C v. L

FCMC No. 1974/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 1974 OF 2008

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Coram: Deputy District Judge K.W. Wong in Chambers (not open to public)

Date of Hearing:  15^th, 22^nd & 30^th January 2009

Date of Handing Down of Written Decision: 26^th February 2009

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DECISION

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1.This is the application of the Respondent Husband (“Husband”) against the Petitioner Wife (“Wife”) for: -

i)   discharge of an injunction dated 16^th May 2008 made by this Court restraining him, either by himself, his servants, agents or otherwise from disposing or otherwise dealing with his interest, rights and benefit of and in the property in Brampton, Ontario, Canada (“Brampton”) until the adjudication of the Wife’s application for ancillary relief or further order; and

ii) the payment out from the Court to him of HK$550,000 or such amount as this Court thinks fit to meet his legal costs in these proceedings and in related proceedings commenced by the Wife against him in Canada on the ground that the said money was unreasonably and unjustifiably intercepted by the Wife while it was sitting in their joint account and ordered to be paid into Court when the aforesaid injunction was made.

Brief Background

2.The Husband and Wife are respectively 55 and 48 years old. The Husband is now an executive director of a company earning $65,000 a month. The Wife is a qualified town planner having an average monthly income of about $150,000.

3.The parties were married on 24^th November 1986 in Hong Kong when the Husband was 32 and the wife 26. The Husband was then working as an officer in an International bank and the Wife a town planner. There is one daughter of the marriage, namely, TV, born on 10^th July 1992. She is now 16 and is studying in a local international school.

4.The Wife became a Canadian citizen before the marriage. She supported the emigration of the Husband to Canada in or about 1990. The Wife later also successfully sponsored the Husband’s parents, Mr. LS and Madam HL, and his siblings emigrating to Canada. It is not in dispute that the Husband’s parents engaged in business relating to property development in Hong Kong prior to emigrating to Canada. Soon after their emigration, quite a number of landed properties were acquired in Canada, including Brampton. Brampton was a commercial plaza located in Ontario. It was registered in the name of one SLP Holding Inc. (“SLP”) in 1996. This company, according to the Husband, was named after his parents, by combining the two names ‘S’ and ‘L’. The Husband together with his 3 other siblings are shareholders of SLP with equal shareholding. It is also said by the Husband that in order to gain tax benefit, he and his five other siblings are “co-tenants” of Brampton with he himself a 22% co-tenant of Brampton though he holds 25% shareholding in SLP.

5.While the parties were in Canada, they purchased a property in Beardmore, North York, Toronto, Canada (“Beardmore”) in 1994 using sales proceeds of their former matrimonial home in Hong Kong. The rest of the fund came from the Husband’s parents as a gift. Beardmore is registered in their joint names.

6.The parties later decided to move back to Hong Kong. They did so in 1997. In 1999 they purchased a unit in Pacific Palisades in the Braemar Hill (“Matrimonial Home”) at a price of $7.41 million with assistance of mortgage. It has been occupied by the family as matrimonial home and is registered in the sole name of the Wife.

7.The marriage is not without difficulties. One of the allegations made by the Wife against the Husband is infidelity which the Husband denied. They agreed to seek marriage counseling in or about early 2008 with a view to help get through their ailing relationship. Unfortunately the counseling did not work out. The relationship broke up after 21 years.

8.On 5^th February 2008, a notice of severance of joint tenancy was registered in Canada against the land title of Beardmore.

9.On 15^th February 2008, the Husband was asked by the Wife, and he said he reluctantly agreed, to leave the Matrimonial Home.

10.On 22^nd February 2008, the Wife issued a Petition based on “unreasonable behaviours” on the part of the Husband.

11.It is not in dispute that the Wife raised a loan of HK$5.5 million from the Hang Sang Bank secured by a mortgage of the Matrimonial Home on 13^th March 2008 without the prior notice and consent of the Husband. Some $0.5 million has been applied to pay off the existing mortgage. The balance of about $5 million was kept by the Wife, pending investment opportunities.

12.The Petition was contested and an Answer was filed by the Husband on 14^th March 2008. The main suit has not yet been set down. No decree of divorce has been granted so far. From the tone of the Answer, which was drafted by the Husband personally when he was still acting in person, he denied many of the behaviours complained of him and appeared intending to salvage the marriage.

13.On 15^th May 2008, the Wife filed a Form A giving notice that she will be claiming financial relief against the Husband including transfer of two landed properties, namely,

i)   Beardmore; and

ii) Brampton.

