealing of Money from Accounts 97.The Husband denies stealing money from ST’s accounts and his evidence is that the parties had all along drawn money from the business accounts to meet the family’s expenses including the mortgage instalments of their former matrimonial home at Taikooshing and its household utilities charges, as well as the management fees and rates of some of their other properties such as the one in the Discovery Bay, all of which were by autopay from the business account with the Bank of Communication. These autopay arrangements were however cancelled by the Wife after her return to Hong Kong in early 2000. As a result, he says, he had tried to draw money from ST’s accounts to meet these various expenses which was necessary to support himself as well as preserving the parties’ assets. 98.It is not denied by the Wife that those autopay arrangements were cancelled by her, and given the facts that such financial arrangements had all along been practised by the parties during the marriage and that the Husband was a partner of ST, even if she might have her own reason for terminating such arrangements, what the Husband did thereafter cannot be said to be unjustified, and certainly not stealing, and as pointed out by the Husband, there were clearly other alternative ways of dealing with the matter without transferring the business of ST, such as stop putting money into accounts, or making new arrangements with the banks, but certainly not giving away a business which she had worked so hard for so many years and which she treasured so much, and which was the main source of the family’s income, in the manner that she did simply for these reasons. It just does not make sense. Offer to Husband 99.Before she transferred ST to her daughters, the Wife alleges that she did through her mother ask the Husband to return to manage the business in or about March 2001 but he declined. She admits that she never ask him directly herself or through her lawyers. This is incredible as he was then legally represented, why didn’t she do it through her lawyers to his so that there would at least be some record of her offer in case of any future dispute over ST, something which she must have easily anticipated in view of the conflicts and hostilities already existed between the parties in their divorce proceedings. Above all, he was a partner of ST in every sense, something which the Wife recognized, albeit reluctantly, in the case of her alleged attempt to sell ST to her brother in 1997 which was vetoed by the Husband as a partner, and was therefore entitled to be properly consulted by the Wife of her intention with the business. Her failure to do so must be therefore looked at most suspiciously. 100.Furthermore, this alleged request through her mother to the Husband was never mentioned in any of the Wife’s many lengthly affirmations and the fact that it was only raised in her evidence in chief just add fuel to the suspicion that it was only a recent fabrication. 101.The Wife has also sought to justify her failure to formally inform the Husband on the ground that he had on may occasions indicated that he no longer wanted to run the business and that he wanted to retire. Although from the various letters produced by the Wife from the Husband that he might have complained of having to do everything by himself and that he would like her to come back to Hong Kong to help run the business, he had however never indicated that he wanted to give up his share or interest in ST, and there is absolutely nothing in what the Husband had said to justify the Wife’s belief that he would not mind ST being given away. In fact the evidence of Mr.Young about the Husband’s scolding of him on telephone shows that he had very much in mind his interest in the business, something which no doubt Mr.Young would have informed the Wife and which contradicts her evidence that she thought the Husband was no longer interested in the business. 102.The Wife’s reason for wanting to cease the business but did not because she could not remove the inmates unilaterally for the same reason as in RG is, as I have pointed out earlier, illogical and incredible. So is her reason, in my view, for the transfer to her 2 daughters who were then full-time students in the US without any skills or experience in running any business and who admittedly would have to find someone to run and manage the business. This begs the obvious question : why couldn’t the Wife do the same and find someone to run and manage the business, and that if this friend of her daughters, Mr Young was able to do so, why couldn’t she simply hire him instead of having to first transfer the business to her daughters ? There is simply no satisfactory answer from the Wife. Transfer to Daughters 103.The reason for choosing her daughters because the Wife’s brother suggested that the Husband would not harm them so that it would prevent future sabotage actions is equally illogical. If it was indeed the Husband’s intention to sabotage the business so as to ruin her, it should not make any difference to him whether ST was to be registered in the names of the daughters or somebody else, as he would still know or suspect that the Wife was behind this manoeuvre and hence would not stop his action. I believe there was another reason for choosing the daughters. 