LCJWY v. LCKS

FCMC 16239/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

SUIT NO. 16239 OF 2013

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DECISIONS ON COSTS

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1.  These are two matters on costs before me, the first in time is the Petitioner Wife’s application by way of a summons dated 22^nd January 2016 for variation of the costs order nisi made in my judgment handed down on 8^th January 2016 after the trial of the preliminary issue over the beneficial ownership of certain assets, in which I made that order nisi for costs of the trial to follow the event against the Wife in favour of the Respondent Husband and his parents the Interveners herein. The Wife now proposes that in the particular circumstances of the case she should only be liable for half of their costs, which is opposed by both the Husband and Parents.    

2.  The second matter is the costs of the Husband’s unsuccessful application for leave to remove the 2 children of the family, both daughters aged 9 and 11 respectively, for summer holiday to Singapore in August 2016, in which the Wife seeks her costs while the Husband proposes that there be no order. I propose to first deal with the more difficult one in respect of the trial of the preliminary issue.   

Trial of Preliminary Issue

3.  The relevant backgrounds of the parties leading to the trial of the preliminary issue were already set out in details in my said judgment and I do not propose to recite them here, suffice it to say that the preliminary issue arose because those assets (“Disputed Assets”) were held in the Husband’s name but which he claimed were on trust for his Father and/or Mother. There was however no declaration of trust in respect of any of those assets, hence the trial was to determine their beneficial ownership so that the matrimonial assets between the parties could be ascertained and identified for the purpose of the Wife’s ancillary relief application.

4.  Upon hearing oral testimonies from the parties as well as the Mother and Sister of the Husband during the trial, I accepted the case of the Husband and Parents and found that all of the Disputed Assets belong beneficially to the Father and/or the Mother, and concluded in my judgment with the order nisi for costs to follow the event against the Wife for the reasons as I saw at that time:

“[112] Thus bring me to the question of costs of the trial. As already noted above and in my decision on her discovery application, while the Wife was entitled, in the absence of any expressed trust, to require the Husband and Parents to prove their case in respect of the Husband’s interests in the Disputed Assets, surely by the time when all the evidence in particularly those disclosed pursuant to my discovery order were before the court, it clearly encumbered on her and those advising her to properly re-consider or re-assess her case before proceeding to trial, so as not to run any risk of being held liable for the costs not only of the husband but also the parents, instead of so aggressively and stubbornly pursuing what has now proved to be a false hope, which is in fact quite surprising to me as it seems wholly disproportionate to her claims which were at the time essentially only for appropriate accommodation and financial provision for her 2 daughters upon divorce with no claim for herself. In the premises I see no reason why she should not have to face the inevitable consequence: That she is to bear the costs of both the Husband and Parents for the trial of the preliminary issue with certificate for Counsel to be taxed if not agreed, which is an order nisi to be made absolute at the expiration of 14 days.”

5.  By her Skeleton Argument dated 27^th June 2016 the Wife now seeks to advance further points why costs should not follow the event, and that she should only pay half of those costs of the Husband and Parents.

6.  Firstly, Mr Russell Coleman SC who did not appear for the Wife at the trial submits that it is trite that though the ownership question is one giving rise to a Civil or Chancery-type claim, it has arisen in the course and context of matrimonial proceedings, where the Court is required to adopt a quasi-inquisitorial approach.

7.  In such circumstances, he submits, the Court needed to investigate and itself be persuaded that assets held in the name of the Husband in fact belonged to someone else. The question only arose for the Court to be able to conduct the first stage of the process of identifying the parties’ assets, matrimonial and non-matrimonial, as laid down by the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537.

8.  It is in that context, Mr Coleman submits, that the fact that the burden of proof lay on the Husband to prove the assets did not belong to him is relevant to the costs question. It is however also relevant, he submits, that the discovery sought by the Wife was not only opposed by the Husband but also by the Parents, hence it is hardly surprising that the Wife was deeply suspicious as to their motives, and their trenchant opposition did nothing to assist the Wife in believing their position.

9.  Mr Coleman also submits that much of the vesting of legal title in the Husband occurred prior to the marriage so that the Wife had no direct involvement or knowledge of the details and based her case on her own impressions and what she had heard from the Husband and the Mother, while there is no finding by this Court that she was not to be believed in her recollection of what she said she heard and was told during the marriage.

10.  It is relevant, Mr Coleman submits, to the facts that there was a presumption of advancement unless the Court were able to deduce from the evidence the real intention of the Father and/or the Parents behind each of the transactions, while both the Husband and Parents bored the burden of proving their intention at the time did not coincide with the transfer of the legal title, hence not only the Court but also the Wife had had to look at, as stated in the judgment, “all the evidence holistically including the whole course of the parties’ conduct in relation to the assets which had admittedly spread over almost 20 years ...”             

11.  Furthermore, Mr Coleman submits that this Court also noted in the judgment that “on the face of it, I cannot say that there is no meritsin such case of the Wife against the Husband and his parents” [71], that it was in effect “only upon close scrutiny of the evidence before the courtsuch case of the Wife is in fact fraught with all sorts of difficulties andinconsistencies” [72], but then, Mr Coleman argues, the evidence before the court to which such close scrutiny could be applied included oral evidence which was not available either to the Court or the Wife before the trial.

12.  All of these, Mr Coleman submits, emphasize the need for the Court, and the Wife, to have had the ability to consider holistically the entirety of the evidence, both documentary and oral, prior to being able to form a firm conclusion one way or the other on the parties’ respective case, which was however not possible until the conclusion of the trial. Hence, it can be seen and submitted that:    

(1)  most of the Wife’s perception of what was the true position flowed from her recollection of past events, so it was understandable she was unable to give evidence on the facts, as she was in a position where she simply did not know, but the Husband’s evidence or case did not chime with what she was told during the marriage;

(2)  the Court made no finding that the Wife did not have that recollection, or that it was not properly based;

(3)  rather, in the circumstances, the Court agreed that the Wife was perfectly entitled to challenge the Husband’s case;

(4)  the burden was on the Husband and Parents to prove that the beneficial ownership was separate from the legal ownership of the Husband;

(5)  as there was no declaration of trust but a series of coincidence which the Court recognised and which required exploration in light of the evidence as a whole including the oral evidence;

(6)  the Wife should not be unfairly penalised for wanting to explore and make the Husband prove his case and satisfy his burden;

(7)  this issue of beneficial ownership is relevant to what the Wife would otherwise get in ancillary relief;

(8)  the non-forthcoming stance the Husband and Parents took in relation to discovery gave all the more reason for the Wife to want to investigate and go to trial on the issue. The difficult stance they chose to take with disclosure made the Wife more suspicious;

(9)  with the evidence before the Court, or the lack of it, the Wife’s advisors would not have advised the Wife to drop her application unless they were to assume that everything the Husband and the Parents might say at the trial would ultimately be believed, but which the Wife was not obliged to do on the documents alone;

(10)  indeed the documentary evidence submitted by the Husband and the Parents pursuant to the discovery order did not sufficiently prove their case and did not explain the series of coincidences in the chronology of events relating to the transfer of ownership of the assets in question;

(11)  credibility and evidence at trial was the most important factor which led to the Court making the decision in the judgment, which could only do so ‘holistically’ after having looked at the documentary evidence and hearing the oral evidence, that the Court believed the Husband, his sister and the Mother as to their case;

(12)  credibility was all the more important because the father was not there to give evidence and his case was based solely on the evidence of the Mother who represented what his intentions were when he transferred the assets to the name of the Husband;

(13)  the trial hearing was necessary for the husband and the Parents to succeed in their case and on their burden of proof;

(14)  in the circumstances it was not unreasonable for the Wife to have tested the case at trial.               

13.  Mr Coleman therefore submits that while the Wife accepts that having lost the trial she should bear some responsibility for costs, it would in the circumstances be wholly disproportionate and unfair for her to bear all the costs of the Husband and the Parents, and that the fair and appropriate costs order is for her to bear only one half thereof.

14.  The Wife’s application is as noted opposed by both the Husband and Parents, with Mr Jeremy Chan for the former arguing that the Wife should be liable for all the costs as it was her unreasonable stance and position that put the Husband and the Parents through a full-blown trial.

15.  It is not the law, Mr Chan submits, that whatever properties or assets are held in the hands of one spouse (as opposed to being held in the hands of third-parties), then the other spouse is entitled to ‘test the case’ or ‘test the evidence’, and thereby push for a full-blown trial together with cross-examination of all of the witnesses, and to be able to do so with impunity.

16.  This was a case, Mr Chan argues, where the Wife gave no quarter and essentially took almost every possible point up until the very end, and her such approach must be visited by appropriate costs orders in the normal and usual manner, which is to follow the event, including for those few concessions that she only made at the first day of the trial, such as something as simple and straightforward as the ‘source of funds’ must have come from the parents and could not from the Husband as it is not a case that he bought properties and assets with his earned income.

17.  Even in the case of the Husband’s 1 share out of 60,000 shares in WS Ltd on trust for the Mother, Mr Chan points out that the Wife, having no sense of proportionality, chose to proceed full steam ahead with her challenge until the very end, as also in the case of his 1 share in GC Ltd with just some undeveloped New Territories agriculture lands that had sat idly for many years.

18.  Furthermore, Mr Chan submits, the Wife laid extremely serious allegations against not just the Husband but also the Parents and even the Sister of “making a concerted effort ... to mislead about his truefinancial means” which the court has found to be unsubstantiated nor justified, while her propositions and submissions of estate planning and tax avoidance in relation to some of the transactions on the part of the Father were complete and utter speculation not based upon any facts nor evidence.

19.  Whilst accepting that the Wife was entitled to challenge the Husband’s case, Mr Chan argues that it does not follow that she was thereby entitled to push for a full-blown trial together with cross-examination of all of the witnesses with impunity, as one only needs to look at her position during the trial to see just how unreasonable was her litigation conduct by the time when she came to give evidence, bearing in mind by then she had already heard all of the evidence of the Husband, the Mother and Sister, as illustrated as follows:

(1)  that even during cross-examination she still continued to insist that the London Property wholly belongs to the Husband;

(2)  that she continued to refuse to accept that GC Ltd does not belong to the Husband;

(3)  that she continued to insist that the 1 out of 60,000 shares in WS Ltd belonged to the Husband;

(4)  that she continued to insist that the Husband was the beneficial owner of all the other Disputed Assets;

(5)  that she went further to claim that the Husband owned 100% of the Regent-on-the-Park and Po Garden Properties and that the Mother and Sister held them on trust for him;

(6)  that she only dropped her case in relation to the investment agreement between the Husband and Mother on the last day of evidence.  

20.  Therefore the trial was inevitable, Mr Chan submits, not because as a matter of law and procedure that the Wife was entitled to take the Husband and his family to court so as to elicit oral evidence before she would believe them, but because of her staunch position and stance that even after hearing their oral evidence, she still required a decision from the court for which she should be held fully liable for all the costs as a result.

21.  As for the Wife’s submission that her advisors would not have advised her to drop her application unless they were to assume that the court would ultimately believe everything the Husband and Parents might say at trial, but that she was not obliged to think, on the documents alone, that the court was bound to believe his evidence, Mr Chan argues that the same thing could be said of all cases that essentially hinge upon credibility/oral evidence but it is a non sequitur and simply does not follow that this thereby means that the Wife can escape the normal and usual costs consequences that inevitably flow from her own choice  not to believe the Husband and the Interveners when the court had found and determined that she was wrong not to believe them.

22.  Accordingly and in the premises Mr Chan submits that the Wife’s application be dismissed with costs and certificate for counsel to the Husband, and that the costs order nisi be made absolute.

23.  Similarly Ms Bonnie Cheng, appearing for the Parents, submits that as the trial of the preliminary issue falls squarely within the Chancery realm and is no different from ordinary ownership disputes in civil litigations, hence O.62 r.3(2) which sets out the general position that the unsuccessful party will be ordered to pay the costs of the successful party shall apply to this case where both the Husband and Parents were wholly successful parties who prevailed on each and every issue in dispute at the trial, hence there is simply no reason to deny them of any of their costs.

24.  Whilst it is accepted, Ms Cheng submits, that the Parents did not execute written declarations of trust regarding any of the Disputed Assets and they bore the burden of proof at trial, but that did not give the Wife a carte blanche to run a case “fraught with all sorts of difficulties andinconsistencies” or to make serious allegations against the Husband and Parents for “conspiring to mislead the court” based on “mere suspicions, conjecture or speculation”, which were subsequently all found by the court to be unfair and unjustified. 

25.  In particularly, she submits, when the detailed affidavits filed by the Husband and Parents and the discovery they gave, both voluntarily and pursuant to the court’s decision on 30^th June 2015, provided a detailed account and a holistic picture of the circumstances of all the relevant transactions and the parties’ actual intentions at the time, while the 2^nd affidavit of the Mother fully explained the circumstances and reasons in the creation of the trusts with supporting documents on the provision of funds with almost 700 exhibits, and with the discovery exercise completed by 21^st July 2015, it was therefore incumbent on the Wife and her advisors to properly re-consider or re-assess her case before proceeding to trial, which was in fact also her case in her discovery application when she informed the court that she was “entitled to be provided with such information so that she can take proper advice on whether and if so which of the Disputed Assets she seeks to pursue”, yet she chose to pursue a full-blown challenge in respect of all the Disputed Assets save for two relatively minor items which she only conceded towards the end of the trial.

26.  Regarding the Wife’s point about the Husband and Parents being non-forthcoming or trenchantly opposed to her discovery application and which contributed to her decision to pursue her challenge, Ms Cheng argues that was not fair considering her very extensive requests and the substantial volume of documents and information that were volunteered by the Parents both before and after the requests, and for those which they did object, it was mainly over the Parents’ own divorce documents for which they had good and obvious reasons to oppose.

27.  As for the Wife now seeking to place great emphasis on the credibility and oral evidence of the Husband and Parents at the trial, Ms Cheng submits that their oral testimonies were in substance the same as in their affidavits and were corroborated by documentary evidence, hence their case was advanced well before trial and remained consistent throughout the proceedings, it is therefore submitted that whatever basis the Wife may have to proceed to trial, the inevitable consequence is that she being the losing party should bear the costs of the Parents being the winning party.

28.  That last submission for the Parents brings me back to what I said about their position in my earlier decision on the Wife’s discovery application against them, which is worth repeating here:

“[32] ... In my view any person who elects to place his/her property under the name of another person without any express declaration of its beneficial ownership has or can be said to have given up his/her right to privacy or confidentiality vis-à-vis the other party when there is a dispute over the ownership of the property, in particularly when the dispute arises from ancillary relief proceedings of the person given the legal title who is under an obligation to make full and frank disclosure of his financial resources to the court and hence cannot refuse disclosure of any information or documents in his name or legal title, so as to enable the court to achieve justice between him and his spouse who may very often not even present when such legal ownership was created and has no personal knowledge or information thereof, as is the situation of the Wife here.”

29.  It was upon these reasons that I went on to state in my decision why the Wife was entitled to the information and documents sought from the Parents:

“[33] In my judgment the relevancy of the information and documents sought by the Wife against GC Ltd can only be known once production and examination have taken place, and in that situation the only practical course is for the court to look at all the available evidence to determine whether a prima facie case has been made out as to the relevancy of evidence and documents.”

30.  Thus, having been provided with all such information and documents before the trial, the relevant question to be asked is whether the Wife would then be in a position to make a proper re-assessment and re-evaluation of her case and to arrive at a considered conclusion that the Husband was indeed not the beneficial owner of any of the Disputed Assets without going through the trial?

31.  The fact is that the discovery exercise was completed only on 28^th July 2015, as I am now told, which was just about 2 weeks before the trial was to commence, hence it is submitted for the Wife that it was wholly unrealistic, and would not be reasonable, to assume that she could or should have reviewed all the evidence when completed within such a short time, and that it must be the case that she could not have done a proper reassessment in that 2 weeks before trial as would have prevented the occurrence of the substantial part of the costs of the trial. In any event, Mr Coleman submits, that evidence when all was provided was largely circumstantial, and was in piecemeal fashion, leaving the Wife and her advisers to have to fit the pieces together and construct what they believe happened.