Background Leading to the Present Application

14.The matter first came before me on 15^th May 2008 at the first appointment. The Wife was then represented by solicitors and the Husband acting in person. In the course of the hearing solicitor for the Wife requested an undertaking from the Husband not to dispose of his Canadian landed properties before adjudication of the Wife’s ancillary relief application. However, the Husband only agreed to give the undertaking in respect of Beardmore but not Brampton. His undertaking was accordingly recorded in my order dated 15^th May 2008.

15.It is the Husband’s case that he held the Canadian landed properties and shares of the land-holding companies on trust for his parents. However the Wife says that they are gifts from the Husband’s parents.

16.On the next day, i.e. 16^th May 2008, solicitors acting for the Wife, equipped with the Wife’s affirmation made on 16^th May 2008 (“Wife’s 1^st Affirmation”), took out an ex parte (on notice) summons for an injunction against the Husband to restrain disposal of Brampton. The Husband was present at the hearing. The injunction was granted with a direction that an inter parte summons returnable on 3^rd June 2008 be issued.

17.It was said in the Wife’s 1^st Affirmation, and relied on as one of the grounds for the injunction, that on or about 29^th April 2008, the Wife realized the Husband was attempting to dissipate about half of the money sitting in their joint names account with the Hang Sang Bank (“HSB account”) into the husband’s personal account. She alleged that on that date when she was doing internet banking, she noticed that the Husband had transferred a sum of HK$550,000 from their saving account to current account comprised in that HSB account. She thought the Husband might want to move money away from the HSB account to his account maintained in a bank other than HSB. In order to safeguard her interest, she said, she instructed the bank to transfer this HK$550,000 into an account registered in her sole name. The bank did what had been instructed.

18.The Wife said what subsequently happened confirmed what she had suspected to be correct. The bank later told her that a cheque on the joint account for the same amount has been drawn by the Husband in his own favour. This cheque was bounced because the fund had been intercepted.

19.The Wife also said what the Husband alleged about the beneficial ownership of Brampton at the 1^st Appointment was inconsistent with what he had stated in his Form E affirmed on 10^th April 2008. Brampton forms a substantial part of the family assets according to the Husband’s Form E. It is also said that he has beneficial interest therein and no trust interest has ever been mentioned in the Form E.

20.In addition, the Wife also said the Husband had resigned as the Executive Director of one WI Limited (“WI”), a company listed in the Hong Kong Stock Exchange effective in April 2008 without cause. All these demonstrated that the Husband had an intention to evade liabilities to pay her ancillary relief claims.

21.At the hearing on 16^th May 2008, the Husband gave his explanation orally, which are basically the same as what has been set out subsequently in his affidavit. He said the said $550,000 comprised mainly the terminal compensation of $481,083 paid to him by his employer WI. This pay cheque was deposited into the HSB account on 23^rd April 2008. He intended to withdraw $550,000 to his personal account newly opened with the Bank of China by writing a cheque on 29^th April 2008. $300,000 was withdrawn from the saving account into the current account on 29^th April 2008. Two separate sums of $121,000 each were also transferred from the gold/forex account to the current account on the same date. He said he needed money for personal use and had no intention to dissipate. Upon my invitation, solicitor for the Wife agreed to pay the intercepted money into Court before 5:00 pm of 20^th May 2008, which was done.

22.He also said Brampton belongs to his parents and he held Brampton on trust for his parents.

23.The parties did not return on 3^rd June 2008. Instead, they adjourned the matter for argument by consent with an agreed timetable for filing of affirmations. On 14^th August 2008, the Husband also issued another summons for return of the said HK$550,000. This is against the above background that the present applications were made.

24.After the granting of the injunction, the Wife issued proceedings in the Ontario Superior Court of Justice in or about July 2008 against the Husband and SLP for, inter alia, “enforcement” of the injunction and registration of the order against Brampton.

The Grounds of the Application

25.At the substantive hearing, both parties are represented by counsel. The Wife is represented by Mr. Egerton and the Husband by Miss Anita Yip. They have put in very helpful written submission and authorities. Although counsel argued the aforesaid two applications one after one, it is fair to say that the grounds are basically similar. Miss Yip’s grounds for the release of money and discharge of injunction can be summarized as follows:

i)   there is material non-disclosure on the part of the Wife in the ex parte application, which entitles the Husband to a have a discharge of the injunction (in respect of Brampton and $550,000 even the latter is not subjected to any injunction for the time being) as of right without further consideration of the merits;

ii) there has been no application to restrain the sum of $550,000 and this sum is not subject to any injunction;

iii)   even there is an injunction restricting disposal of this money, there is no intention to dissipate;

iv)   the Husband has been “kicked” out of the matrimonial home and is in need of fund to meet his living and legal costs;

v) there is no intention nor is the Husband able to dispose of Brampton, which is owned by SLP 25% shareholding of which is held by the Husband on trust for his parents;

vi)   the Wife has made a fundamental mistake in that Brampton is not held by him. The Husband is now willing to give an undertaking not to dispose of his shareholding nor exercise his power and rights in SLP to dispose of Brampton.