104.Earlier I asked the question that if it was the Wife’s intention to put ST beyond the Husband’s reach, why then did she not transfer it at the same time as she did with RG. I believe the answer lies in the fact that as the Husband was a registered partner of ST, the Wife was probably concerned that it might not be transferred as easily as RG, and having transferred RG to her brother in December 2000, it is possible that she decided to wait and see whether the Husband would find out about it, and that after several months when he did not appear to have discovered the transfer, she might then have become bolder and went ahead to dispose of ST, as well the only remaining asset of the family which she could do so unilaterally without causing too much alarm to the Husband, and instead of to her brother again, which would appear too suspicious and more difficult to explain later, she chose her 2 daughters who were fiercely loyal to her and sympathetic to her case, and whose poor relationship with their father made it easy for them to come to court to support her and to speak against him. Having seen and heard both in their evidence at length in Court, I do not think that the daughters have deliberately lied in their evidence for their mother. I believe that they just told what they thought or believed to be the truth and facts of the case, most of which were obviously fed to them by their mother or her relatives such as her brother rather than from their personal knowledge as they were then living in the US during the material time. There is no doubt of their resentment and animosity towards their father, which was all there to be seen both in their affirmations as well as their testimony in Court. Something unfortunate had probably happened between father and daughters to cause this poor relationship between them, and with the belief that he was guilty of having an affair which destroyed the marriage and now trying to steal the business of ST from their mother and to ruin her financially, it is not at all surprising that both of them took their mother’s side with their full support, and it would be easy for the Wife to decide to transfer ST to them when they would do whatever she said while she could still retain full control of the business in Hong Kong. 105.It cannot be denied that the transfer of ST to the daughters was without any valuable consideration. Both daughters have confirmed it in their evidence. If the Wife’s case is that ST was not worth anything, there is simply no documentary evidence such as properly prepared business accounts to support that contention. The tax returns for previous years show that the business was profitable. As pointed out in my judgment hereinbefore, ST was all along the main source of income that accounted for the parties’ wealth and assets. As in her case with RG, it is simply not enough to throw in a few figures of what she believes to be the number of inmates against what she thinks to be the overhead expenses of ST to arrive at its profitability, nor is there any satisfactory explanation as to why the relevant financial records and accounts of ST were not produced as evidence. There is nothing to persuade me that ST was worth nothing in June 2001, especially after it had just been renovated for $650,000, that justifies the Wife giving it to her daughters. 106.Apart from not being able to close down its business because she could not remove the inmates unilaterally, the Wife also alleges that there was insufficient money in ST’s accounts to pay for its closing. This allegation is also unsatisfactory. Firstly, there were cross-allegations by the parties against each other of taking large sums of money from the business and personal accounts prior to the transfer, and money clearly had been withdrawn which I believe to have come mainly from the business, therefore a production of the last months of the business’ bank statements is simply not enough to show the true financial status of ST. 107.Secondly, if it is true of the Wife’s allegation that it would require $1.3 million to close down ST and that there were only $74,721.77 in its account, the transfer to the daughters of its business means that they would be taking upon this heavy burden which is wholly beyond their means or ability. Her reason for transferring to close relatives because only they would even contemplate taking on such heavy burden just can’t stand on firm ground, and that she would impose such burden on her 2 daughters who were clearly so dear to her is equally incredible. The truth is that ST was not a burden, and the transfer to her daughters was one way to put it out of the reach of the Husband while retaining control thereof by her. Post-Transfer Behaviour 108.It is submitted by Counsel for the Husband that the conduct of the Wife after the purported dispositions of RG and ST all support his contention that the dispositions were with the intention of defeating his claims. In addition to those already referred to earlier such as her continued involvements in the business after the transfer, it is pointed out that she had remained tight-tipped about these dispositions for a long time until she had no choice but to disclose them in May 2002 when faced with the Husband’s application for interim maintenance. Such secrecy on her part, it is argued, is an indication of the bogus nature of these dispositions and the lack of bona fide on her part, as she was then legally represented and could and should have sought legal advice on such dispositions and would