32.  It must be noted that the dispute involved a number of assets including a property in London, shares in 4 companies and funds in certain bank accounts vested or created in the Husband’s name over a period spanning more than 10 years, commencing from the time when he was still a student in UK up to after his marriage to the Wife, and under various arrangements made by his parents at different stages of the parents’ marriage as well as after their own separation and eventual divorce, all with a single salient feature behind almost all of the transactions: that they all took place after the Father was diagnosed with the neurodegenerative disease which rendered him completely incapacitated, and which caused the Wife to believe that they were all part of estate planning by a very wealthy father to his only son of a very traditional Chinese family, of which I agreed in my judgment was not without merits:

“[71] There is no question, as noted above, that some of the transactions relating to the husband’s shareholdings in various companies and the acquisition of landed properties took place well before the parties’ marriage or even their acquaintance, such as the purchase of 25B Po Garden by WS Ltd and its transfer of 30,000 shares to the Husband in 1993, or the allotment of 1 share in CW Investment to him and the company’s acquisition of 16A Po Garden in 1999, which were therefore beyond the Wife’s first hand or personal knowledge and hence her case is admittedly in effect based on her subsequent observations and information including hearsay, aided no doubt by being able to now look back at the entire history of those transactions relevant to the particular and objective circumstances of the Husband’s family in order to build and frame a case of a traditional Chinese family where a very wealthy father intended to make outright gifts to his only son as part of his estate planning as a result of his own incurable illness. On the face of it I cannot say there is no merits in such case of the Wife against the husband and his parents.”

33.  Some of those observations and information which the Wife relied upon for her case, such as the Husband’s response to his neighbour’s request to purchase 16A Po Garden, their matrimonial home at that time, when the Husband claimed to be one of the owners, and that he was never required to pay any rent to the Father for occupying the same, were indeed significant as far as the Wife‘s case was concerned, and certainly warranted clarification and explanation from both the Husband and Parents.          

34.  As noted in my judgment, their case was that the Disputed Assets were essentially the investments of the Father but managed by the Mother after his incapacitation with the main purpose of preserving his assets and earning some income to meet his daily needs and expenses after it became impossible for him to continue with his medical practice, and when the Parents were divorced and the Husband became a lawyer, they decided to involve him in the management only without diverting any beneficial interests in those assets to him.

35.  Furthermore, as reflected by the chronology of events set out in my judgment, it cannot be denied that the factual matrix pertaining to each creation and/or acquisition of those companies and/or landed properties by the Parents and the subsequent vesting of some of their shares in the Husband’s name were much more complicated than those run-of-the-mills disputes involving usually only one landed property such as typically a former matrimonial home, which certainly explains why the trial required 5 days of oral evidence.

36.  Were then those oral evidence necessary to corroborate and substantiate the Husband’s case and those of the Parents so as to enable this court to look at all the evidence holistically and to arrive at the conclusion which it did? I can say without any reservation that the answer must be yes, for the various reasons already articulated above and the fact that what the Husband and Parents said in their affidavits were not all corroborated by documentary evidence, in particularly as to the Parents’ true intention in transferring those assets into the Husband’s name which could only be properly and adequately explained and clarified through oral testimonies, in particularly those of the Mother whom I made the following observation in my judgment:

“[108] ... having heard the Mother, Husband and Sister in evidence, all of whom I find to be honest and credible witnesses whose testimonies were in the main spontaneous, straightforward and consistent, especially those of the Mother with so much details of her management of the father’s financial affairs that not only clearly reveal and reflect her devotion and dedication to her former husband notwithstanding their separation and divorce all these years which is both remarkable and admirable, but also render her case that these Disputed Assets were investments carried out by her for the father to protect and preserve his wealth all the more convincing and credible.”

37.  Furthermore, the fact that the Father, whose intention was central to the preliminary issue, was unable to provide any affidavit, and it was necessary for the Mother to also speak on his behalf, hence to determine what was his real intention very much depended on her credibility, which could only be established through oral evidence at the trial.                        

38.  In the premises I agree that while the Wife was guilty of making certain unfounded and unjustified allegations against the Husband and his family as pointed out in my judgment, it would not be wholly fair that she should be held liable for all the costs of both the Husband and Parents, and that her proposal to be liable for only half of their costs is in the circumstances proper and reasonable, and in the exercise of my discretion I accordingly so order, with certificate for 2 counsel in the case of the Parents.           

Leave Application for Summer Holiday

39.  The Husband’s proposal was to take the 2 daughters to Singapore for a 4-days holiday during which his mother and sister would also come along as it was an extended family reunion on his mother’s side with many of the members residing there. The Wife’s solicitors were accordingly informed on 31^st May 2016 but as no reply was received by 23^rd June 2016, the Husband therefore issued his summons on that day which was subsequently heard on 27^th July 2016.

40.  Leave was required due to a standard term in a Consent Order made on 27^th January 2014 in relation to the daughters, in which the parties were granted their joint custody with care and control to the Wife and reasonable access to the Husband, with the usual direction that the daughters not be removed from Hong Kong without leave until they attain the age of 18. There were however also certain agreed arrangements set out in the recital of the order in respect of the Husband’s access to the daughters including the following:

(a)  for weekdays, he was to have dinner access at least twice a week including one dinner at the daughters’ home ...

(b)  for weekends, he was to have access every Saturday from 10:30 a.m. to 9 p.m.;

(c)  for holiday access, the parties agreed to share the daughters’ school holidays equally; and

(d)  the Husband may have additional access on special occasions or functions such as Father’s Day, his birthday, paternal grandparents’ birthday, etc.;

(e)  the parties were to continue to have family time together for meals outings with the daughters and to celebrate special occasions with the daughters, such as birthdays and other such normal special events as mutually agreed;

(f)  the parties were to continue to share together family events and functions with each other and/or both of their extended families and the daughters as mutually agreed;

(g)  the parties were to continue to share family holidays together as mutually agreed.    

41.  With such wide and mutually agreed provisions clearly designed to promote the daughters’ relationship not just with the Husband but also his extended family including the paternal grandparents, one would have expected little resistance from the Wife to such a simple request for a relatively short trip to a neighbouring city well familiar to the daughters, as I understand they last visited in 2013 albeit together with their mother.

42.  Ms Mairead Rattigan who appeared for the Wife on this occasion explained that this Consent Order specifically did not provide for overnight or staying access for the Husband, and that for family holidays to be shared together as mutually agreed, was for some very specific reasons first made known during the parties’ negotiations in January 2014 which led to the said Consent Order, and were subsequently detailed in the Wife’s 2^nd Affirmation of 20^th March 2014 and again referred to in a letter from her solicitors dated 27^th June 2014 when she objected to a similar request of the Husband at that time, of which I do not propose to go into details here given their sensitive nature, but which according to Ms Rattigan did cause the Husband to abandon his original request for staying access in the Consent Order, and which still remain today her main concern for the daughters and her reason for objecting staying access to the Husband and hence his removal application, as the 4-days trip to Singapore would invariably provide him such an opportunity to which he was not entitled under the said Consent Order.     

43.  These allegations of the Wife have always been denied by the Husband, but they have somehow remained unresolved either through investigation by Social Welfare Officer or other appropriate experts or through a proper hearing, and while I found the Husband’s application not without merits and that he did propose to arrange for the daughters to sleep with his sister and their aunt during the entire trip so as to alleviate the Wife’s concern, and for which his sister had given an undertaking to do so, I agreed with the Wife at the hearing that as long as these alleged behaviour of the Husband remain unresolved one way or the other and still a serious concern to the Wife over the daughters’ welfare, it would not be appropriate for them to go on any overseas trip with the Husband at this stage, and hence I refused his application.

44.  It is in this factual context and for these reasons of my decision that I now come to decide on the question of costs, and given the nature of the application I agree with Ms Cheng that it would be appropriate in the circumstances to make no order as to costs of the Husband’s application.         

FCMC 16239/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

SUIT NO. 16239 OF 2013

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DECISION ON COSTS
(Discovery Applications)

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1. On 30^th June 2015 after a 2 days’ hearing I handed down a decision on the Petitioner Wife’s 2 applications for specific discovery respectively against the Respondent Husband and his Parents the Interveners, and made a costs order nisi in her favour to be made absolute at the expiration of 14 days in respect of her applications. Both the Husband and Parents now seek to vary that costs order nisi to the extent that the Wife should instead pay the majority of their respective costs.

2. The detailed background of the case leading to the Wife’s discovery applications can be found in my said decision and I do not propose to again recite them here, save as follows.

3. The discovery applications arose from the Husband’s declaration in his Form E that various assets including shareholdings in several companies holding inter alia the parties’ matrimonial homes and a property in UK with a total worth estimated at more than HK$77 million (“Disputed Assets”), all of which registered in his name but which he claimed to be holding on trust for either of his parents, which was however disputed by the Wife, and after the Husband and/or Parents had objected or refused to answer some of her earlier questionnaires, she followed up with these discovery applications.

4. The 1^st discovery summons issued on 21^st July 2014 was against the Husband requiring him to provide to the Wife for specific discovery of items listed in the schedule annexed thereto within 28 days. In that schedule the Wife had set out the Husband’s answers to her earlier questionnaire with specific requests for further and better particulars of those answers with supporting documents arising therefrom or under the original questionnaire [A2/348 – 364].

5. As the hearing of that summons on 14^th August 2014 was fixed for only 15 minutes, and when it became clear that it would be opposed by the Husband, it was agreed between the parties for it to be adjourned to another date for argument pending the Husband filing his affirmation in reply.

6. At the re-scheduled hearing on 11^th December 2014, leave was granted to the Parents to join in the proceedings as it was by then agreed that the dispute over the beneficial ownership of those Disputed Assets would have to be dealt with first as preliminary issue before the court was to hear the Wife’s ancillary relief application, and as a result further directions were given in respect of the preliminary issue and that the hearing of the discovery application had again to be adjourned to another date for argument.

7. After the Parents had accordingly filed their affirmations pursuant to the directions given at the said hearing, the Wife issued another questionnaire this time to the Parents, and when they refused to answer some of them, she followed up with her 2^nd discovery summons on 16^th March 2015 against the Parents, and when it was opposed it was then consolidated with her 1^st summons for argument which eventually took place on 22^nd May and 4^th June 2015. As noted above, I allowed the discovery sought against the Husband and Parents respectively with costs to follow the event in favour of the Wife.

8. Mr Jeremy Chan for the Husband now argues that the Wife’s 1^st summons started off as a Himalayan exercise but by the time of the hearing she only pursued 4 items out of what was said to be a very extensive and comprehensive 28-pages questionnaire, some of which had earlier been provided by the Husband, others were agreed or sorted out at the beginning of the hearing, but was in the main convoluted and confusing and often required his solicitors to tell her where to find the answers earlier provided to many of her questions, or with new questions being posed as alleged deficiencies, and hence he should only bear her costs of those 4 items which the court found in her favour, of which the Husband submits should constitute less than 5% of the overall costs of the entire exercise, whereas for all those questions and requests which the Wife had since her summons been dropped or abandoned, the Husband should instead be awarded his costs.

9. Similarly the Parents’ case is that the costs order nisi should be varied to the effect that the Wife should instead pay 80% of their costs of and occasioned by her application, or alternatively to pay their costs as set out in Annex I to their summons [F/2350 – 2352], to be taxed if not agreed with certificate for 2 counsel.   

10. Mr Abraham Chan with Ms Bonnie Cheng for the Parents submit that this was not a case where a party had been evasive in giving discovery, and that to the contrary the Interveners had all along been forthcoming and proactive in producing relevant documents with thorough explanations on material events, as demonstrated by the detailed evidence provided before the discovery application.

11. Mr A Chan argues that, in contrast to the Parents’ reasonable and measured approach, the Wife had instead deployed an oppressive scattergun approach wholly lacking in any sense of decency or proportion, by starting off with a total of 35 requests/questions against the Parents, and while some were subsequently dropped as shown in Annex I, the remaining ones against both the Parents and the Husband were enough to result in an expansive and protracted exercise involving no less than 3 substantive hearings which he submits as extraordinary and unreasonable for an interlocutory application of this kind, particularly so with some of her requests, such as her insistence that the solicitor representing the Husband should produce the divorce papers of the Parents on the wrongful assertion that she had acted for one of the Parents in their own divorce, or those against WS Ltd in which the Husband held only 1 out of 60,000 shares, only to be abandoned by her shortly before the hearing.

12. Mr A Chan further submits that from a wider perspective the court will see that the Wife’s approach to discovery reflects a broader pattern of baseless and unfocused aggression throughout the litigation, as illustrated by her insistence on pursuing matters such as the source of funding for the disputed assets or the validity of the Investment Management Agreement between the Husband and his mother, and again only to be abandoned at the trial.

13. Mr A Chan submits that at the end the Wife was only successful in her application against the Parents in obtaining specific discovery against the ancillary relief order pursuant to their divorce, and that even this order was qualified by the undertaking put forward by the Wife only at the substantive hearing, for which she was successful with only one discrete and narrow matter amongst many other requests which she either failed or abandoned, and hence by taking a broad-brush approach it is submitted that the Wife should instead be required to pay 80% of the Parents’ costs, while for those items which the Parents had voluntarily supplied to the Wife for the purpose of saving time and costs, Mr Chan submits that an appropriate order is for there to be no order as to costs.

14. Ms Remedios for the Wife on the other hand submits that the costs order nisi should not be varied as against either the Husband or the Parents as they had co-operated to refuse and/or delay discovery even in respect of the corporate vehicles holding the 1^st and 2^nd matrimonial home, and/or had given piecemeal discovery at or following the respective hearings, which had rendered all the hearings necessary for the Wife to fully argue her claim for specific discovery, and that in any event some of the hearings for discovery were taken up by the Husband or Parents for other applications or procedural matters arisen therefrom which had eaten into the time set aside for the discovery application for which the Petitioner should not be held responsible.

15. Ms Remedios further submits that in so far as there had been a succession of hearings and/or the Wife had narrowed down her requests as and when piecemeal discovery had been given, or to re-allocate time for more contentious issues, it would be unjustifiable and inappropriate for the Husband or Parents to seek apportionment of costs, when each hearing had been proved to be necessary because on each occasion, they had resisted discovery of the remaining items, which led to the inevitable substantive hearing on 22^nd May and 4^th June 2015.

16. I agree that those earlier hearings were adjourned due to necessity or other procedural reasons which cannot be said to be the Wife’s fault, or for that matter, anybody else. They were part of and incidental to her discovery applications and hence their costs should be treated accordingly.

17. As for those questions or requests raised in the Wife’s applications to which the Husband or Parents subsequently or eventually agreed to provide answers, information or documents, I fail to see how it can be argued that she should as a result bear their costs for their efforts in doing so as to comply with her such requests, or for those requests that she had eventually withdrawn or abandoned after certain answers or information provided by the Husband or Parents which rendered it unnecessary for her to pursue them and were thus not dealt with at the hearing. This was what I found in my said Discovery Decision:

“20. As noted above some of the documents sought by the Wife have since been provided by either the Husband and/or his parents, and that the disclosure sought has now been narrowed to those in the Tables attached as Appendix A, and as she no longer at this stage pursue disclosure relating to WS Ltd nor discovery before 2010, or in relation to I-Investment Ltd, while the list of assets of both GW Investment and HF Consultants were confirmed and resolved at the hearing, essentially only those documents concerning GC Ltd under items 13 – 16 of Appendix A1 against the Husband and similar items 17 – 21 of Appendix A2 against his parents, as well as their divorce settlement and/or order are still at issue.”

18. Henceforth in my view they should form part of the costs of the Wife’s discovery application, but for those requests which the Husband or Parents had agreed to answer or comply without argument prior to the substantive hearing, the appropriate order for them would be costs in the cause of the trial of the preliminary issues.

19. What remains is the substantive hearing on 22^nd May and 4^th June 2015, where there can be no question that the result justifies that they be in the Wife’s favour in any event, as readily conceded by both the Husband and Parents, and hence she should be entitled to those costs of and occasioned by her applications which were being opposed by either the Husband or Parents and had had to be adjudicated at that hearing.

20. Accordingly the costs order nisi is varied only to the extent that for those parts of the Wife’s discovery application to which the Husband or Parents had answered or complied without argument, they shall be costs in the cause of the preliminary issue, save for those of and incidental to the amendment of the order of 30^th June 2015 which shall go to the Husband and Parents as I agree with their submissions that they were entirely the fault of the Wife for having wrongly included in the order those items which were never adjudicated at the hearing, to be taxed if not agreed.  