26.The gist of Mr. Egerton’s argument is this. The Family Court has no jurisdiction to grant an interim lump sum nor is there any application for costs allowance. If the money is to be released, the money should be released to the HSB account which is jointly owned. It should therefore be split and distributed equally to the parties. In respect of Brampton, the Husband’s evidence in subsequent affidavits is inconsistent with what he has sworn earlier on in the Form E. In Form E he deposed to the facts he had beneficial interest in Brampton. In later affidavit he said that he was simply holding the interest on trust for his parents. They did not know English and had to rely on their children, particularly the Husband to manage their investments in Canada. Now the Husband’s version had changed and was said to be a mistake. Mr. Egerton submitted such retraction is unbelievable. How a university graduate with a master degree and an executive director of a listed company could have made such silly mistakes. His evidence is unbelievable. The Husband also failed to make sufficient disclosure, e.g. rental incomes from the Canadian properties, in his Form E. The Husband denied non-disclosure. As the dispute of facts can only be resolved at trial, Mr. Egerton urged the Court to maintain the status quo until conclusion of the trial. There will be no prejudice caused to the Husband, he submitted.

27.Mr. Egerton submitted that the undertaking, since given at a time after the Wife has already instituted proceedings in Canada, is unacceptable.  It is because the Wife is simply unable to assess the implication of such undertakings, if accepted, on her pending proceedings in Canada.

Material Non-disclosure

28.In the case of Brink’s Mat Ltd v Elcombe [1988] 3 All ER 188, at 193, Ralph Gibson LJ has helpfully set out the relevant principles relating to the matter of discretion in non-disclosure in Anton Pillar orders and injunctions as follows:

“   (vi) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application.  The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.  (vii) Finally ‘it is not for every omission that the injunction will be automatically discharged.  A locus poenitentiae may sometimes be afforded’: see Bank Mellat v Nikpour [1985] FSR 87 at 90 per Lord Denning MR. The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms…”

29.Balcombe LJ further stated in Brink’s Mat Ltd v Elcombe, (supra) at p.193-4 the following:

“The rule that an ex parte injunction will be discharged if it was obtained without full disclosure has a twofold purpose. It will deprive the wrongdoer of an advantage improperly obtain: see R v Kensington Income Tax Comr, ex p Princess Edmond de Polignac [1917] I KB 486 at 509. But it also serves as a deterrent to ensure that the persons who make ex parte applications realize that they have this duty of disclosure and of the consequences (which may include a liability in costs) if they fail in that duty. Nevertheless, this judge-made rule cannot be allowed itself to become an instrument of injustice. It is for this reason that there must be discretion in the court to continue the injunction, or to grant a fresh injunction in its place, notwithstanding that there may have been non-disclosure when the original ex parte injunction was obtained: see general Bank Mellat v Nipour … and Lloyds Bowmaker Ltd vBritannia Arrow Holding plc (Lavens, third party)…) (my emphasis).

30.Although the “freezing” order concerning the $550,000 is neither a Mareva injunction nor Anton Pillar order, by reason of its restrictive nature which is akin to an injunction, I consider the above principles applicable to the discharge of the Brampton injunction as well as to the release of the $550,000. By reasons of the above passages, with due respect to Miss Yip, the injunction and the freezing order will not be discharged automatically as submitted even there is non-disclosure. The alleged non-disclosures should be looked at to see whether they are of sufficiently materiality to justify an immediate discharge and whether injustice will be caused to the applicant Wife if the money is released and injunction discharged.

About the $550,000

31.Miss Yip criticized the Wife of serious and deliberate non-disclosure of material facts when the Wife made the application. The material non-disclosure which Miss Yip complained of included matters set out in the following paragraphs. It is impossible to form any conclusion of facts for the time being because there is no cross-examination of witnesses. However, the thrust of her attack can immediately be felt after going through the affidavit evidence. In fact, the facts relied on by Miss Yip are not in much dispute, though each party attaches different explanation for what actually had happened.

32.Firstly, Miss Yip submitted that the Wife failed to disclose a hand-written statement dated 17^th January 2008 by the Husband agreeing to pay his Wife all his “fixed deposit” in his joint account together with his monthly pay cheque as “gift of love”. On the next day, i.e. 18^th January 2008, a fixed deposit of C$40,701.81 was transferred to a joint account opened with the Hong Kong Bank in the joint names of the Wife and their daughter. The transfer was confirmed by the Wife in paragraph 41 of her Affirmation. Miss Yip submitted that the disclosure of these facts should have negated any intention to dissipate on the part of the Husband. He voluntarily transferred money to the Wife as promised!