have been advised to take proper steps including notifying the Husband before actually disposing of them. 109.The fact that these dispositions were never mentioned in any of the correspondence between the parties’ solicitors, even in August 2001, months after the transfer, when the Husband’s solicitors raised his concern about the Wife’s attempt to dissipate family assets and requested for her undertaking not to do so (Bundle A p.42), no mention of the transfer of the 2 businesses was ever made in her solicitors’ reply simply just add weight to the argument that she was deliberately being secretive and deceitful about the dispositions. Furthermore, in the long letter from her then solicitors Messrs. Yen, Yu & Co of 7th August 2001 (Bundle A p.355 – 358) when the issues over the parties’ dealings with the family assets and accounts were raised in details, in particularly when the business of ST was mentioned and that the Husband was alleged by the Wife to be just a “bare trustee” holding all the assets for her who was the sole beneficial owner thereof, I agree with the Husband that on any fair view, there cannot be any reason for the Wife not to disclose, there and then, that the 2 businesses had already been transferred to her brother and daughters respectively, if indeed there were proper and genuine reasons to do so. Her failure to disclose simply cannot be justified, and it can mean only one thing : that she did not want the Husband to know about them. 110.It is also submitted on behalf of the Husband that the most peculiar features of the 2 dispositions was that all the transferees had no experience in managing or operating the business of elderly homes and had no money to meet any financial loss should it arise, or if I may add, to close the business down with all the consequential expenses which the Wife had put in excess of more than $1 million and that they did not actually reside in Hong Kong at all. As the subsequent facts show that they had to rely upon other people to manage both business for them just add further weight to the Husband’s argument that the Wife could have kept the business and hired someone to manage them for her. The facts that Mr. Young, himself without any prior experience or skill, was hired first by Wang to manage RG, and later by the 2 daughters for ST but even on his own evidence, he was mainly hired to deal with the various lawsuits as well as these proceedings for the limited companies and not managing the 2 business by himself, which he described to be chaotic and that it was very much left to the more senior staff to do what they saw fit. This, the Husband submits, is incredible and no real or genuine owner would allow his business to be run in this fashion. 111.The evidence of course reveals that the business of RG, in the form of the limited company, has been further disposed to 2 strangers who happened also to be non-residents of Hong Kong and who have failed to take part at all in these proceedings. The facts that this disposition was made in the middle of the S.17 application by Wang with full knowledge thereof, at a consideration which was, according to Mr. Young’s evidence, different from that as stated on the Instrument of Transfer, and on conditions which were never revealed or explained, simply further add strength to the Husband’s argument that all these were carried out by or on behalf of the Wife to make sure that RG would be put beyond the Husband’s reach despite his present application. Conclusion 112.Having considered all the facts and evidence before me including hearing and seeing all the parties and witnesses in Court, I find the Wife to have failed to rebut the presumption under S.17(3) that she disposed of the business of RG and ST with the intention to defeat the Husband’s claim for financial provision. In fact, I am satisfied that all her actions in respect of the dispositions aforesaid including the timing of the transfers, her close relationship with all the transferees, her deliberate concealment of the transfers from the Husband, her withdrawal of money from personal and business accounts and her cancellation of all the autopay arrangements were for one reason and one reason only : to put all her assets out of the reach of the Husband so that he would not be able to proceed with his financial claims against her in the event of their divorce. Accordingly, I order that the Wife’s dispositions of RG and ST be set aside, with the costs of and incidental to the s.17 application to the Husband to be paid by the Wife except for the 2 days on 12th and 13th of May 2003 which were adjourned due to the fact that his Counsel was unavailable and is therefore to be paid by the Husband to the Wife. All costs are to be taxed on party and party basis and with certificate for Counsel and to be an order nisi to be made absolute at the expiration of 14 days. I shall now wait for the parties to come back before me for directions consequential to the setting aside of the dispositions, and for the ancillary relief application generally.
Representation : Christopher Lam instructed by Chan, Leung & Cheung for the Petitioner. Lisa Remedios instructed by Oliver C.M. Chan & Co. for the Respondent. Appeal by the Respondent to Court of Appeal dismissed. Please refer to CACV9/2004 dated 26 May 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other judgments that cite this case
Further hearings and rulings under FCMC 5641/2001