FCMC 16239/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO.16239 OF 2013

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JUDGMENT
(PRELIMINARY ISSUE ON BENEFICIAL OWNERSHIP)

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1.  On 12^th November 2013 the Petitioner Wife filed for divorce in these proceedings against the Respondent Husband for the dissolution of their 11 odd years marriage and for custody of their 2 daughters and general ancillary relief. Upon exchanging their Form E for the purpose of FDR, preliminary issues were raised over the beneficial ownership of certain assets including companies shares, a landed property and certain funds (“Disputed Assets) held under the name of the Husband which he claims are on trust for either or both of his parents who were subsequently given leave to intervene in these proceedings, but which the Wife believes to beneficially belong to the Husband and should be regarded as part of the marital assets or his financial resources for the purpose of her ancillary relief application, hence it was agreed that these issues should first be resolved before the FDR hearing, and which is the matter now before me.   

2.  It is not disputed that the Husband had never paid for any of these Disputed Assets, and that the Wife’s case is that they were all given to him by either of his parents essentially either as gifts or advancement, or as part of his father’s estate planning due to his deteriorating health as a result of a debilitating neurodegenerative decease since the late 1980s, of which no doubt I will have more to say later in this judgment.

3.  Both the Husband and his parents deny they were gifts or part of estate planning of the Father who is undisputedly a man of very substantial wealth, but rather that the Husband was made the legal owner only of those assets, as was his sister S (“Sister”) of some of them, at various times and for various reasons but essentially for him and his sister to be involved in their father’s financial affairs in order to learn to manage them and to help to preserve and grow his wealth in view of his incapacity.

4.  It is however common ground that there is no express declaration of trust in respect of any of the Disputed Assets, and that it is also noteworthy that the vesting of legal title of most, but not all, of the Disputed Assets on the Husband and the creation of such alleged trusts took place prior to his marriage to the Wife in 2002, and hence the latter has had no direct or personal knowledge of any details of such transactions, and that she has admittedly based her case essentially on information acquired during the marriage including her own impressions and what she had allegedly heard from the Husband and/or his mother the 1^st Intervener (“the Mother”).

5.  It would also be helpful to set out here particulars of those Disputed Assets so that they can be read together with the background facts and relevant chronology of events which are to follow below:

(a) A flat in Lincoln House, Knightsbridge, London, UK (“Lincoln House Property”) allegedly on trust for the Father;

(b) 1 of 3 shares in GW Investment Ltd which holds a 16A Po Garden, Brewin Path, Hong Kong (“Po Garden Property”) allegedly on trust for the Father;

(c) 2 of 4 shares in HF Consultants Ltd which currently holds a property at The Merton, Kennedy Town, Hong Kong (“The Merton Property”) allegedly on trust for the Father;

(d) 1 of 60,000 shares in WS Ltd allegedly on trust for the Mother;

(e) 1 of 2 shares in GC Ltd that owns various lots of agricultural land in Yuen Long, New Territories allegedly on trust for the Father.

(f)  Various bank accounts and securities accounts of total value in excess of HK$10 million allegedly on trust for either of the parents.   

Background

6.  The Husband is now aged 39, and the Wife 38. Both came from wealthy local banking families and were married on 30^th November 2002 with 2 daughters now aged 9 and 8. The Husband is a solicitor and a consultant of a law firm but works mainly in his family’s business, while the Wife is a housewife and had been so throughout the marriage.

7.  As for the other background facts relevant to the Disputed Assets, I propose to adopt the Chronology of Events attached as Appendix 2 to the Wife’s Closing Submission as the basis for a more relevantly shorter version below, of which there is little dispute as to matters of primary fact and in particular relating to the time and means of acquisition of these assets:

Date	Event
1973	Husband’s parents were married
26 Jun 1975	Husband was born
15 Sep 1976	Wife was born
1978	Sister was born
Sept 1979	GC Ltd was incorporated with Husband’s parents each held 1 share for purchasing agricultural and grassland in the New Territories
1980	WS Ltd was incorporated with 59,000 shares held by a nominee for the Father and 1 share held by a company owned by the parents
1980s	I-Trust was established with Husband and Sister as beneficiaries and Mother as protector
1986/1987	Father was diagnosed with neurodegenerative disease
1988	Father appointed Mother as attorney to deal with his financial and personal affairs
January 1991	Parents’ separation according to their subsequent separation agreement
Jul 1993	WS Ltd purchased 25B Po Garden
Aug 1993	Father’s nominee transferred 30,000 shares in WS Ltd to Husband and 29,999 shares to Mother
Oct 1995	Lincoln House Property was purchased in Husband’s name when he was a year 2 student at Oxford
Jan 1997	Mother and her brother were each allotted 1 share of GW Investment and were appointed directors
Mar 1997	Husband’s parents signed deed of separation
June 1997	Husband finished studies and returned from England
Sept 1997	Husband transferred all his shares except 1 in WS Ltd to Mother
1999	Husband’s parents filed for divorce
24 May 1999	Husband was appointed a director of GW Investment and was transferred 1 share from Mother’s brother who also resigned as director
Oct 1999	Sister completed her studies in law at King’s College in London and returned to Hong Kong
8 Nov 1999	GW Investment purchased 16A Po Garden Property and rented it out
17 Nov 1999	1 share in GW Investment was allotted to Husband’s Sister
21 Jan 2000	HF Consultants Ltd was incorporated
9 July 2001	Mother resigned as director and transferred her 1 share in GC Ltd to Husband who was also appointed the director
2001	Mother remarried
Jan 2002	HF Consultants allotted 2 shares to Husband and 1 share to Father
Feb 2002	HF Consultants purchased Regent on the Park Property
30 Nov 2002	Parties married in Hong Kong
Early 2003	Parties moved into Regent on the Park Property as their 1st matrimonial home
13 July 2005	Elder daughter was born
Sep 2005	Parties moved into 16A Po Garden Property as their 2nd matrimonial home
9 Mar 2007	Younger daughter was born
Aug 2007	Regent on the Park Property was sold with sale proceeds used to pay off 16A Po Garden Property’s mortgage, HK$1 million to the Husband and for the purchase of another property known as The Merton
18 Mar 2008	1 additional share in HF Consultants was allotted to Father
Oct 2011	WS Ltd sold 25B Po Garden
Mar 2012	Husband moved out of 16A Po Garden Property for 3 months after domestic disputes with Wife and returned in May 2012
18 Dec 2012	Father transferred his 2 shares in HF Consultants to Sister

8.  It is against this background of the Husband’s family and the parties’ marriage that now brings me to their divorce proceedings which as noted above were commenced on 12^th November 2013 when the Wife filed for divorce against the Husband based on his unreasonable behaviour and sought custody of both daughters and general ancillary relief for herself the daughters, with a 1^st Appointment for both CDR and FDR fixed for hearing on 7^th April 2014.

9.  Meanwhile the parties were directed to file and exchange their Form E which then triggered off what can be described as a whole series of extensive and very often contentious discovery applications with one of which led to a judgment delivered by this court earlier on 30^th June 2015. 

10.  In his Form E filed on 27^th February 2014 [A1/50] the Husband disclosed a monthly income in excess of HK$280,000 and a net value of his assets of about HK$32 million, but he also revealed holding those Disputed Assets on trust for either of his parents and hence they were not included as part of his assets nor their net value which he placed in excess of HK$77 million.

11.  With these Disputed Assets valued as much and possibly more taking into account of those lots of land held by GC Ltd, and in the absence of any express declaration of trust for any of them, it is not surprising that the Wife took issue with their alleged trusts, and as a result the Husband’s parents were subsequently given leave to intervene on 11^th December 2014, with directions for this dispute to be first tried as preliminary issues before FDR when it was also agreed amongst the parties with a view to save time by setting out their respective case and evidence by way of affidavits instead of formal pleadings which would otherwise be the case.

12.  It was also agreed that in view of the Father’s health condition which has prevented him from any court’s attendances or filing any affidavits, only the Mother was to file her evidence and to attend the trial during which she and the Father were represented by Mr Abraham Chan with Ms Bonnie Chan, while the Husband was represented by Mr Jeremy Chan, and the Wife by Mr David Pilbrow SC with Ms Corinne Remedios.

13.  As expected the case of both the Husband and Parents is essentially the same which can be summarised as follows:

(a) the Father established I-Trust for the Husband and Sister as beneficiaries with the Mother as the protector of the trust with certain assets held under a trust company known as I-Investment Ltd to secure for their education expenses, and upon their graduation from university the trust was subsequently wound up with the legal and beneficial interests in the trust company vested in the Husband and Sister equally, which are the only assets given to them by their parents;

(b) the Father developed a neurodegenerative disease in about 1986/1987 which has since left him completely bedridden and to lose his speech and requires round-the-clock respirator assistance and nursing care, but otherwise his mental faculties have remained intact and unaffected;

(c) the Parents divorced in 1999 with an amicable financial settlement, and the Mother remarried in 2001;

(d) the Lincoln House Property was purchased by the Father but put in the name of the Husband as he was then studying in UK and that it was for the family’s use;

(e) the Regent on the Park Property was purchased with a sitting tenant by the Mother as an investment for the Father through HF Consultants, and that the Husband was later made a shareholder of HC Consultants only for the purpose of learning to manage properties under the Mother’s supervision;

(f)  upon the parties’ marriage and when the Regent on the Park Property became vacant and the parties were looking for a place to move, they were allowed to reside in that property by paying a monthly sum of HK$12,500 for its use and to pay for its renovation and other maintenance expenses;

(g) upon the sale of the Regent on the Park Property by the Father the Husband was paid HK$1 million out of the sale proceeds as reimbursement of his renovation expenses, with the rest for the Father’s own use including paying off the mortgage of the 16A Po Garden Property and for the purchase of the Merton Property;

(h) the 16A Po Garden Property was purchased as an investment for the Father through GW Investment with the Husband and Sister being made shareholders of the company to learn to manage properties, and when the Husband needed a bigger home for his family upon the birth of his elder daughter, the parties were allowed to move into this property on similar conditions as before for the Husband to be responsible for all outgoing expenses;

(i) GC Ltd was formed by the Parents for purchasing agricultural and grassland in the New Territories as long term investments in anticipation of future government’s development in those rural areas, and the Mother’s transfer of her shareholding to the Husband on trust for her to explore into development potentials and the feasibility of purchasing further neighbouring land, but the company has never generated any income;

(j) the Mother had from time to time over the years asked the Husband to manage and invest her own monies in various joint bank accounts with him including a fund management contract in which she had contributed an initial sum of HK$10 million for him to manage and invest for her.     

14.  As noted above the Wife’s case is that over the years the Father had funded the purchase of the various landed properties of the Disputed Assets in the name of the Husband direct or through companies, whose shareholding had been vested in the names of both the Husband and the Sister, and hence such assets as were registered in the Husband’s name were gifted by the Father to him with the intention at the time of transfer of conveying the beneficial interest as well as the legal title in these assets to him, and that if there is any doubt in this regard, she argues that the presumption of advancement should prevail and confirm that to be the position.

15.  The salient feature of all these transactions, the Wife further notes, is that they all took place after the Father’s diagnosis in about 1986 of his motor neuron disease which rendered him virtually completely incapacitated and with a short life expectancy, and were made to the Husband as their only son of a traditional Chinese family during a time when there was liability for inheritance tax in England and estate duty in Hong Kong, of which the court must bear in mind when considering the real intention of the Father and/or the Parents behind each of the transactions.

16.  It is also submitted by the Wife that the absence of declaration of trust in relation to any of the disputed assets is all the more significant because both the Husband and Sister are lawyers, while the Father was also familiar with the purpose and workings of a trust, having set up the I-Trust for the Husband and Sister with the Mother as the Protector thereof. As the beneficial interest and legal title go hand in hand, the Wife submits that the Husband and his parents bear the burden of proof that their intention at the time of the transactions did not coincide with the transfer of legal title.

17.  Alternatively, the Wife prays in aid the presumption of advancement that the Father, in a very traditional Chinese family, and who was ill but very wealthy and worth an estimated HK$700 million, intended to and did at relevant times make outright gifts to his only son, and she submits that in the circumstances of the case and the contemporary evidence that exist, the Husband and the Parents have not discharged the burden of proving a contrary intention nor rebutted the presumption of advancement.

18.  It is further the Wife’s case that as the Husband was aligning himself with a construction that he was not gifted the various beneficial interests and purporting to shelter behind alleged trusts, it was to avoid his matrimonial obligations in his divorce with the Wife, and hence his subsequent acts and declarations should not be admissible or of little weight at his instance in proof of the alleged trusts.

19.  It is submitted by the Wife that the special circumstances of this case point to no trust having been set up at the time of the original transactions albeit that there may have been consensual agreement of a family to distribute or deal with assets after the event, particularly in the aftermath of the Parents’ divorce.

20.  While consensual re-arrangements occur in traditional families, the Wife submits, even more so where there has been a divorce, as assets are re-distributed, one or the other party makes provision, or cause provision to be made for the children, in addition to or instead of ancillary relief, or simply to ensure the wealth is kept within the family, as in the case of the Father here, the special circumstances being his frail health and uncertain life-expectancy, which makes it perfectly foreseeable, the Wife submits, that the Father would wish to ensure that his children and grandchildren have a comfortable life within his own uncertain lifetime, particularly so when he has already discharged his financial responsibilities to his ex-wife who has since remarried.

21.  It is further submitted by the Wife, while it is the case of both the Husband and Parents, as put by the latter’s Counsel “that those disputed assets were acquired on an ad hoc basis driven by a number of readily explicable pragmatic considerations, and that the court in ascertaining the Father’s intention should look at the objective circumstances at the time of the acquisition or transfer”, she does not accept that those transactions were in fact “ad hoc”, and submits that each of the transactions was linked to key dates which are the “objective circumstances”, and that the court should draw inference from the circumstantial evidence that each of the transactions was intended by the Father as a gift.       

22.  Before proceeding to consider the evidence of the parties’ respective case including those referred to above by the Wife as objective circumstantial evidence prevailing at the date of the respective transactions, it would of course be relevant to first set out the law and principles applicable to the disputes now before me.

Applicable Legal Principles

23.  It is settled law that any ownership dispute between divorcing couple and third parties falls squarely within the Chancery realm: TL v ML& Ors (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1236, endorsed by the Court of Appeal in LWYA v KYW &Anor CACV 151 & 152/2013, unreported, and as such there is no room for discretionary consideration of the kind that might normally apply in general matrimonial proceedings.

24.  The legal principles concerning such a ownership dispute as stated by the UK Supreme Court in Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776 have been helpfully summarised by Mostyn J in Bhura v Bhura & Others [2014] EWHC 727 at §8:

“The applicable legal principles concerning a property dispute such as this are tolerably clear and have most recently been re-stated by the Supreme Court in Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776. In summary I think they are as follows:

i)If there is an express declaration of beneficial interests then that is, almost invariably, the end of the matter. Such an express declaration can only be displaced if it has been procured by fraudulent conduct …

ii)If there is no express agreement about the beneficial interests then there is likely to be (at least) a tacit understanding. This is hardly surprising as one would expect that when people enter into what may very well be the most important economic transaction in their lives – buying a home – they would have a pretty clear understanding of who owned what share of it. In determining whether there was such a tacit understanding, and if so what it was, the court will look at all the evidence holistically and will examine the whole course of the parties’ conduct in relation to the property.

iii)In the rare case where the evidence does not reveal a tacit understanding about ownership the court can reach for the presumptions. An obvious presumption is that beneficial ownership is the same as legal title (see Jones v Kernott at paras 17 and 51(1)).

iv)Another is the presumption of resulting trust. In Pettitt v Pettitt [1970] AC 777 at 824 Lord Diplock doubted that it was of much relevance in the modern era …

v)A further presumption is the presumption of advancement but this can be regarded as being on the death-bed …

vi)But presumptions are only presumptions

vii)“Actual facts” are those which suggest that a result steered by a presumption is unfair. Although there are different degrees of emphasis and nuance all of the Justices in Jones vKernott accepted that where a tacit agreement could not be found by a process of inference the court could impute to the parties a fair agreement which they never in fact made but which they should “be taken” as having made (see paras 45, 60, 72, 85(2)). Of course, as Woodhouse J pointed out, this involves a “fictional attribution of intention”, but the process has a long pedigree. One only needs to remind oneself of Lord Denning MR’s statement in Appleton v Appleton [1965] 1 WLR 25 at 28 to see how the wheel has turned full circle. There he said “A judge can only do what is fair and reasonable in the circumstances. Sometimes this test has been put in the cases: What term is to be implied? What would the parties have stipulated had they thought about it? That is one way of putting it. But, as they never did think about it at all, I prefer to take the simple test: What is reasonable and fair in the circumstances as they have developed, seeing that they are circumstances which no one contemplated before?” I cannot see any difference between that statement and that of Lord Wilson in para 87 where he rhetorically asked “where equity is driven to impute the common intention, how can it do so other than by search for the result which the court itself considers fair?”