33.Secondly, it is said that the Wife had failed to disclose a single sheet of statement of the joint account when the injunction was applied. The Court was then deprived of the financial position of the Husband. It turns out such information is, Miss Yip submitted, crucial. The Husband is running out of liquid asset and has to borrow from his brother. The Wife denies that.

34.Thirdly, the Wife has failed to disclose that she did not take issue of another sum of $126,000 transferred out by the Husband. This fact is not contested.

35.Fourthly, the Wife has failed to disclose the source of the $550,000, which comprises mainly the terminal compensation of the Husband upon his leaving WI. Such disclosure shows that the intercepted money is, in fact, the Husband’s own money though sitting in a joint account. The fact that the terminal payment has been deposited into this account is not contested.

36.Fifthly, the Wife is heavily criticized for her failure to disclose her own means, which when revealed, should have clearly shown the extreme disparity of the parties’ respective cash position and liquid assets. It is not drawn to the Court’s attention that she now possesses cash and liquid assets such as shares amounting to some HK$12 million while the Husband has less than a million. The fact that she has refinanced the Matrimonial Home and obtained a loan of $5.5 million in March 2008 has not been disclosed. Had this fact been disclosed, Miss Yip submitted, the Court should not have granted the injunction and the money returned to the Husband. She described the suppression of financial information showing extreme disparity of the parties’ respective cash and liquid assets most outrageous. She submits that this ground alone should entitle the Court to discharge the injunction and release the intercepted money without investigating merits.

37.The Wife admitted that the refinancing is without the notice and consent of the Husband. She explained that she would like to do some investment using the loan. Her plan of investment has been made know to the Husband before the breakup.

38.It is fair to say that Mr. Egerton did not accept there was any material non-disclosure on the part of the Wife, and even if there were, the gist of his submission is that it is un-intentional. Although he said that the Wife’s financial position was fully and frankly placed before the Court as it had been contained in the Wife’s Form E which was used at the 1^st Appointment the day before, he conceded, and I think fairly and reasonably, that it is not the sort of disclosure expected of by the Court in an injunction application. The Court must be drawn to the attention of the material facts when the party applies for the injunction.

39.After hearing submission of counsel, I accept that there is non-disclosure of material facts. I agree that the above facts, if disclosed, may have affected the Court’s exercise of its discretion on whether to injunct Brampton as well as to restrict the disposal of the $550,000 at the time of the application.

40.It is the Husband’s affidavit evidence that since his return to Hong Kong in 1997 and until 29^th April 2008, he only maintained the following 2 accounts, namely,

i)   the HSB account. This is the account into which the $550,000 was deposited and intercepted; and

ii) the account with Canadian Imperial Bank of Commerce (“CIBC”).

41.These accounts are joint accounts with the Wife. The HSB account was used to deposit his monthly income and the CIBC account for deposit of the rentals received from Beardmore. The Husband said these were his only accounts until end of April 2008. So throughout the years he was transparent. He opened an account with Bank of China in his sole name about 3 months after the issue of the petition. That was why he deposited the terminal compensation into the HSB account even those after the Wife had issued the petition.

42.Although the Wife said that she often used the joint account and therefore the money in it should be shared, she does not appear to disagree with what the Husband has said about this account, i.e. it was mainly used for him to hold his money. Her owned evidence also suggests that she managed “her own money” with her own accounts. In paragraph 40 of the Wife’s 2^nd Affirmation on 12^th November 2008, she has this to say in relation to the transfer of C$40,000 to her account:

“on the same occasion, I reiterated my request for the transfer of his money in the bank account under our joint names into bank account of myself and the Daughter. The Respondent then wrote me another statement to the effect that as a gift out of love, he would within a week’s time transfer all the fixed deposits and his pay checks to me. …” (my emphasis)

43.The above shows that she acknowledges the money in the joint account belonging to the Husband; otherwise it would not have been necessary for her to make such request. She agrees the money in the joint account being his money. Furthermore, such promise from the Husband would not have been meaningful to her for the simple reason that she is also the co-owner of the money. Such “gift of love” would not have been a gift at all and I would have thought it would have been brushed aside right away by the Wife. I do not think that she would ask for the transfer at all if she herself has interest in the money sitting in the joint account.

44.nbsp;  The Wife’s affirmation evidence that she does not very often check this joint account, though it is open to her to do so, supports the Husband’s case in this respect.

45.At any rate I consider the fact that she obtained a loan of 5.5 million on the Matrimonial Home without the Husband’s prior consent raises an eyebrow. It is beyond dispute that normally the matrimonial home is an important asset belonging to the parties to the marriage regardless of the name under which the property is held. In matrimonial proceedings, the matrimonial home will normally be subjected to a lis pendens registered by a party’s lawyers restricting its disposal until conclusion of the proceedings. The refinancing has the effect of disposing part of the family’s assets. It turns the Matrimonial Home into a more liquid form in favour of the Wife, giving her a tactical advantage over the Husband. The net equity of the matrimonial home is diminished, thus neutralizing the impact of any lis pendens against the Matrimonial Home. It may also have the created a charge over any account opened by the Wife with the HSB, including the HSB joint account.

46.I understand that the Wife contends that the Husband owes substantial landed properties and other investment through SLP and another family company called FW Ltd (“FW”). The later holds investment, mainly which the Wife alleges to worth about $200 million. The Husband’s interest in FW for the time being is 8% and it may increase to 22% in future. Accordingly the Husband owns more assets that she does for the time being. It is therefore necessary to freeze the Husband’s assets. It will do no prejudice against the Husband.

47.Be that as it may, this has to be balanced against other factors. It is not in dispute that the Wife’s liquid assets, after refinancing the Matrimonial Home, far exceed that of the Husband. Hers is about $12 million and the Husband’s less than a million. A freeze of over half of the liquid assets of the Husband may have the effect of depriving the Husband of funds to meet his living and legal expenses, thus stifling his ability to defend. It is grossly unfair to him.

48.It is true that the Husband would like to move some of the money to his personal account, thus making it beyond reach of the Wife. However, basing on the available evidence disclosed to the Court at the substantive hearing, I am not satisfied that the money withdrawal incident, at least provisionally, shows intentional dissipation on the part of the Husband. It has to be remembered that even after the issue of the petition the Husband still deposits his own money into this account. Had the aforesaid non-disclosed facts been drawn to the Court’s attention at the time of the application, particularly the facts showing the huge disparity in cash and liquid assets between the parties and her refinancing of the Matrimonial Home without the Husband’s knowledge and consent, I am sure at least in respect of the intercepted money, the Court would have directed the money to be returned to the Husband unconditionally.

49.I am satisfied that the joint account is used mainly by the Husband holding his own money. The intercepted money, though in a joint account, belonged to the Husband. Mr. Egerton’s suggestion that the money be shared equally if returned must fail.

50.I do not consider it necessary to consider whether it is an application for interim lump sum or for costs provisions. This is a case where the money is made “free” and be returned to the party who originally possessed the money.

About the Brampton

51.The material non-disclosure about Brampton, submitted by Miss Yip, includes the legal ownership of Brampton because the Court was not drawn to the attention of the fact that SLP, instead of the Husband personally, owns Brampton. Such information discloses third parties’ interest in SLP, and thus in Brampton.

52.Secondly, it is said that she failed to disclose to the Court that she, being a Canadian citizen and a professional town planner, had during the marriage assisted the Husband’s parents in managing their properties and giving advice to them before acquiring properties in Canada. She had ever lent her name to the Husband’s parents to hold landed properties for the purpose of gaining tax benefit. Such facts, if disclosed, would have led to considerations on whether the Husband has done the same for his parents in respect of Brampton, as he now contends.

53.Thirdly, the Answer of the Husband dated 14^th March 2008 has already stated that Brampton is held on trust for the parents. The Wife is said having failed to draw the Court’s attention to this fact at the time of the application.

54.Fourthly, the Wife was not ignorant of any alleged trust of the L’s family. According to her Form E and her 2^nd Affirmation, the Wife mentioned that as early as January 2008 when the Husband wanted to save the marriage, the Husband informed her of his potential benefit under the trust. It was even written down by him. This information should have been particularly drawn to the Court’s attention when making the application.

55.In respect of Miss Yip’s forceful argument, it will be an uphill battle to argue otherwise on behalf of the Wife. I do not think Mr. Egerton has sought to argue along this line. It is his contentions that the Husband’s resilement from his previous statements on oath a clear basis for granting an injunction. It is also his argument that intention to dissipate, though present in the present case, is not a must. Other considerations, such as his retraction from an earlier sworn statement and the alleged undisclosed assets, warrant a continuation of the injunction.  

56.I agreed with Miss Yip that there is no full and frank disclosure on matters relating to Brampton. As stated above, such non-disclosure will not discharge the injunction automatically. It is prudent to take all other circumstances, including whether there is an intention to dissipate assets and the nature of retraction from the Husband’s early statement, into consideration before deciding whether to discharge the Brampton injunction.

Is Intentional Dissipation a Pre-requisite for the Brampton Injunction?