25.  Henceforth and with these principles in mind, I shall now turn to consider the parties’ evidence as to each of the Disputed Assets in chronological order relevant to the creation of the alleged trust, but before doing so it would be relevant to first set out the Mother’s evidence about her own marriage with the Father in particularly his neurodegenerative disease which she says was central to the various decisions that he had made over the years for the acquisition of those Disputed Assets and the subsequent arrangements with their children the Husband and Sister as set out in her 2^nd Affidavit [B/293, 295-297]:

“8. (Father) and I were childhood and family friends. We both came from big families and our respective families knew each other very well. (Father)’s brothers were my father’s friends and I first met (the Father) when I was around 13 or 14 years old. We were engaged when I was around 15 years old and (Father) around 19. (Father) and I practically grew up together. We got married in 1973 when I was still attending university in London. After graduation from university, I did not apply for any jobs and remained a housewife, devoting my time to taking care of (Father) and my children aside from making investments. Unfortunately, in around 1986 or 1987, (Father) was diagnosed with motor neuron disease (also known as A.L.S., being a neuro-degenerative disease similarly suffered by the internationally well-known Professor Stephen Hawking) which has gradually affected his physical movements but fortunately without affecting his mind.

9. It was a sad and difficult time for our family since (Father) being a medical doctor knew what exactly was to happen and since our children were only aged 11 and 8 respectively at that time. All of a sudden, I had to shoulder all responsibilities of the family. It was particularly painful for me as I had to stay strong to give both mental and physical support to (Father) and to bring up our children almost single-handedly.

10. It turns out that (Father)’s condition is one of the rare exceptions (similar to Professor Stephen Hawking’s) and, with his determination, he outruns the normal life expectancy of around 3 to 5 years of patients with similar conditions. Within 2 years since he was diagnosed with motor neuron disease, the disease had left him completely bedridden and caused him to lose the ability to speak and swallow as well as difficulties in breathing. Having tried different means of communication, (Father) finds it more effective to go back to the most basic form of communication – spelling sentences by way of choosing the correct alphabet using his eye movements with the assistance of his caretakers. The process may take longer but it has proved to be effective. (Father) now relies on liquid diet via tube-feeding as well as round-the-clock respirator assistance and nursing care. Despite such physical challenges, (Father) has retained an impeccable memory. Before he suffered a minor stroke in February 2010, he was able to keep himself occupied with horse-racing (including doing his “homework” on his horse-race betting), soccer matches, securities investments and daily news (the last of which remains his present daily activity). Nonetheless, he was and is still able to give instructions to his family members, carers, solicitors and his secretary, Ms CL, who has been serving him till now for over 30 years.

11. Soon after the diagnosis of motor neuron disease and knowing exactly what would eventually happen to his health, (Father) instructed his solicitors, Messrs. Woo, Kwan, Lee & Lo, to give me a general power of attorney in accordance with section 7 of the Powers of Attorney Ordinance, Cap. 31 of the Laws of Hong Kong (the “Power of Attorney”). The reason for executing the Power of Attorney was to enable me to assist with dealing with (Father)’s financial and personal affairs. The Powers of Attorney was executed on 11 October 1988 in the presence of a solicitor. There is now produced … a copy of the Power of Attorney. I am advised by my lawyers and verily believe that this Power of Attorney remains valid to this date, giving me the authority to (including without limitation) save and invest (Father)’s money, enter into transactions and conduct litigation on his behalf. Albeit so, to keep his mind active, I have always with the assistance of his caretakers consulted and discussed with (Father) before I made major investment decisions, and discussed with him what vehicle I should use to hold such investments.

12. In 1999, (Father) and I divorced. Despite our divorce and my re-marriage in 2001, I still regard (Father) as my dear family member and I have continued to look after the family’s affairs, as well as his personal and financial affairs. There has remained a high level of mutual trust between us. Ever since the onset of (Father)’s illness, the resultant round-the-clock medical care has meant substantial recurring medical expenses. However, while relying on dividend income, (Father) became very fond of gambling which occasionally resulted in heavy losses even up to a few million Hong Kong dollars in some years. Out of a deep concern for his welfare, I have endeavoured to preserve and grow his wealth as much as possible and have up till now paid him regular weekly visits to check on his condition and manage his household matters such as supervising his helpers, secretary and medical support team. Throughout the years, I have been managing (Father)’s helpers, including (but not limited to ) arranging for the payment of their salaries, making arrangements to their daily roster and the timing of their holidays, renewing their contracts and looking for replacement helpers when necessary. I have also continued to monitor his health condition. His helpers would ask me for instructions whenever there is any issue with matters relating to (Father), whether it be health issues or practical issues like the need for a replacement wheelchair. I have never abandoned him but have looked after him continually in spite of the change in our relationship and after my children have become grown-ups, as after all, (Father) has been and is still my childhood, family and trusted friends for over 40 years.

13. As the years went by and as my children became of age, I felt that they should learn and eventually take up the responsibility of looking after their father and managing his assets. While I have continued to manage (and am still managing) (Father)’s wealth on his behalf, (Father) and I decided to gradually involve the children in the management of his affairs (as explained further below), both in the hope that they would one day take up full responsibility for managing their father’s affairs on his behalf and learn about investment and property management for their own benefit. By no means, however, was such arrangement any indication of (Father)’s assets being passed to them as gifts at all. As things stand, my children as much as I am are merely administrators of (Father)’s wealth and assets on his behalf.

14.  I note that in paragraph 5 of the 3^rd Affirmation of the Petitioner dated 21 July 2014, the Petitioner claimed that I am not on good terms with (Father) … Given the circumstances and reason for my managing (Father)’s affairs on his behalf as explained in the foregoing paragraphs, I feel offended that the Petitioner could have made such groundless and inappropriate comments which come from nowhere. At the time of my divorce in 1999, my son, the respondent, had not even met the Petitioner. Also, during their marriage, the petitioner had merely lived with (Father) for no more than 2 months, which certainly does not enable or entitle her to give a fair account of the relationship between (Father) and me. Moreover, as explained above, since (Father) remains capable of giving instructions independently with the assistance of caretakers, I have always sought his approval before making major decisions notwithstanding the power of Attorney. In particular, all property investments described in this Affidavit were sourced by me, proposed to (Father) and subsequently approved by him. I have always endeavoured to act in his best interests for reasons already explained.”       

26.  I should also note that as part of my order for discovery against the Husband and the Parents prior to the trial of the matter now before me, the Parents did produce to the Wife’s legal advisers a list of their assets at the time of their divorce and their ancillary relief settlement and order in 1999 made pursuant to their Deed of Separation made earlier on 6^th March 1997, and while they were not, for reasons not necessary to go into here, included in the trial bundles, their terms and effects did form part of the Parents’ case and upon which the Mother was cross-examined during the trial.   

27.  The Wife as noted above takes issue with the Mother’s case and it would likewise be relevant to refer to the main crux of her evidence when she responded in her 3^rd Affirmation as follows [B/237, 238]:

“4. In the Respondent’s mother’s affirmation … she gave accounts of how the Respondent are holding some property interests, shares in companies and bank accounts on trust for her ex-husband, the Respondent’s father, who is now bedridden and incapacitated. She also indicated that she maintains a good relationship with her ex-husband and helps him manage his financial affairs and companies although they were divorced many years back and she is now married to a wealthy Malaysian tycoon. However, from what I have observed, this is not the case. I recall the Respondent’s father was not in good terms with the Respondent’s mother when she met her current husband and divorced the Respondent’s father. When the Respondent and I were married, the Respondent’s father did not want his ex-wife to bring her new husband to attend our wedding but she ignored him.

5. In my view, it is not the case of the Respondent’s mother having a good relationship with his father, but rather that his father’s health has deteriorated so significantly over the past years that he no longer has the capacity to make his own financial decisions and the respondent’s mother has simply taken it upon herself to manage his financial affairs. I have witnessed the Respondent’s mother holding his father’s hand to sign documents on a weekly basis without the presence of a nurse or a doctor. Although the Respondent’s father’s mind is still functioning, he is incapable of signing anything and has difficulty communicating to people. A maid who worked for the family in the past helped him dictate singular words. It is clear that all the father’s assets are currently controlled by the Respondent and his sister S while the mother oversees and abets.

6. The Respondent’s father’s net worth is reportedly to be in the range of HK$500 to 700 million based on his shareholding in the LCH Holdings, in addition to his direct holdings in various properties in Grenville House. There is no reason why he needed the respondent to hold any assets for him especially when those assets in question are not worth a significant value compared to what he has. It makes better sense that he had simply gifted those assets to his son as fathers do.

7.  Even though the Respondent relied on and referred to his mother’s affirmation in his Answers relating to assets he claims are held on trust for his father or mother, the Respondent’s mother’s affirmation is purely narrative and contains not a single piece of documentary evidence, contemporaneous or otherwise, to support the claims. One would have thought that multi-million businessmen like his father and mother would have the knowledge and experience and be advised of the importance of documenting trust interests by way of a trust deed.” 

28.  It is against these respective pleaded case of the parties that I shall now consider the evidence of how and why the Husband was made the legal or registered holder of each of those Disputed Assets, then ask myself this question of whether there was any tacit understanding between him and his parents over the beneficial interests of these assets at the time of the vesting of their legal title on him, and if so what they were by looking at all the evidence holistically including the whole course of the parties’ conduct in relation to the assets which had admittedly spread over almost 20 years, starting with the Lincoln House Property in chronological order, where appropriate, of the vesting of legal title in the Husband.

29.  I should also note here that upon the close of evidence and in her closing submission, the Wife confirmed that she no longer takes issue with the Husband’s case that he has been holding the last item of the  Disputed Assets namely the HK$10 million investment funds on trust for the Mother.    

Lincoln House Property

30.  The Mother’s case is that this property was purchased in 1995 for £250,000 by the Father as a base for her visits to their children and for them to stay while attending school there, and with the Husband then a 20 year old student at Oxford, while the Sister was then only 16 year old and an upper 6^th year student at Roedean School, it was decided that the property be put under the Husband’s name for easier management as the Mother herself already owned another property in London [B/224, 228], and that she had been told by her elder sister who was then an estate agent that if a person owned more than one property in England and sold the second one, the profits from that sale would be subject to taxation, hence in the circumstances the Husband became the natural candidate to hold Lincoln House for the Father.

31.  According to the Mother, it was expressly understood by the entire family that the property was a family asset held by the Husband as nominal registered owner only on trust for the Father, with all its purchase cost and expenses paid for by the Father who has continued to do so up to date from his funds or hers, as evidenced by all the invoices and receipts as well as correspondence with their London lawyers produced by her in the proceedings and very helpfully summarised by her counsel Mr Abraham Chan in Appendix B of his Opening Submission.

32.  The Mother’s evidence is corroborated by the Husband when he provided further details as to the arrangements for the property in his 3^rd Affidavit [B/255, 256-258]:

“3. … My parents had explained to me that the London Flat was to serve as our family’s base in London and that my sister and I were to stay there for our then upcoming studies at the College of Law (London) and the University of London (King’s College) respectively.

4. My parents had also explained to me that the London Flat was purchased under my name as my father was sick and my mother was unsuitable to hold the property for tax reasons. I was told that they would pay for everything relating to the purchase (obviously, since I was still a student living on monthly allowances provided by my parents). With my parents having the need to stay in Hong Kong, I was chosen to handle day-to-day administration of the London Flat for the obvious reason that I was the only one of legal age physically residing there (while my sister was still in secondary school). My parents had, however, made it clear to me that the London Flat was not my personal asset and I was not permitted to do anything with it without their permission. I was not involved in the purchase negotiations and never even saw the title deeds but simply signed the relevant papers as requested.

5. After I finished my studies at the College of Law (London) in or about June 1997, I left England for good and never took part in the maintenance of the London Flat (save for perhaps certain correspondence with the local authorities concerning council tax and freehold issues as I was the registered owner on paper). My sister continued to stay at the London Flat for the remainder of her university studies. When she left England for good in or around 1999, the London Flat was left empty. Thereafter, my family (specifically my mother, my sister and I) would stay at the London Flat whenever we visited London for holidays. The Petitioner and I had stayed at the London Flat a couple of times when we visited London, but we had to borrow the keys from my mother as she was the key-holder. Indeed, throughout the years, it was my mother who dealt with the London Flat (including its decoration, cleaning, plumbing repairs, purchase of freehold title and so forth). To this day, I would pass all letters and invoices relating the London Flat to my mother.

6. My parents have, to date, continued to pay for all expenses relating to the London Flat. My mother told me that they have been paying such expenses using their joint checking account at Lloyds Bank (“Parents’ Lloyds Account”). For this purpose, my parents had initially drawn on a designated savings fund {“Parents’ Fund”} under their joint savings account at Halifax. In or around 2001, my mother transferred the Parents’ Fund to a new tri-party joint account at Halifax (with my sister and I) such that we could become back-up signatories. Given the cumbersome UK banking process, the Parents’ Fund was in or around 2006 transferred to a Hong Kong designed savings account under I-Investments Limited (with the same 3 parties being signatories) for easier administration. I understand that the Parents’ Fund has now been depleted but my parents continue to pay for such expenses using the Parents’ Lloyds Account. I do not pay for anything in relation to the London Flat and do not see any current reason to do so given that I do not have beneficial ownership of it nor reside in it.”

33.  This evidence of the Husband is also supported by the Sister, also a solicitor but is now working in-house for a property developer, who confirmed in her affidavit [B/249, 252-253] as follows:

“10. In relation to Lincoln House, to the best of my knowledge and belief, despite it being held in my brother’s name, it was always my family’s understanding that the property was not his and instead it was my father’s asset. Lincoln House was purchased on my father’s behalf and held in my brother’s name at a time when he was already of age and I was still below 18 years old. I stayed at Lincoln House when I attended university in London and whenever I am in London for work or for holiday subsequently. As far as I am aware, all expenses and outgoings in respect of Lincoln House were paid for using my parents’ funds. To the best of my knowledge and belief, my brother does not possess the keys or the title documents to Lincoln House. Consistent with my family’s understanding that the property was not my brother’s, I would never ask my brother for permission before staying at the property. Neither did I need to inform him if I stayed there. My mother holds the keys to the property on my father’s behalf and whenever l am in London on holiday or for work and wanted to stay at Lincoln House, I would have to ask my mother for the keys and would have to return them to her after use. To the best of my knowledge and belief, major decisions in respect of Lincoln House were and continue to be made by my mother on my father’s behalf after consultation with him and would be executed by my brother.”

34.  It is as noted above the Wife’s case that the Lincoln House was an outright gift to the Husband as there was a need for him for London accommodation in 1995 when he started at the College of Law there, while the Sister was then still in Brighton, and as the Mother had already separated and was living in 25B Po Garden with her own London property which could have been used as a London base if she so chose.

35.  The Wife therefore submits that as the Father must have known his life expectancy was compromised by his illness and that he could not expect to outlive the 7-year rule for UK Inheritance Tax at the prevailing rate should he later give away a UK asset, hence her argument that his purchase of the property in the Husband’s name as an outright gift was consistent with sound estate planning to avoid the UK Inheritance Tax, while the Father’s subsequent acts of payment of the outgoings on Lincoln House do not advance his or the Husband’s case as they are self-serving and/or are equally consistent with wealthy parents continuing to provide for their children. 

36.  The Wife also takes issue with the Husband’s evidence that he has not paid for anything in relation with this property, of which she describes as evasive if not dishonest, as one of the documents from the bundle of invoices, receipts and other relevant documents relating to various payments for the property, namely LCKS3-1(d) [D/930 - 972] in which a letter from Salim Bhimji dated 25^th September 2008 addressed to the Husband stating that the freehold price of the property has been agreed at GBP180,448 and that the 10% deposit was to be paid by 31^st October 2008 [D/970]. Immediately thereafter, according to the Wife, is a copy of the Lloyds Bank cheque dated 20^th October 2008 drawn from the joint account of the Husband and Mother in the sum of GBP18,044.80 for the 10% deposit.