57.The Wife relied on the fact of the Husband leaving the service of WI without her consent as a ground for evading liability. However, according to undisputed evidence, the Husband’s resignation was made known to the Wife at the marriage counseling session before the issue of the petition when both the Wife and the Husband were still thinking of saving the marriage. The Husband explained that because the Wife had raise criticism of WI and wondered why he, as a Christian, would work for it. He said that in order to show his commitment to his Christian faith and as a gesture of good will to the Wife of his determination to improve, he resigned. It was something which happened before the divorce petition. The Wife alleged that she expected the Husband to discuss with her before making his decision. She said it was not her intention to ask him to quit.

58.The above shows how easy any misunderstanding and discrepancy in one’s expectation may arise on issues between them. As decision to resign took place when the parties were still exerting effort to save the relationship, I cannot see why this can be regarded as evidence to defeat one’s claim.   

59.The HSB account has all along been used by the Husband as his only money holding account in Hong Kong. The Husband had made numerous transactions through this account before. He even deposited his compensation and pay cheques in it after the issue of the petition. I am not satisfied that Wife has sufficiently established an intention to dissipate assets by the mere fact of the Husband moving away his money in this account. The said transfer only renders surveillance by the Wife of the Husband’s money difficult or impossible.

60.Miss Yip asked for an immediate discharge while Mr. Egerton submitted that intention to dissipate not a pre-condition for the injunction. It is therefore a question of law as to whether an intention to dissipate a pre-condition for granting an injunction in a matrimonial case.

61.Miss Yip relied on an English authority of The Law Society v Shanks [1988] 1 FLR 505, CA to support her proposition that an intention to part with assets must be shown before the injunction in the present case is granted. In Shanks (supra), Mr. Shanks was ordered to pay costs to his wife in matrimonial proceedings. As the wife was legally aided, the Law Society of England under the English statutory power obtained a judgment against him. There was clear evidence showing that he was unwilling to satisfy the costs order. A Mareva injunction was obtained before a first instance judge. Mr. Shanks appealed to the Court of Appeal. Sir John Donaldson, M.R. who delivered the only 2-page judgment in the Court of Appeal, allowed the appeal. It was stated in the judgment that the injunction had the effect of preventing Mr. Shanks from buying even a loaf of bread or having his ordinary living expenses. The learned Master of the Rolls stated:

“In the present case Mr. Shanks shown a marked reluctance to pay the judgment but here was no evidence of any intention to dissipate his funds. The Mareva injunction should not have been granted and would therefore be set aside.”

62.Shipman v Shipman [1991] 1 FLR 250 was a case concerning a wife suspecting the husband intending to dispose of his severance payment he was expecting to receive, thus defeating her ancillary relief claims. It was found as a fact that the husband had made considerable disclosure and kept the wife informed of his intention with regard to the use of the severance pay. However he refused to give an undertaking having the effect of freezing any part of the severance pay. The wife therefore entertained considerable suspicion that he intended to dispose of the severance pay and made an application for an injunction, which was duly granted by the registrar. The injunction was made pursuant to section 37 of the Matrimonial Causes Act 1973 (“MCA 1973”).  The Hong Kong equivalent of this English provision is section 17 of the Matrimonial Causes Ordinance, (Cap179) (“MCO”). The husband appealed against the registrar’s decision restraining him from disposing of or dealing with a sum amounting to about half of the severance payment. This appeal was dismissed by a single judge of the Family Division in the English High Court.

63.It was held by Lincoln J in Shipman that:

i)   the court has an inherent jurisdiction to freeze assts which might be put beyond the reach of the applicant, notwithstanding the enactment of section 37 of MCA 1973 (i.e. section 17 of MCO of this jurisdiction);

ii) the court, when deciding whether to exercise its inherent jurisdiction to restrain the husband, was not required to have regard to the many restrictions and safeguards surrounding the use of worldwide Mareva injunctions and to assimilate the use of and procedure for injunctions in the family court to those in commercial law. The matrimonial field called for a different approach; and

iii)   if the injunction is discharged it is possible for the husband to change his intention, however genuine and well-disposed to his wife his present state of mind might be; and if left without a job and new responsibilities, will be faced with a temptation to eat into the whole of the fund.

64.When asked how this case can be reconciled with the principles in Shipman which was upheld in Hong Kong by the learned Madam Justice Le Pichon (as she then was) in Tan Li Hui v Tan Kian Chee [1997] 4 HKC 94. Miss Yip urges this Court to follow Shanks, as it is an English Court of Appeal decision while Shipman is not. However, it is fair to say that as a fall back she does invite this Court to exercise good sense having regard to all relevant circumstances including intention to dissipate before granting injunction otherwise the Court will be invited to grant injunction in each and every matrimonial financial dispute. 

65.I think Shanks can be readily distinguishable from Shipman. In Shanks, the Mareva injunction was obtained after (my emphasis) the divorce proceedings and is for the purpose of satisfying a costs order statutorily enforced by a third party. It is not an injunction granted in aid of preserving family assets pending the ultimate judicial determination by the Court as to what proportion of that asset is to be shared or made available to the applicant spouse, as in Shipman. Accordingly, although the Shanks injunction arises in a matrimonial context, it is no different from an ordinary Mareva injunction granted in a commercial context. It is to facilitate the enforcement of a costs order. Furthermore, it has been commented by the learned Master of the Rolls in Shanks that the injunction is breathtaking in its width because by the injunction Mr. Shanks would be prevented from buying his food or having his daily expenses. It has been said by the Master of the Rolls the order was “plainly wrong in this respect”, and its dismissal plainly understandable. 

66.The Shipman type injunction is meant to ensure that one spouse does not selfishly or irresponsibly salt away family assets which may be in the name of that spouse but which must be carefully preserved, pending final determination of the spouses’ respective ancillary claims. A pragmatic approach is essentially taken in all family cases when exercising its inherent jurisdiction. I consider the approach of Shipman instead of Shanks should be applied to the present case.

67.Even though the many restrictions and safeguards surrounding the use of commercial Mareva injunctions is not applicable to an injunction in the matrimonial context, that does not mean I need not consider any intention to dissipate. Injunction is an equitable remedy and is an exercise of the court’s discretion. The issue before me is whether after considering all relevant circumstances of the case, I should exercise my discretion to grant the injunction, or to discharge it at this interlocutory stage.

Other Considerations

68.It is stated in the Husband’s Form E that Brampton is a landed property in which he has beneficial interest together with his five other siblings. He states that he holds 22% beneficial interest therein. He went on to calculate his 22% interest, adopting an exchange rate of CAD1 to HKD7.7 and an valuation of CAD4.5 million and came up with his net interest in Brampton being HK$7,623,000.

69.It is not in dispute that there is no mention of any trust interests required to be stated in part 2.11 of the Husband’s Form E.

70.There is also no mention of securities held by the Husband in part 2.7 of the Husband’s Form E. That was confirmed by the Husband in the answers filed on his behalf to the Wife’s questionnaire. The Husband said that he had only one account with Chung Nam Securities Ltd (“Chung Nam”) which was closed in November 2007. However, according to a statement produced by the Wife and exhibited at the hearing, the Husband in fact operated another security trading account with Chung Nam as at the date of the Form E (10^th April 2008). The statement showed that as at 30^th May 2008, there is a credit balance of $31,833.79 in that account.

71.It is the Wife’s case (paragraph 38 of her 2^nd Affirmation) that on 17^th January 2008 the Husband was asked to state particularly his “ownership” in a BVI company holding various assets. The Husband then wrote on a piece of paper to the effect that in respect of SLP which held Brampton, he had 22% interest; and in respect of FW which is a BVI company, he directly held 8% now and it was highly probable that he would own up to 22% thereof in future. The note was exhibited at page 222 of the bundles. It is the Wife’s estimate that FW had an asset value of about HK$200 million.

72.The Husband now stated that Brampton had been held on trust by him and his siblings for and on behalf of his parents. He had no interest in Brampton which belonged to his parents absolutely. He said the Wife well knew about such fact because he could not afford to purchase it (paragraph 87 of his 1^st Affidavit 28^th August 2008). After filing of his Form E, he was advised by his brother and later confirmed by Canadian lawyers that he  “should not be regarded as the ‘beneficial owner’ under item 2.2 of Form E since the purchase monies came from my parents” (paragraph 89 of his 1^st Affidavit). That is why he was unable to give any undertaking to the Court on 15^th May 2008 when asked.

73.Furthermore, regarding the alleged hand-written note, he said he was then referring to the percentage shareholding he held and would be holding on trust for their parents. He was not then referring to his own beneficial interests therein. He has no interest in these properties held through corporate vehicles.

74.I must say the Husband’s explanation on his retraction from previous sworn statements far from satisfactory. As pointed out by Mr. Egerton, he was a university graduate with a master degree. He was a chief operational officer and executive director of a company listed in the Hong Kong Stock Exchange. It will be quite unbelievable that he would have messed up and/or failed to understand the meaning of “beneficial interest” and required reminder and advice from siblings and lawyers before he realized he had made a mistake.