37.  Read together, Mr Pilbrow submits for the Wife, the clear impression is that in addition to the maintenance, the parents also paid for the freehold purchase of the property, but on closer examination of the second page of the Salim Bhimji letter [D/971], a faint handwritten annotation just legible states “21 Oct 2008. Funds £18,044.80 from I-Trust Multi-Currency A/C… To Lloyds Bank # …”. It therefore appears, he argues, that the 10% deposit, ostensibly paid by the parents, was refunded by the I-Investment which leads to the Wife’s suspicion that I-Trust may have been refunding the Mother for her or the parents’ payments in respect of Lincoln House, and which was further fuelled by the subsequent evidence during cross-examination of the Sister when she confirmed that not only was the 10% deposit refunded, the whole cost of the freehold was paid with the I-Trust account.

38.  It is therefore submitted for the Wife that the Husband could not have overlooked paying over HK$2 million for the purchase of the freehold of a property in his own name, as he as a lawyer would have realized the significance that a clear inference could be drawn that he paid for the freehold because he owned the leasehold and wished to enhance the value of his own asset, and which is what the Wife is now asking the court to draw as regard Lincoln House.

39.  Furthermore, it is submitted for the Wife that when the freehold for Lincoln House was purchased in around late September 2008, which were from the Husband’s share in I-Trust and not from the Father, but yet it was within a year of the sale of Regent on the Park for HK$16 million in October 2007, and hence if what the Husband and the Mother were saying is true about ownership, the Father should have been flushed with cash, and would not have needed his children’s help to pay through their I-Trust account. 

40.  Mr Jeremy Chan for the Husband however argues that the fact that money from I-Trust was transferred to the joint account of the parents, with the consensus of both Husband and Sister, and then used to pay for the freehold, actually underlines the fact that Lincoln House does not belong to the Husband at all, as clearly demonstrated by the Sister’s evidence that she agreed to use money from I-Trust in equal share with the Husband because Lincoln House belongs to her father, but if it were to belong to her brother, she certainly would not have agreed to use her share of the money in I-Trust to fund his property.

41.  Mr J Chan further submits that, by contrast, there is in fact another property in UK at Oxford Square of which there is no dispute that it was funded by I-Trust because that property belongs to both Husband and Sister in equal share. Hence he submits that Lincoln House could not belong to the Husband as the Sister would not have agreed to use her share in the I-Trust to fund its purchase.

42.  At any rate, Mr J Chan submits that the Wife has never put such a case to any of the witnesses during the trial and therefore should not be allowed to do so in her closing submission.

43.  Similarly Mr Abraham Chan for the Parents submits that properly considered, the use of funds from I-Trust actually lends further credence to their case, as otherwise if Lincoln House were the Husband’s property, why would the Sister feel obliged to assist in his acquisition of the freehold by contributing funds from I-Trust, and why would such funds have had to go through a convoluted route of being first transferred into the joint account of the Parents at Lloyds?

44.  Mr A Chan also argues that the gifting of Lincoln House to their son alone at age 20 is in fact contrary to both parents’ practice of no favouritism in the family and their parenting philosophy to not spoil their children with extravagant gifts.

45.  Furthermore, Mr A Chan notes that the following matters are telling that the Husband could not be the beneficial owner of Lincoln House:

(a) when the property was renovated, the Mother only consulted the Husband and Sister about the colour scheme they each preferred for their respective bedrooms;

(b) while both siblings stayed in the property during their studies in London, the Sister had stayed for a longer period (3 years versus 1 year of the Husband) and much more frequently thereafter when she travelled to London;

(c) when the Husband wanted to stay in the property during his visits to London, he has had to ask for the keys from the Mother;

(d) the Husband was not consulted before his parents allowed one of his cousins to stay in the property, which he only learnt of when the cousin was about to fly off to England;

(e) as evidenced by the produced documents, many of the correspondence with regard to the purchase of Lincoln House and related matters were addressed to the Mother direct or on behalf of the Husband;

(f)  the outgoings of the property such as service charges have continued to be settled by funds from the Parents’ joint account at Lloyds over all these years and not from the Husband notwithstanding that he has since had his own income and means to do so if he were indeed the beneficial owner.      

46.  As for the Wife’s suggestion that Lincoln House was placed under the Husband’s name so that upon the demise of the Father, his estate could evade inheritance tax, Mr A Chan argues that since both Mother and Husband have categorically denied this to be the case and said on oath in unequivocal terms that the Father’s ownership of Lincoln House would be reported to the UK Inland Revenue Department for estate duty purpose, there is simply no basis whatsoever for the Wife to construct an “illegality” argument with such a suggestion, and that this most serious assertion was in any event never properly or fairly put to the witnesses and should therefore not be allowed to run her case on this basis.

47.  I agree with Mr A Chan on this point, but even if that assertion had been properly put to the witnesses and that their response were a bare denial, that argument of the Wife would in my judgment still be fraught with difficulties, as according to her case, Lincoln House was purchased by the Father for the purpose of providing accommodation to the Husband in London while he was studying there, but decided to put it in the Husband’s name to avoid UK Inheritance Tax in the event of his own surmise from his illness within 7 years, does it not mean that the Father should still retain the beneficial ownership because it was just an family arrangement to avoid UK Tax?

48.  Furthermore, the “holistic” dealings of Lincoln House subsequent to its purchase such as its utilisation by other members of the family including cousins over the years, the fact that the Sister had stayed there longer during her studies in London and more frequently thereafter but no similar purchase of accommodation for her by the Father, and that all decisions concerning the property were made by the Mother who has always retained its door keys are in my judgment simply not consistent with the Wife’s case that the Husband is the beneficial owner.

49.  As for the subsequent payment for the freehold interest of Lincoln House through the siblings’ I-Trust account, as rightly pointed out by Mr A Chan, if it were the Husband’s property, why would the Sister be willing to contribute towards its payment? Surely by then the Husband would have been financially well capable of doing so on his own if it were indeed his own property. The fact that the payment came from the sibling’s I-Trust account seems to me entirely consistent with their evidence that they were merely assisting their father with that payment as he was then having cash flow problem, which the Wife disputes because he had earlier sold Regent on the Park and was flushed with cash in my view simply ignores the fact that he had used those sale proceeds to pay off the mortgage of 16A Po Garden and to purchase the Merton Property.

50.  For all these reasons I accept the case of both the Mother and Husband that Lincoln House was purchased by the Father for use by the family members during their stay or visits in London in particularly for the accommodation of both the Husband and Sister during their studies there, that as the Husband was then at age and studying in London, it was convenient for him to hold the property with the clear understanding as a trustee or nominee for the Father, and that he has no beneficial interests at all in the property.

51.  I shall next consider the disputes over the Husband’s interests in various companies which held/hold landed properties, all of which according to the Wife were outrights to him with a common theme or purpose, i.e. as part of the Father’s estate planning or consensual family arrangements to distribute his assets due to the Father’s debilitating illness.

1 of 60,000 Shares in WS Ltd

52.  This company was originally held by the Parents with 59,999 shares by the Father’s nominee and 1 share by another company jointly owned by him with the Mother. In July 1993 the company purchased 25B Po Garden for HK$10.8 million with a mortgage for HK$6.5 million, and shortly thereafter the Father’s nominee transferred 30,000 shares to the Husband and 29,999 shares to the Mother, and both were also appointed directors of WS Ltd together with the Father’s personal secretary.

53.  On 6^th March 1997 the Parents formally entered into separation by signing the said Deed of Separation in which the Father agreed, inter alia, to continue to pay for the mortgage of 25B Po Garden and declared to have no interest, right or claim in that property. According to that deed, the parents had been living apart since about 1991 and that the Mother had all along been residing in 25B Po Garden after its purchase in 1993.

54.  In about September 1997 the Husband transferred all his shares in WS Ltd except one to the Mother but retained his directorship. The Mother explained this transfer in her 2^nd Affidavit [B/293, 316]:

“57. … (The Father) agreed to transfer all the Respondent’s shares to me, so I asked the Respondent to stay on as a director but transfer all the shares he held in his name to me, save that he still held 1 share in order to satisfy the then legal requirement in Hong Kong for there to be two shareholders and two directors for any Hong Kong incorporated company. I have all along made clear to the Respondent that he is holding the 1 share on trust for me. All along, the management of all affairs relating to the company and the funding for this company have rested with me solely. The Respondent is only involved in signing the annual audited accounts and annual meeting records. He has never received any income or dividend from this company, as it is expressly understood that he is not entitled to any of these …”

55.  While it is not disputed that 25B Po Garden had all along been used by the Mother as her home until it was sold in December 2011 for HK$43 million, and that there is no evidence to suggest that the Husband had been given any payment thereof, the Wife says that there is a nexus in time that links his successive beneficial interest in the two Po Garden flats, held respectively through WS Ltd and GW Investment, 16A being a replacement for 25B as below, and which arrangements she submits should be considered together so as to understand the real intention of the parents behind these transactions to convey the beneficial interests to the Husband.

56.  The Wife submits, the fact that the Husband held only 1 out of 60,000 shares does not paint the full picture because it was only later, pursuant to the Deed of Separation made between the Parents on 6^th March 1997 as part of their divorce settlement reached in February 1999 that the Husband’s shareholding was altered within 3 months when he was transferred 50% shareholding in GW Investment on 25^th May 1999, and shortly thereafter in October 1999 GW Investment purchased 16A Po Garden which was to become the 2^nd matrimonial home of the Husband and the Wife, while at about the same time the Sister was also allotted a share in GW Investment.

57.  The clear inference, the Wife submits, is that all these were part of a consensual family arrangement upon the parties’ divorce in February 1999, and in return for giving up his then 50% share in WS Ltd and hence 25B Po Garden, the Husband was gifted a share in GW Investment which purchased 16A Po Garden.

58.  Whether that was the case or not, it would of course be necessary to first consider the evidence in more details of those arrangements during the relevant periods in respect of GW Investment before returning to this issue.   

1 of 3 Shares in GW Investments

59.  The chronology of events in relation to this company can be found in Appendix C to Mr Abraham Chan’s Opening Submission and again is generally non-controversial. This company was initially incorporated and owned by the Mother and her brother with each holding 1 share and as directors in about January 1997 intended as an investment vehicle, but it was not until October 1999 when it made its first investment in the purchase of 16A Po Garden Property, of which the Mother explained in her 2^nd Affidavit that it was for and on behalf of the Father for the purpose of preserving his assets and preventing him from gambling away all his money [B/302-306]:

“23. As mentioned above, (Father) was very fond of gambling … There had been times when his losses were heavy, even up to a few million Hong Kong dollars in some years. To preserve his assets and to prevent him from gambling away all his funds, I came to realize that the best way to preserve his funds was to assist him in investing his cash in real properties. I raised my idea to invest in real properties in Hong Kong to (Father) some time prior to May 1999. He agreed that it would be a good idea to buy real properties and borrow some money to finance the purchase. Our idea was that the rental income from the properties would be able to pay off part or all of the mortgages obtained for the purpose of financing the purchases and the properties would increase in value over time. (Father) also expressed his wish that the Respondent should begin to learn how to manage properties under my supervision and to shoulder the responsibility of managing his assets.

24. Coincidentally at that time, my brother … and I had been directors and equal shareholders (each holding 1 share) of a Hong Kong –incorporated company, i.e. GW, through which we meant to (but did not eventually) make some investments. It therefore occurred to me that I could use this company (instead of incorporating a new one) as the vehicle to purchase real property for (Father). Given (Father)’s wish as stated in the preceding paragraph and upon obtaining his approval, I asked my brother to resign as director of GW to enable the Respondent to take his place and to transfer his 1 share to the Respondent on or about 24 May 1999 such that the Respondent, as one of the shareholders, could take up the joint responsibility of giving a personal guarantee for the mortgage of his father’s property to be purchased. Prior to the transfer of the 1 share to the Respondent, I told the Respondent that GW would be used to acquire real property for his father. I told the Respondent that he would be holding the 1 share for his father, that he was only the nominal registered owner of the share. After the transfer of the 1 share to the Respondent, I found a property that was a promising investment for (Father), i.e. 16A Po Garden, Brewin Path, Hong Kong (“Po Garden”). I relayed this potential investment opportunity to (Father) and he agreed to use his funds together with a mortgage to invest in Po Garden. The Po Garden purchase was completed on or about 8 November 1999. After the signing of the sale and purchase agreement and after S returned to Hong Kong in about October 1999, (Father) asked me to involve S in relation to GW so that she too could start learning how to manage properties under my supervision and to shoulder the responsibility of managing her father’s assets. After the completion of the purchase of Po Garden, I share in GW was allotted to S with (Father)’s permission on or about 17 November 1999…

25. Prior to the signing of the provisional sale and purchase agreement for Po Garden, I made it clear to the Respondent again that he and I were holding the respective shareholdings in GW on trust for (Father) since Po Garden, being the only asset of GW, was to be fully funded by (Father). I also reiterated the same to S on behalf of (Father) before the 1 share was allotted to her. It was expressly understood by our children that for this reason they were not allowed to deal with the property except upon (Father)’s instructions…

26. Eventually, Po Garden was purchased under GW’s name in October 1999 as an investment for (Father) using his funds and a bank mortgage…

27. As agreed with (Father), I arranged for Po Garden to be rented out in order that the rental income could be used to pay off the monthly mortgage instalments, various maintenance fees and other outgoings related to Po Garden. Eventually, the property was rented out until around 2005 for monthly rental, which were deposited directly into the account of GW. Any shortfalls not covered by the rental income were fully financed by (Father)…

28. Out of the desire for my children to learn to manage their father’s assets, I had in the beginning wanted the respondent and S to help with the management of Po Garden under my supervision. However, as my children were both too busy with their professional career in leading law firms, I made decisions on investments and tenancy matters on (Father)’s behalf, including finding tenants and negotiating tenancy terms. The Respondent would simply sign the relevant papers as a director of GW when he was available, but he was never involved in the purchase negotiations for Po Garden and had never possessed the title deeds. Meanwhile, (Father)’s secretary, Ms CL, would assist me in follow-up work such as chasing for rental payments in arrears…

29.  Throughout all these years, neither the Respondent not S nor I have ever received any share in the rental income of Po Garden. We simply have no right to do so since we have been holding our shares in GW on trust for (Father).”      

60.  That was according to the Mother how the 1 share in GW Investment became vested in the Husband on trust for the Father, which occurred well before the Wife was to marry him in 2002 and hence were information which she would not have been privy to, but for the fact that 16A Po Garden subsequently became the parties’ matrimonial home during their marriage and has remained so for the Wife and the 2 daughters, of which the Wife argues will go to support her case that the Husband is a beneficial owner, something which she claims that he had admitted to her before, as she stated in her 4^th Affirmation [B/286, 288-289]:

“13.  The Po Garden is our matrimonial home property. The Respondent and I have lived in the Po Garden property for the majority of our marriage from 2005 and I am still currently living in this property with our daughters. For the past 8-9 years we have been living in this apartment, I have never heard the Respondent mention that his father has anything to do with this property. When the Respondent and I agreed to divorce and he volunteered to move out in November 2013, we had a discussion in our bedroom where he was telling me that he was narrowing the choices of places he was considering to move to such as Regent on the Park or Valverde, where he is now living. We talked about post-divorce financial arrangements and I told him I would not ask for any spousal maintenance but I would like him to pay for the girls and transfer the Po Garden property to me as this has always been our home and I would like our two daughters to have a secure place to live for the rest of their lives. The Respondent’s response to my request was, “the problem is I only own 1/3 of this flat, so I cannot make the decision. If it is 100% owned by me, the I can give it to you”. He did not mention anything about the apartment actually being held on trust for his father, and that he does not even have a 1/3 share in it.

14.  I also recall that, about 4 years ago, our friend and neighbour JC who used to live in 15A Po Garden was interested to buy our apartment so that he could connect the two apartments together. The Respondent declined their offer and explained that he only has a share in the property. Later, the Respondent was upset to find out from other friends that JC’s wife has been gossiping to many of our common friends that she was surprised to find out that the Respondent does not solely own our apartment. Again, the Respondent did not mention anything about the property being held on trust for his father. Ironically, when JC moved out of his 15A flat, the Respondent’s mother bought the flat and moved into it.”