75.Furthermore, his explanation about his hand-written note, though the veracity of which cannot be verified until trial, does not appear to me to be logical. I have reservation to accept his explanation. In the Husband’s affidavit, he explained the circumstances leading to his writing of the note. He said he was then “requested to state his [my] interests in the companies in Canada which he [I have] has been holding on trust for my parents”. One wonders why it is necessary to specifically ask for trustee (as against beneficial) interest for the simple reason that no matter it is 8% or 22% or whatever, such interest is a bare legal interest and is worthless. I doubt the Wife would be interested to know his trust interest. Logically and naturally, she would be more interested to know his beneficial interest. Is it not the Husband’s case that the Wife had pre-planned to extract from him all financial information in contemplation of the divorce! If that is the case, is it not more likely that it is beneficial interest instead of trust interest she was more interested in!

76.On the other hand, it has been advanced on behalf of the Husband at the hearing that the non-disclosed securities trading account was a trust account held for his former employer. His explanation does not appear to the Court to be convincing without further elaboration. Firstly he tendered his resignation as early as January 2008. By April 2008 he left the employ of WI. However, the said statement shows a credit balance as at 31^st May 2008. Why then trust properties are not returned to his employer after termination? Secondly, contrary to what he alleged the account to be his trust account, this account was opened in the name of “LKS-personal”, which is different from the name of the account he alleges to be his --- “LKS”. If one is mindful to earmark an account as a trust account, one wonders why it is not labelled direct as a “trust” but a “personal” account. That can only be ascertained at trial.

77.In the circumstances of the present case, there are good reasons for the Wife’s fear of dissipation or part with possession of Brampton by the Husband, though the evidence adduced at the ex parte application is far from satisfactory. Like Shipman, the Husband may, upon pressure from his siblings and parents, or his other consideration of the paternal family and its interest, be tempted to part with possession of his interest in SLP and thus Brampton in future, rendering any court order in favour of the Wife difficult to enforce. Alternatively, in light of the diagrammatically different view of the parties on the beneficial ownership of Brampton, a prudent way is to preserve Brampton’s status quo. I am satisfied that it is a proper case for an injunction to be granted.

78.Now that the Husband is agreeable to provide an undertaking of similar effect in lieu of an injunction. According to the draft submitted by Miss Yip on behalf of the Husband and orally supplemented, the Husband is even willing to give such undertaking as a director of SLP as well. Under normal circumstances the undertakings will be accepted and the injunction discharged. The complication here is, according to Mr. Egerton, the injunction has been registered in Canada and has been the subject matter of a challenge by SLP. He does not know the implication on the Canadian proceedings if an undertaking is accepted in lieu of the injunction. He prefers not to accept the undertaking and invite the Hong Kong Court to maintain the status quo.

79.It is the Husband’s affidavit evidence in Form E confirming his beneficial interest in Brampton and his subsequent resilement therefrom that brings suspicion upon him. It prompted the Wife’s present application. On a balance, it is not all that clear that his interest in Brampton is a bare legal trustee. The undertaking was only offered at the hearing. There is also no expert evidence from the parties as to the implication of the undertakings on the proceeding in Canada. Its effect thereon remains unknown. I consider that it is reasonable in the circumstances of this particular case to preserve the injunction and maintain the status quo. I therefore continue my said injunction granted on 16^th May 2008 until disposal of the Wife’s ancillary relief application or further order.

Conclusion and Costs Order

80.I order that:

i)   the $550,000 paid into Court by the Wife on 20^th May 2008 be forthwith returned to the Husband through his solicitors on record; and

ii) the said injunction granted on 16^th May 2008 by this Court in relation to Brampton be continued until the adjudication of the Wife’s application for ancillary relief or further order.

82.Regarding costs, as the Husband is successful in his application relating to the $550,000, which application is strenuously opposed by the Wife, I fail to see why the usual rule of costs following the event should not apply. Since the arguments advanced at the present hearing are relevant to both applications, it is fair to split the costs equally between the two.

83.Regarding costs of the interlocutory injunction, since it is for holding the ring, I consider it fair for costs be reserved to the trial judge of the ancillary relief if the matter goes to trial, or to the financial dispute resolution (“FDR”) judge if the question can be settled at the FDR.

84.I therefore make costs nisi that:

i)   the Wife do pay the Husband’s costs of the application relating to release of the $550,000, with certificate for counsel;

ii) the costs of the interlocutory injunction, with certificate for counsel be reserved to the trial judge of the ancillary relief if the matter goes to trial, and to the FDR judge if the question can be settled at the FDR; and

iii)   for the purpose of taxation, the total costs relating to the injunction and the release of $550,000 be split equally between the two applications;

such order be made absolute in 14 days if no application is made to vary the same.

Petitioner (Wife): Mr. Robin Egerton, Counsel, instructed by Tang, Lai & Leung

Respondent (Husband): Miss Anita Yip, Counsel, instructed by Gloria Chan & Co.