61.  Unlike the case with Lincoln House, and as pointed out by the Wife, 16A Po Garden has been used by the Husband exclusively as a home for his family since 2005, and on his own admission rent-free save for its outgoings and maintenance, which seems contrary to the Mother’s evidence of the original intention of renting it out for income to meet its mortgage payments as an investment for the Father who has instead ended up paying the mortgage instalments out of his own pocket even up to date, which just fuels the Wife’s suspicion that it was not his investment but rather a gift to the Husband, and as he had earlier done so similarly with the 1^st matrimonial home at Regent on the Park held by HF Consultants in which the Husband was also allotted its 50% shares with exclusive use of that property for his family, it is therefore submitted by the Wife that it would also be relevant for that arrangements in HF Consultant to be considered together in view of the apparent similar circumstances in which the Husband became involved.      

2 of 4 Shares in HF Consultants

62.  According to the Mother, HF Consultants was acquired in 2002 for the same purpose of investing in real properties for the Father initially for the Regent on the Park property and later the Merton, the chronology of events of which can be found in Appendix D of Mr Abraham Chan’s Opening Submission.

63.  The arrangement for the shareholding in HF Consultants was however somewhat different from that for GW Investments, of which the Mother explained in her 2^nd Affidavit as follows:

“35. As explained above, (Father) had wanted our children to learn how to manage properties under my supervision and shoulder the responsibility of managing their father’s assets. As a result, the following arrangements were put into place for the purchase of Regent on the Park by HF. Firstly, the Respondent and I were appointed directors of HF. Secondly, in anticipation of the bank’s likely requirement for a controlling shareholder of HF to give a personal guarantee for the mortgage, (Father) arranged to have 1 share in the company allotted to himself and 2 shares transferred to the Respondent for the Respondent to hold those shares on trust for him. (Father) felt that he was unsuitable to be the personal guarantor himself due to his health condition. The Respondent had by then established his own professional career and was in a position to share my burden of taking care of (Father)’s affairs. Therefore, unlike the shareholding arrangement in GW, (Father) took the view that there was no need for me to be added as a nominee shareholder of HF for the purpose of providing a personal guarantee, and that my directorship in HF should suffice to supervise the Respondent’s activities in the company. Eventually, when Regent on the Park was sold (as will be explained in sub-section II below), (Father) arranged to have 1 more share in HF allotted to himself. As (Father)’s health deteriorated after his minor stroke in 2010, I proposed to (Father) that he could transfer his 2 shares in the company to S for her to hold them on trust for him. He agreed to my proposal in the presence of S and the transfer was effected on 18^th December 2012…

36. All along, I made it expressly clear to the Respondent and also to S before she became a shareholder of HF that (Father) wanted them to hold the shareholding in HF on trust for him. However, despite (Father)’s and my desire for the respondent and S to take up the affairs of their father, the Respondent and S were too busy with their respective work as a lawyer and I remained heavily involved in the management of the properties under HF.

37. The mortgage instalments and outgoings for Regent on the Park were financed by the monthly rental income generated from the existing tenancy mentioned above until October 2002, when the tenant terminated the tenancy early. From October 2002 onwards, the shortfalls were financed by (Father), who had arranged for approximately HK$20,000 every month to be deposited into the bank account of HF to settle the mortgage instalments.

38. The Petitioner and the Respondent were wedded on 30 November 2002. Prior to that, the respondent had been looking for a place to stay with the Petitioner after their wedding. However, the Respondent was not able to find a desirable yet affordable place to rent. When it became clear that the tenant at Regent on the Park would be vacating the property, the Respondent asked (Father) and me if he could stay in Regent on the Park first.

39. In view of the Respondent’s monthly salary of only approximately HK$60,000 at that time, (Father) compromised and permitted the Respondent and Petitioner to move into Regent on the Park on the condition that the Respondent would pay a monthly sum of HK$12,500 as contribution towards the running costs of the property and be responsible for any renovation costs. Meanwhile, (Father) continued to finance the mortgage instalments and other outgoings. There was not, however, any agreement or mutual understanding whatsoever that the respondent would acquire any interest in the property, and that he and the Petitioner were to stay in the property as mere licensees. This could be substantiated by the fact that (Father) had subsequently returned the Respondent HK$1,000,000 being the renovation costs paid out from the Respondent’s own savings. The payment was made despite the fact that the Respondent had agreed to bear the renovation costs. What happened was that, after Regent on the Park was sold, the Respondent told the (Father) that his renovation had enhanced the value of the property and facilitated its sale at a good price. He therefore requested his father to pay him back the renovation costs, to which request (Father) agreed.”    

64.  As a result the parties moved into Regent on the Park in early 2003 until 2005 when the Wife became pregnant with the younger daughter and the family then moved into 16A Po Garden, and Regent on the Park was then rented out for HK$44,000 per month until August 2007 when it was sold, of which the Mother explained in her said affidavit as follows [B/309-310]:

“42. By around August 2007 … (Father), after discussion with me, decided that it was good time to realize this investment property. He then gave me the permission to sell it in order that the sale proceeds could be used to pay off primarily (i) the outstanding bank mortgage of this property and (ii) the outstanding mortgage of Po Garden. The proceeds were also used to pay the respondent for his contribution towards the renovation of Regent on the Park … and for purchasing another investment property … The Merton … The remaining balance of the sale proceeds was paid back to (Father) at his request.

43. To complete the picture, I set out below how the net proceeds from the sale of the Regent on the Park were dealt with:

(i) The initial deposit, further deposit and the amount receivable on completion (altogether the “Net Proceeds”) were first deposited into HF’s bank account.

(ii) As HF did not have any savings account, the Net Proceeds of amount HK$11,070,000 were placed into an existing but relatively inactive joint savings account of the Respondent and S (“Fixed Deposit Account”) as temporary fixed deposits to earn deposit interest.

(iii) Thereafter, around HK$7,652,000 was used to release the mortgage of Po Garden held under GW.

(iv) Approximately HK$1,350,000 was used for the purchase of The Merton held under HF and for paying incidental expenses of the purchase including stamp duty and legal fees …

(v) Approximately HK$1,000,000 was deposited into my account and later transferred to the Respondent as a reimbursement as explained … above; and

(vi) The residual balance was returned to (Father).” 

65.  To complete the picture, the residual balance said to be returned to the Father, on the basis of the above figures, amounted to HK$1,068,000.

66.  The Mother then went on to provide further details as to the purchase of The Merton in the same affidavit as follows:

“46. For the same reasons as explained … The Merton was bought under the name of HF as an investment property on behalf of (Father). As can be seen in the exhibit … the purchase involved the following payments utilizing funds from the Fixed Deposit Account, a mortgage, and the funds in HF’s bank account:

(i)An initial deposit of HK$200,000 which I paid. I was subsequently reimbursed from the Fixed Deposit Account;

(ii)A further deposit of HK$213,000 and stamp duty of HK$103,100 (i.e. a total of HK$316,100) drawn from the Fixed Deposit Account which was then transferred to HF’s bank account for payment;

(iii)Agent commission fee of HK$20,650 paid from HF’s bank account;

(iv)Legal fee of HK$7,000 drawn from the Fixed Deposit Account which was then transferred to HF’s bank account for payment; and

(v)The balance of the purchase in the sum of HK$827,000 which was settled in part by a bank mortgage and in part by funds from the Fixed Deposit Account (which was transferred to HF’s bank account for payment).

67.  Similarly it is the Wife’s case that there is a nexus in time between the acquisition of Regent on the Park and the parties’ marriage, as it was on 19^th January 2001, which was about 6 months after the parties’ engagement in July 2001 and within the same year of their subsequent marriage in November 2002, when 2 out of 3 shares of HF Consultants were transferred to the Husband, and 3 days later HF Consultants entered into a sale and purchase agreement for Regent on the Park which was completed on 15^th March 2002 with the assistance of a mortgage, and that the Husband was named as the sole guarantor of the mortgage.

68.  While the property was tenanted when purchased, as pointed out by the Wife, early vacant possession of the premises was obtained and after renovations were carried out which were paid for by her parents, the parties were able to move in and occupied it as their first matrimonial home until their first child was born.

69.  The clear inference, the Wife therefore submits, is that this was a wedding gift and/or in any event a contribution to the purchase of the parties’ first home by giving the Husband a shareholding of its holding company, and consistently with beneficial ownership being held by him as a 2/3 owner of HF Consultants, upon sale of Regent on the Park, the proceeds of sale were paid into his savings account held with his sister.

70.  The Wife further submits that consistent with the Husband’s beneficial ownership, part of the proceeds were then utilised for the repayment of the mortgage on their 2^nd matrimonial home at 16A Po Garden owned by GW Investments in which the Husband and Sister held 2/3 shares, and while the Father was allotted an additional share after Regent on the Park was sold, 4 years later in December 2012 he transferred all his 50% shareholding in HF Investments to the Sister, all of which were part of his family arrangements to distribute assets to his 2 children.

71.  There is no question, as noted above, that some of the transactions relating to the Husband’s shareholdings in various companies and the acquisition of landed properties took place well before the parties’ marriage or even their acquaintance, such as the purchase of 25B Po Garden by WS Ltd and its transfer of 30,000 shares to the Husband in 1993, or the allotment of 1 share in CW Investment to him and the company’s acquisition of 16A Po Garden in 1999, which were therefore beyond the Wife’s first hand or personal knowledge and hence her case is admittedly in effect based on her subsequent observations and information including hearsay, aided no doubt by being able to now look back at the entire history of those transactions relevant to the particular and objective circumstances of the Husband’s family in order to build and frame a case of a traditional Chinese family where a very wealthy father intended to make outright gifts to his only son as part of his estate planning as a result of his own incurable illness. On the face of it I cannot say there is no merits in such case of the Wife against the Husband and his parents.

72.  However, upon close scrutiny of the evidence before the court, such case of the Wife is in fact fraught with all sorts of difficulties and inconsistencies, and is at the end in my judgment highly unlikely to be the true intention of the Father when those company shares were allotted to the Husband. There are amply reasons.

73.  Firstly, on the basis of the Wife’s case, the first of such alleged estate planning of the Father to make outright gifts to the Husband would be the transfer of the 30,000 shares in WS Ltd in August 1993 shortly after WS Ltd’s purchase of 25B Po Garden in July 1993. As WS Ltd was first formed and owned by the Parents in equal shares in 1980 for their investments, hence if the Father in 1993 were to make a gift to the Husband as part of his estate planning, it begs the obvious question of why would he want to do it through a company jointly owned by the Mother and when its only asset, i.e. 25B Po Garden was purchased as her home upon their separation and hence was not even his own property to give?

74.  The evidence before the court in particularly the Parents’ Deed of Separation and their subsequent divorce settlement/order reveal that the Parents agreed to live apart in 1991, and as a result 25B Po Garden was eventually purchased to be her future residence, for which the Father agreed to pay for its purchase including its mortgage instalments, which were all substantiated and verified by the relevant terms of their said Deed of Separation signed in 1997 and their subsequent divorce settlement/order granted in 1999, and in which the Father confirmed to have no interest in that property or its holding company and agreed to continue to be responsible for its mortgage repayments as part of his financial provisions for the Mother.

75.  Therefore it seems clear to me that although the Father was then an equal shareholder of WS Ltd when 25B Po Garden was purchased in 1993, the property was intended to be the Mother’s home upon their separation, while his payments for its mortgage instalments were part of his financial provisions for her during their separation and subsequent divorce. Under those circumstances I have great difficulty accepting the argument that the Father would find it necessary to gift his son, who was then still a student in UK, in effect half of what he had just purchased for his wife as her home, when he could have easily done so with his other assets whether it was part of his estate planning to distribute his assets or just an outright gift to his son in view of his great wealth. It just does not make any sense to me for him to do that instead with his shareholding in WS Ltd or with the property at 25B Po Garden.

76.  The fact that the Husband later in September 1997 transferred all his shareholding save for 1 share in WS Ltd to the Mother in my view further cements the Parents’ case that it was done pursuant to their intention to proceed to divorce and to facilitate the implementation of the terms of their earlier deed of separation which included the Father’s declaration of no interest in WS Ltd and hence the transfer of his shares held by the Husband to the Mother to complete the formality save for 1 share to comply with company regulations, which they did in May 1998 when the Father issued his petition for consensus divorce.   

77.  Above all, that the Husband was never paid anything, let alone a half share based on his shareholding, of the sale proceeds of the HK$46 million after 25B Po Garden was sold by WS Ltd in 2011 to which he would certainly be entitled if he was indeed the beneficial owner of his shares in WS Ltd, which just goes to support the Mother’s case that he was merely a trustee or nominee for the Father.

78.  Which bring me back to the Wife’s earlier argument that the Husband was instead compensated by 16A Po Garden as a replacement for 25B, of which Mr Pilbrow made the following submission in his Closing Submission:

“43. W says that there is a nexus in time that links H’s successive beneficial interest in the 2 Po Garden flats, held respectively through WS Ltd and GW Investment, 16A being a replacement for 25B.

44. After (Father) and (Mother)’s marriage broke down and they separated on 1^st January 1991, 25B Po Garden was acquired. On 23^rd August 1993, WS Ltd was acquired as a holding vehicle: shares were transferred so (Mother) held 50% and H held the balance of 50%. Both (Mother) and H were appointed as directors. (Father) funded the purchase of 25B po Garden on 16^th August 1993, which was registered in the name of WS Ltd. The property at 25B was used by (Mother) as a home until it was sold on 20^th December 2011.

45. In the course of the discovery application, much was made of the fact that H hold only 1 out of 60,000 shares. This does not paint the full picture because it was only later, pursuant to the separation agreement dated 6^th march 1997 and/or as part of the divorce settlement recorded in the Ancillary relief Order dated 1^st February 1999, that H’s shareholding was altered. Moreover, he was provided with an interest in another Po Garden flat shortly thereafter.

46. It was within 3 months of the parents’ ancillary relief order, that (Mother) had arranged for her brother to transfer to H his (ie the brother’s) 50% shareholding in GW Investment. The transfer was effected on 25^th May 1999. On 5^th October 1999, a Provisional Sales and Purchase Agreement, signed by H on behalf of GW Investment, was entered into for the purchase of another flat, namely 16A. That sale was completed on 8^th November 1999. This was the premises later used by H and W as their 2^nd matrimonial home.

47. After purchase of the flat, (Sister) was allotted a share in GW Investment as well, thereby effectively reducing H’s share to 1/3 as (Mother) retained the share she was holding.

48. During the Discovery hearing on 4^th June 2015, the Court remarked on the time nexus and it is submitted that this was not a mere coincidence …

49. The clear inference is that as part of a consensual family arrangement upon the parents’ divorce on 1^st February 1999, in return for giving up his then 50% share in (Mother)’s home on 25B Po Garden, H was gifted a share in GW Investment, which purchased the replacement 16A Po Garden flat.”   

79.  I have already dealt with above how inherently improbable for the Father to gift the Husband a share in the property purchased solely for the Mother, hence this argument of the Wife that there is a nexus in time that links the Husband’s interests in the 2 Po Garden flats and that 16A Po Garden was a replacement or compensation for him in my view can no longer stand on any ground, let alone a firm one. As submitted by Mr A Chan for the Parents, it is one thing for parties to invite the court to draw inference based on established facts, it is quite another for them to approach their closing submission with propositions which were never put to any witness at trial and which should not be allowed.

80.  Furthermore, the fact that 16A was purchased some 2 years later in November 1999 by a different company GW Investments begs another obvious question: If indeed it was to replace or compensate the Husband for 25B, why waited all that time to do so, and what if the Father were to die from his illness in between which would surely have defeated the whole purpose of estate planning in the first place? And certainly in 1997 when the Husband transferred his 29,999 shares to the Mother, nobody and particularly the Father in his condition could have foreseen that 2 years later in 1999 16A Po Garden would be purchased as a replacement for 25B, or at least there is no evidence before the court for that suggestion, and it all seems to me a post-mortem speculation to fit the pieces to the Wife’s case.  

81.  Above all, if 16A was indeed an outright gift to the Husband, replacement or not, why did he not move into this property upon its purchase in 1999 or use it for his 1^st matrimonial home when he married the Wife in 2002 when instead they moved into the smaller Regent on the Park which was purchased more than 9 months earlier with a sitting tenant and that they had had to wait for the tenant to vacate it and then to renovate it?

82.  Mush has also been said about the Husband’s response when he was approached by his neighbour friend for the purchase of 16A and replied that he was not the sole owner and had to discuss with the others, of which the Wife argues that it was an disputable admission of his beneficial interest in that property, but which I find to be neither here nor there, as there could be other reasons why he said that, such as not wishing to reveal his family arrangements, or that it was his polite way to reject his friend’s proposal.       

83.  On the other hand, I have great difficulty accepting the Wife’s case that Regent on the Park was a wedding gift for the Husband, which was never properly put to him or any of the witnesses at the trial, but at any rate it appears to me a very unusual mean for the Father to make something as significant as a wedding gift to his only son when it was also to be co-owned by him, when he could well afford to gift the entire property to the Husband instead, and even more unusual that some 10 years later in 2012 when he would see fit to make his daughter a co-owner of his son’s wedding gift by transferring his shares to her, which just does not make any sense to me if it were indeed a wedding gift for his son after all.

84.  Mr J Chan for the Husband further submits that as there was no challenge to the evidence that it was the Father who took money out of HF Consultants and/or GW Investment but not the other shareholders, such “free transfer of money” between the Father’s various companies is telling, since these companies all have different shareholders, and if they were real and beneficial owners, then the free flowing of money makes no sense whatsoever, and similarly in the case of the sale of Regent on the Park when HK$7.6 million went to GW Investment for paying off the mortgage on 16A Po Garden, some money went to the purchase of the Merton Property, HK$1 million to the Husband to reimburse his earlier renovation expenses, with the balance all went back to the Father, which evidence were never challenged by the Wife and I agree are wholly inconsistent with her case that Regent on the Park was the Father’s wedding gift to the Husband.

85.  I agree and as pointed out by M A Chan for the Parents, that the objective facts of the case do show that the two Po Garden properties came about in completely different and unrelated sets of circumstances which are much more consistent with the case that they were not gifts to the Husband but rather the Father’s own assets and investments which explains why the latter could use those funds in the ways he did as the sole beneficial owner.

86.  I shall now come to consider the remaining Disputed Asset which seems to be unrelated to any estate planning on the part of the Father according to the Wife but rather more to do with the Mother’s own reason or purpose  

1 of 2 Shares in GC Ltd

87.  This company was incorporated in about late 1970 and used by the Father for purchasing various lots of agricultural land and/or grasslands in the New Territories for long term investments in anticipation of monetary compensations if and when resumed by the government for development. It was initially held by the parents with 1 share each.

88.  It was on 9^th July 2001 when the Mother resigned as a director and transferred her 1 share to the Husband allegedly on trust for her so that he could explore the development potentials of acquiring neighbouring plots of land for possible enhancement of the existing value, and that it would be better for a male representative of the company to deal with the villagers in meetings and negotiating with them, but as it turned out, according to the Mother, the Husband had been too busy with his own career that he had not been able to carry out any further investment for GC Ltd, nor has there been any government resumption of the company’s lands, as a result there has never been any profit or income generated by the company.

89.  The Wife however submits that it is another significant nexus in time that the share in this company was transferred to the Husband, as it was only a few days later when the Mother re-married, which is a clear inference that upon her re-marriage, the Mother wanted to divest herself of her remaining ties with the Father as her ex-husband, which is consistent with the fact that when she was ordered by this court to give discovery of this company, she stated that all the relevant documents had already been handed to the Husband and referred the matter to his solicitors. Hence it is submitted that the court should draw inference that the transfer of the share to the Husband was an outright gift to him.  

90.  This argument that the Mother wanted to divest herself of her remaining ties with her ex-husband upon her re-marriage is, submitted by Mr A Chan for the parents, inconsistent with the facts that notwithstanding their divorce years ago which was an amicable one, the parents have co-owned other assets up to the presence including joint accounts at Lloyds, and that the Mother has continued to be closely involved in the management of the Father’s affairs in accordance with his wish, particularly so when it was also specifically provided in their Deed of  Separation of 1997 which was later incorporated in their divorce settlement order the following clause which in my view not only goes to refute the Wife’s argument but also support the Mother’s case of her continued involvements in the Father’s personal affairs notwithstanding their divorce :

 “(7)  Notwithstanding that the Parties have since the 1^st day of January, 1991 lived separate and apart, the Husband acknowledges with thanks that in view of the Husband’s health condition, the Wife had continued to visit the Husband and look after the Husband and his household affairs (hereinafter referred to as “the Wife’s said visits”). The Wife agrees that the Wife’s said visits may continue as circumstances permit on the express understanding that the Wife is under no contractual or legal obligations of any sort in making the Wife’s said visits. For the avoidance of doubt, the Husband declares that all the Wife’s rights and entitlements under this Deed are not subject to the Wife making the Wife’s said visits.”   

91.  If indeed the Mother had wanted to divest herself of her remaining ties with the Father, she could have easily and conveniently done so at the time of their divorce by making it part of their financial settlement to transfer her share in GC Ltd to him or his nominee and to resign her directorship at the same time. The fact that it was not done at that time and that she transferred her share to the Husband instead several years later just goes to support the Mother’s case that she just wanted him to help her deal with that investment upon her re-marriage as her husband is a Malaysian and she may not be able to spend as much time in Hong Kong as before. I am simply unable to see any reason why she would want to make such a gift to the Husband, as it certainly cannot be said to have anything to do with estate planning.

Funds held for Parents

92.  While as noted above that the Wife now no longer disputes the Husband’s case that he has held investment funds for both of his parents, with those for his mother in much bigger amounts as much as HK$10 million at one time and in various deposits and securities accounts under an express agreement, while those for his father were much smaller and only in RMB currency, it would nevertheless be relevant to go into evidence in some details to see if they may shed any light one way or the other on the parties’ respective case generally and/or in relation to those other Disputed Assets.

93.  The Mother’s evidence is that initially it was for convenience purpose so that the Husband could handle her investments in Hong Kong due to her frequent travels abroad, as she elaborated in her 2^nd Affidavit [B/293, 316]:

“58. From time to time over the years, due to my frequent travels to places of different time zones which made it rather difficult, if not entirely impossible, for me to give investment instructions within banks’ or brokers’ office hours in Hong Kong. I had previously asked the Respondent to effect certain Malaysian securities transactions on my behalf using my funds and holding those securities on trust for me. The Respondent would deposit my funds into his DBS Vickers account to purchase the securities. The balance after the stock purchase and the dividends earned would then be accumulated in that account in Ringgits. On one occasion on or around 12 June 2007, the balance in the DBS Vickers was first converted into US dollars and then transferred to my account with DBS Vickers. Given that DBS Vickers did not allow the automatic transfer of the dividends from the Respondent’s account to my HSBC (Kuala Lumpur) account, but the Kim Eng Bank did, the Malaysian securities which were originally held by the Respondent in his DBS Vickers account were later transferred to the Respondent’s Kim Eng (HK) Account with s standing instruction that all dividends received are to be transferred to my account held with HSBC (Kuala Lumpur). However, to avoid incurring exchange rate losses, the dividends before these securities were transferred to Kim Eng (HK) still remain in the Respondent’s DBS Vickers account. On 9 March 2012, I instructed the respondent to sell the Malaysian securities and transfer the proceeds of sale to my account with Kim Eng Singapore. Up until 25 May 2012, all dividends accumulated in the Respondent’s Kim Eng (Hong Kong) Account were transferred to my account on three occasions. As at 31 January 2014, there was a residual cash balance of MYR637,496.48 in the DBS Vickers account which the Respondent continues to hold on trust for me pending my further instructions. I told the Respondent that I expect him to repay such monies to me when the Ringgits currency should appreciate back to the Asian currencies crisis level, and I trust that he will do so given our mutual understanding that he is simply holding those monies on trust for me …”

94.  The Mother went on to explain in her same affidavit the purpose for setting up more formal investment funds under an investment agreement with the Husband in order to help him to build up his investment funds management profile:

“60. In around 2013, the Respondent expressed to me his interest in setting up his own investment fund should he leave his current employment, but was concerned about his lack of capital, investment and fund management experience as well as track records which would be needed to convince others of his abilities. To help him to build up his management profile to attract potential clients in the event that he shall pursue an investment or fund management career in the future, I entered into a fund management agreement with him (the “Investment Agreement”) on 25 April 2013. Under the Investment Agreement, the Respondent is to manage and invest my funds (the ”Investment Funds”) on my behalf. The initial principal sum was HK$10,000,000.”

95.  In support of her case the Mother has also provided movement details of those Investment Funds in 2014 and produced a copy of the said Investment Agreement and the latest ledger account of the Funds [B/318-319].

96.  As for the funds said to be held on trust for the Father, which as noted above were all in RMB and just slightly more than the equivalence of HK$400,000, the Husband’s evidence in his 3^rd Affidavit is simple:

“37. During about 2006 to 2008, my father had wanted to invest in Renminbi but due to relevant regulations, only a maximum of RMB20,000 could be bought by an individual each day. He therefore asked me to establish a standing instruction with Chong Hing Bank Limited over a period of time to purchase and accumulate Renminbi for and on his behalf, using funds provided by him.

38. A total of approximately HK$417,000 was provided by my father for the purpose of purchasing Renminbi for and on his behalf and in return a total of RMB400,000 was bought…

39. My father subsequently gave me RMB100,000 out of such RMB400,000 as a gift but the rest (being RMB300,000) was continued to be held on trust for him. I recall that in one subsequent year, my father withdrew RMB30,000 from his RMB300,000 and gave RMB10,000 to each of my sister, the Petitioner and me as “lai see”. The residual balances have been kept in fixed deposit to date…”

97.  While none of these evidence, even when unchallenged, may go so much to firmly support or refute either case of the parties in respect of those remaining Disputed assets, they do in my view show the Parents’ readiness to involve their children especially the Husband in assisting and managing their own investments, which is in the circumstances of their family not at all unusual and given the fact that both of their children are lawyers.

Conclusion

98.  In her closing submission the Wife alternatively prays in aid the presumption of advancement that the Father, in a very traditional Chinese family, intended to and did make outright gifts to his only son the Husband, as he was ill but very wealthy, worth an estimated HK$700 million based on his known publicly listed shareholdings alone and his Granville House property.

99.  The underlying principles are clear and well established when there is a gratuitous transfer containing no express or inferred provisions determining beneficial ownership, the starting point is that there is a rebuttable presumption of resulting trust: that is that the transferor did not intend to make a gift, which may be rebutted either by extraneous evidence that the transferor did intend to make a gift, or by a counter rebuttable presumption of advancement that the transferor did intend to do so in view of the father-son relationship.

100.  That presumption however will only apply in the absence of direct evidence of intention, and such evidence of intention must, as already noted above, apply to the time of the transfer or purchase, and by reference to the circumstances at that time only: see Overseas Trust BankLtd v Lee See Ching John [1999] 3 HKC 197; The Oxley v Hiscox [2005] 1 Fam 211; Stack v Dowden [2007] AC 432; Jones v Kernott [2011] 3 WLR 112.

101.  For the reasons articulated above, I have no difficulty coming to the view that this presumption does not apply to any of the Disputed Assets when their legal title became vested in the Husband, as I am satisfied that he and the Parents have discharged their burden of proof that those Disputed Assets were not gifts from the Father and/or Mother, wedding or otherwise, nor were they distributed to him as part of the Father’s estate planning, and that he is holding them on trust for either of his parents for the various purposes stated above.

102.  While I agree with the Wife’s argument that in the norm when a person suffering from a debilitating illness with a very limited life expectancy as the Father’s, and with the kind of wealth that he has, as submitted by Mr Pilbrow, it is perfectly foreseeable that he would wish to ensure that his children and grandchildren have a comfortable life within his own uncertain lifetime, and that upon his demise they would not be burdened by any liability for inheritance tax in England or estate duty in Hong Kong or otherwise, and hence all the reasons in the world to carry out some serious estate planning, of which I agree that it is not only normal but in fact prudent to do so, but whether or not the Father did do so with his other assets such as his Granville House property or his shareholding in his family business is not clear and was never put to him or any of the witnesses, what is clear to me however is that there is simply no logic or reason for him to do so with those Disputed Assets in the ways as suggested by the Wife in dribs and drabs and at different times which span over an unreasonably lengthy period of more than 10 years between the first and the last alleged distribution given his highly uncertain condition, and certainly not, as pointed out by both Counsel for the Husband and the Parents, in such convoluted ways as set out above.

103.  As a matter of fact, having already set up the I-Trust for his 2 children in the 1980s, had the Father really intended to distribute his assets to them as estate planning after his illness, it would have been logical for him to do so around the time in 1988, when he appointed the Mother as his attorney to deal with his financial affairs, or thereafter by simply injecting those assets intended for his children into their I-Trust, or even to consult an expert to create an all-encompassing trust for that purpose, which would in my view be the easiest and most straightforward way to do.

104.  Secondly, the whole point of estate planning, I would have thought, was to distribute one’s existing assets rather than to go about looking and acquiring more assets on different occasions and then distributing them but leaving the bulk of the existing assets untouched, as in the present case. It just does not make any sense in particularly in the circumstances of the Father’s illness, and would certainly not serve any purpose of saving or avoiding tax or estate duty on the bulk of the assets still under his name.

105.  While it may be argued that purchasing those landed properties with funds from the Father and then putting them in the Husband’s name can achieve the same purpose, however as such funding were fairly limited mainly just for down-payments as all the properties were purchased with substantial bank mortgages, the savings on tax or estate duty would certainly be minimal and the whole exercises would just seem pointless when the bulk of the Father’s assets, of which the Wife has estimated at HK$700 million, were to remain liable to those charges.

106.  Whether at HK$700 million or less, and it seems that the Mother or the Husband did take issue with that estimate, by comparison the total value of the Disputed Assets even at their highest seems to me a mere fraction of the Father’s assets, which begs the obvious question of why bother with them and, as pointed above, why on such piecemeal basis and in such convoluted ways? As already discussed above, even if they were merely gifts which the Father may want to make from time to time to his son, and for that matter his daughter as well, the same question can still be asked, and either way I am unable to find any logical answer.

107.  All these seem rather to me a case, and using the Wife’s words, of a very traditional Chinese family where a wealthy father would from time to time purchase various properties for his own investments and benefits, mainly through the mother as a result of his own incapacity, but also involved his children in their management given that both were lawyers by making them one of legal owners with the intention that upon his demise, and subject to his final wish and desire and provided that those assets would still exist, then the children may stand to inherit them without incurring any liability for tax or estate duty, but until then the father was to retain all beneficial interests and rights over those assets including selling them and utilizing their proceeds as he wished to the exclusion of their children, as amply evidenced by the ways he had dealt with those assets and their sale proceeds freely and unrestrictedly, and without any say from the children at all material times. Henceforth yes It may be common in traditional Chinese family for wealthy parents to make arrangements to vest the legal title of their assets to their children prior to their death, but it does not follow that they would necessarily give up on their beneficial rights and interests, and I believe most of the time they would not, as I have found in the present case.

108.  I say this because having heard the Mother, Husband and Sister in evidence, all of whom I find to be honest and credible witnesses whose testimonies were in the main spontaneous, straightforward and consistent, especially those of the Mother with so much details of her management of the Father’s financial affairs that not only clearly reveal and reflect her devotion and dedication to her former husband notwithstanding their separation and divorce all these years which is both remarkable and admirable, but also render her case that those Deputed Assets were investments carried out by her for the Father to protect and preserve his wealth all the more convincing and credible.

109.  Much has been said by the Wife about the Mother’s resistant to disclose any details or particulars of her own divorce settlement with the Father as basis for asking this court to draw inference against her for making a concerted effort with the Husband to mislead about his true financial means, as well as the criticism of the Sister for making untrue statements while being an officer of the court, none of which I find to be substantiated or justified, and when in fact, as noted above, the subsequent disclosure of the Parents’ Deed of Separation and divorce settlement turned out to actually strengthen and substantiate their case.

110.  As pointed out in my discovery order, there is no question that the Wife was perfectly entitled to challenge the case of the Husband and the Parents and that the burden was on them to satisfy the court that the Husband has no beneficial interests in those Disputed Assets in which he was held out as the legal owner but was in fact a trustee or nominee for the Father and/or Mother, but as noted at the beginning of this judgment, since most of the vesting of those assets on the Husband took place well before the parties’ marriage and were therefore not within the Wife’s personal or firsthand knowledge or information, and that she had admittedly relied essentially on her own observations and impression obtained during the marriage, however there must be more than mere suspicion, conjecture or speculation for the Wife to make that kind of allegations against the Husband and his family for conspiring to mislead the court and to assist him to defeat her ancillary relief claim, which are indeed serious allegations that require much stronger evidential basis. As such and in the premises I reject these allegations of the Wife as totally unfounded and unwarranted, and were in my view unfair and unjustified to both the Husband and his family.

111.  In conclusion and for all the reasons set out above, I am satisfied on balance of probability that the Husband has rightly and properly discharged the burden of proof that he has no beneficial interests in any of those Disputed Assets, as he was/is merely holding them on trust or as a nominee for his father and/or mother.

112.  Thus bring me to the question of costs of the trial. As already noted above and in my decision on her discovery application, while the Wife was entitled, in the absence of any expressed trust, to require the Husband and Parents to prove their case in respect of the Husband’s interests in the Disputed Assets, surely by the time when all the evidence in particularly those disclosed pursuant to my discovery order were before the court, it clearly encumbered on her and those advising her to properly re-consider or re-assess her case before proceeding to trial, so as not to run any risk of being held liable for the costs not only of the Husband but also the Parents, instead of so aggressively and stubbornly pursuing what has now proved to be a false hope, which is in fact quite surprising to me as it seems wholly disproportionate to her claims which were at the time essentially only for appropriate accommodation and financial provision for her 2 daughters upon divorce with no claim for herself. In the premises I see no reason why she should not have to face the inevitable consequence: That she is to bear the costs of both the Husband and Parents for the trial of the preliminary issue with certificate for Counsel to be taxed if not agreed, which is an order nisi to be made absolute at the expiration of 14 days.

113.  As for the costs of the Wife’s discovery application which have earlier been reserved, I propose to deal with them separately.

114.  What remains is my gratitude to Counsel for all parties for their most valuable assistance provided to the court throughout the trial.

FCMC 16239/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO.16239 OF 2013

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DECISION
(SPECIFIC DISCOVERY)

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1.  There are several matters before me but the main disputes are essentially about the Petitioner Wife’s 2 discovery summons respectively against the Respondent Husband and his parents the 1^st and 2^nd  Interveners for information and documents relevant to the forthcoming trial in August 2015 of the preliminary issue over the beneficial ownership of certain properties including companies legally held by the Husband but which he claims to be on trust for the Interveners and hence should be excluded from the Wife’s claims for ancillary relief upon the dissolution of their 10 odd years marriage.

2.  The remaining matter is the Husband’s summons against the Wife for production of copies of various bank documents and for her to answer his 3^rd Questionnaire, of which I understand had been resolved by the time of the hearing but the Husband wishes to seek costs against her for that summons.

Background

3.  The Husband is now aged 39, and the Wife 38. Both come from wealthy local banking families and were married on 30^th November 2002 with 2 daughters now aged 9 and 8. The Husband is a solicitor and a consultant of a law firm but works mainly in his family’s business, while the Wife has been a housewife throughout the marriage. As for the other background information relevant to the applications now before me, I propose to adopt as follows most of the Chronology of Events attached as Appendix B to the Wife’s Skeleton Argument, the accuracy of which I understand to be of no serious issue except perhaps some small discrepancies as to some of the dates mentioned therein:

4.  It is against this background of the Husband’s family and the parties’ marriage that now brings me to their divorce proceedings which were commenced on 12^th November 2013 when the Wife filed for divorce against the Husband based on his unreasonable behaviour and sought custody of both daughters and general ancillary relief for herself the daughters, with a 1^st Appointment for both CDR and FDR fixed for hearing on 7^th April 2014.

5.  Meanwhile the parties were directed to file and exchange their Form E which then triggered off what can be described as a whole series of extensive and very often contentious discovery applications leading to the ones now before me.

6.  In his Form E filed on 27^th February 2014 [A1/50] the Husband disclosed a monthly income in excess of HK$280,000 and a net value of his assets of about HK$32 million, but he also revealed that the following assets under his name are in fact held on trust for either of his parents and hence not included in his net value:

(a) his one share in GW Investment Ltd which holds the parties’ matrimonial home at Po Garden Property of which he valued at HK$43 million is on trust for his father;

(b) his legal title of the London Property which he valued at GBP 2 million is on trust for his father;

(c) his 2 shares (50%) in HF Consultants is held on trust for his father;

(d) his one share in WS Ltd is held on trust for his mother;

(e) his one share (50%) in GC Ltd is held in trust for his mother;

(f) Various bank accounts and securities account of total value in excess of HK$8 million under his name are held on trust for either of his parents.  

7.  With these assets valued at least HK$77 million and probably more taking into account of those lots of land held by GC Ltd, and in the absence of any express declaration of trust for any of them, it is not surprising that the Wife takes issue with all of these alleged trusts, and her discovery applications almost immediately jumped into full gear starting with a very extensive and comprehensive 28-pages questionnaire [A1/183].

8.  In response the Husband on 22^nd April 2014 filed his list of objection to those requests which he found objectionable in particularly those relating to those companies which he allegedly holds on trust and has no beneficial interests save for documentary evidence in support of the trust relationship [A1/240].

9.  On 30^th May 2014 the Husband filed his answer to those requests in the Wife’s said questionnaire which he was willing to disclose, together with a supportive affidavit of his mother (1^st Intervener) in which she dealt with those issues over the various companies and assets said to be held by the Husband on trust for either herself or the 2^nd Intervener, which can be summarised essentially as follows:

(a) that the father established I-Trust for the Husband and his sister S as beneficiaries with the mother as the protector of the trust with certain assets held under a trust company known as I-Investment Ltd to secure for their education expenses, and upon their graduation from university the trust was subsequently wound up with the legal and beneficial interests in the trust company vested in the Husband and S equally, which are the only assets given to them by their parents;

(b) that the father developed a neurodegenerative disease in about 1986/1987 which has since left him completely bedridden and to lose his speech and requires round-the-clock medical care;

(c) that the parents divorced in 1999 with an amicable financial settlement, and the mother remarried in 2001;

(d) that the London Property was purchased by the father but put in the name of the Husband as he was then studying in UK and that it was for the family’s use;

(e) that the Regent-on-the-Park Property was purchased with a sitting tenant by the mother as an investment for the father through HF Consultants, and that the Husband was later made a shareholder of HC Consultants only for the purpose of learning to manage properties under the mother’s supervision;

(f) that upon the parties’ marriage and when the Regent-on-the-Park Property became vacant and the parties were looking for a place to move, they were allowed to reside that property by paying a monthly sum of HK$12,500 for its use and to pay for its renovation and other expenses;

(g) that upon the sale of the said property the Husband was paid HK$1 million out of the sale proceeds as reimbursement of the renovation expenses, with the rest paid to the father for his own use including funding the purchase of the Merton Property;

(h) that the Po Garden Property was also purchased as an investment for the father through GW Investment and similarly the Husband and S were made shareholders of the company to learn to manage properties, and that when the Husband needed a bigger home for his family upon the birth of his elder daughter, the parties were allowed to move into this property on similar conditions as before for the Husband to be responsible for all outgoing expenses;

(i) that GC Ltd was formed by the parents for purchasing agricultural and grassland in the New Territories as long term investments in anticipation of future government’s development in those rural areas, and the mother’s transfer of her shareholding to the Husband on trust for her to explore into development potentials and the feasibility of purchasing further neighbouring land, but the company has never generated any income;

(j) that the mother had from time to time over the years asked the Husband to manage and invest her own monies in various joint bank accounts with him including a fund management contract in which she had contributed an initial sum of HK$10 million for him to manage and invest for her.

10.  On 21^st July 2014 the Wife issued the discovery summons now before me against the Husband [A2/346], and when it became clear that the application would be opposed and that those assets alleged to be held by the Husband on trust for his parents would be disputed by the Wife, the parents issued a summons on 28^th November 2014 [A2/472] for leave to intervene in the parties’ ancillary relief proceedings and for the determination of the issue of whether those assets identified in Annexure A as Disputed Assets attached to their summons are held by the Husband on trust for either of them, which is the subject of the forthcoming trial of the preliminary issue in August 2015.

11.  On 11^th December 2014 upon granting leave to the parents to join in the parties’ financial disputes as Interveners, I also directed that the beneficial ownership of the Disputed Assets be first determined as a preliminary issue which as noted above has since been set down for trial for 5 days commencing on 12^th August 2015.

12.  Meanwhile the Wife also issued another discovery summons on 16^th March 2015 [A2/542], this time against the Interveners and which was also opposed, while the Husband also issued his own discovery application against the Wife [A2/570], both of which were subsequently consolidated with the Wife’s earlier discovery application for argument before me which took place on 22^nd May and 4^th June 2015, during which Ms Corinne Remedios appeared for the Wife, with Mr Jeremy Chan for the Husband, and Mr Abraham Chan with Ms Bonnie Cheng for both Interveners.

13.  Before proceeding to consider the 3 applications, it would be relevant to first set out the applicable law and principles to the disputes now before me.

Applicable Legal Principles

14.  The law on disclosure is well established, that is it must be relevant to the matters in issue, as it was held in B v B(Matrimonial Proceedings: Discovery) [1979] 1 All ER 801 when Dunn J summarised the law relating to discovery in ancillary relief applications at p811:

“I will conclude the part of my judgment by summarising my conclusion as to law.

(1) A party to a suit must disclose all the documents in his possession, custody or power which are relevant to the matters in issue. The court has discretion whether or not to order him to make such disclosure, and also has discretion whether or not to order him to produce the documents for inspection by the other party or the court.

(2) The documents of a company are in the legal possession of the company. If they are or have been in the actual physical possession of a director who is a party to litigation they must be disclosed by that director, if relevant to the litigation, even though he holds them as servant or agent of the company in his capacity as an officer of the company.

(3) Whether or not documents of a company are in the power of a director who is a party to the litigation is a question of fact in each case. “Power” in this context means “the enforceable right to inspect or obtain possession or control of the document”. If the company is the alter ego of such a director so that he has unfettered control of the company’s affairs, he must disclose and produce all relevant documents in the possession of the company.

(4) Where relevant documents in the possession of a company are disclosed by a director as being in his custody or power, the court has a discretion whether or not to order production of them.

(5) The discretion is a judicial discretion, and in exercising it the court will have regard to all the circumstances. The court will balance the relevance and importance of the documents and the hardship likely to be caused to the wife by non-production against any prejudice to the husband and third parties likely to be caused by production. It has not hitherto been the practice of the court to order production of company documents to which the board of directors objects on affidavit, provided that the court is satisfied that the objection is not contrived for the purpose of frustrating the powers of the court. The court will not in exercise of its discretion order parties to do that which they have no power to do. The court will not order production unless it is satisfied that production is necessary either for disposing fairly of the issues between the parties or for saving costs.”   

15.  His Lordship also made the following observations on relevancy in the context of financial proceedings in matrimonial cases at p809:

“It is another feature of such proceedings that one party, usually the wife, is in a situation quite different from that of ordinary litigants. In general terms, she may know more than anyone else about the husband’s financial position: she will know at first hand of the standard of living of the family during the marriage; she will know about the furnishing and equipment of the matrimonial home, and of the physical possession of the husband, and perhaps the appropriate amount of cash kept in the house. She may also know, from conversation with the husband in the privacy of a matrimonial home, the general sources of his wealth and how he is able to maintain the standard of living that he does. But she is unlikely to know the details of such sources or precise figures, and it is for the reason that discovery now plays such an important part in financial proceedings in the family division.

Applications for such discover cannot be described as “fishing” for information, as they might be in other divisions. The wife is entitled to go “fishing” in the Family Division within the limits of the law and practice.”

16.  The preliminary issues to be tried in August 2015 for which this application for discovery is related to is of course not strictly speaking ancillary relief proceedings mentioned by His Lordship, and is rather a ‘chancery action’ for determining ownership of properties involving third parties, but ultimately for the statutory purpose of ascertaining and identifying the financial resources of each of the Husband and the Wife for their ancillary relief applications, which is the first step in the section 7 exercise laid down by the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537.

17.  Furthermore, it would also be relevant to refer to the legal principles concerning such a property dispute stated by the UK Supreme Court in Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776 and recently summarised by Mostyn J in Bhura v Bhura & Others [2014] EWHC 727 at §8:

“The applicable legal principles concerning a property dispute such as this are tolerably clear and … are as follows:

If there is an express declaration of beneficial interests then that is, almost invariably, the end of the matter. Such an express declaration can only be displaced if it has been procured by fraudulent conduct …

If there is no express agreement about the beneficial interests then there is likely to be (at least) a tacit understanding. This is hardly surprising as one would expect that when people enter into what may very well be the most important economic transaction in their lives – buying a home – they would have a pretty clear understanding of who owned what share of it. In determining whether there was such a tacit understanding, and if so what it was, the court will look at all the evidence holistically and will examine the whole course of the parties’ conduct in relation to the property.

…”

18.   Henceforth in the exercise of my discretion whether to order disclosure and/or production of those documents sought by the Wife in this application, I am to bear all these principles in mind so as to enable the court at the forthcoming trial of the preliminary issue to look at all the evidence holistically and to examine the whole course of the parties’ conduct in relation to these Disputed Assets. I shall now turn to consider the discovery summons now before me

Wife’s Discovery Summons against Husband & Parents

19.  The details of the disclosure sought by the Wife against the Husband [A2/346] and his parents [A2/542] are respectively in Appendix A1 & A2 of her Skeleton Argument, and in broad terms she seeks the following discovery:

(1) bank statements of Husband’s bank accounts:

(a) Wing Hang Bank Account #757XXXXXX

(b) Bank of East Asia Account #0155XXXXXXXXXX

(c) DBS Vickers (HK) Ltd Account #325XXXX

(d) Chong Hing Bank Private Bank Account #256XXXXXXXXX

(2) list of assets of following companies:

(a) GW Investment Ltd which owns the 2nd matrimonial home in which the Husband is a director and 33% shareholder;

(b) HF Consultants Ltd which owned the 1st matrimonial home and currently holds the Merton in which the Husband is a director and 50% shareholder;

(3) the management accounts, list of assets, tax returns of GC Ltd which holds agricultural lands in New Territories in which the Husband is a director and 50% shareholder;

(4) lists of assets and financial statements of I-Investment Ltd of which the Husband is a director and 50% shareholder;

(5) lists of assets of the Husband’s parents at the time of their divorce and their ancillary relief settlement or order.

20.  As noted above some of the documents sought by the Wife have since been provided by either the Husband and/or his parents, and that the disclosure sought has now been narrowed to those in the Tables attached as Appendix A, and as she no longer at this stage pursue disclosure relating to WS Ltd nor discovery before 2010, or in relation to I-Investment Ltd, while the list of assets of both GW Investment and HF Consultants were confirmed and resolved at the hearing, essentially only those documents concerning GC Ltd under items 13 – 16 of Appendix A1 against the Husband and similar items 17 – 21 of Appendix A2 against his parents, as well as their divorce settlement and/or order are still at issue.  

21.  The Husband’s position regarding GC Ltd is simple as set out in his original answers [A2/550 – 551]: that the requested information and documents are not relevant to determining the beneficial ownership of the 1 share out of 2 issued shares of the company, and that the proper persons to be asked if at all are the Interveners.

22.  Essentially the Interveners’ position regarding GC Ltd is similar, and Mr Abraham Chan further submits on their behalf that the materials sought are in any event unnecessary for the fair just and proportionate resolution of the preliminary issue, such as its management accounts which he argues are not documents that can shed any light on the beneficial ownership over the company’s shares, as the company has no control over or business in what arrangements its registered members may have made to divest themselves of their beneficial interest in the shares.

23.  As regard the various requests for the Interveners’ list of their assets prior to their divorce and their divorce settlement or order, Mr Chan submits that they all stem from fevered conjecture that the arrangements in relation to the London Property and GC Ltd were somehow part of their divorce settlement, but of which he argues that there is not a sliver of evidence to support such conjecture of the Wife, other than the assertion that the said arrangements somehow coincided in time with the divorce settlement.

24.  This is far too weak and remote, he submits, a basis to justify what will be a draconian and intrusive order for the disclosure of the Interveners’ most private and confidential arrangements on their own finances dating back many years and years prior to the parties’ marriage, and that the requests are all the more improper given the detailed accounts in respect of the London Property and GC Ltd which have already been given by the 1^st Intervener in her affidavit with documentary evidence wherever necessary. This is not a case, Mr Chan submits, of parties seeking to conceal affairs relevant to issues before the court, as both Interveners have been nothing but forthcoming in respect of matters which truly relate to the Preliminary Issue and fair disposal of the proceedings.

25.  In reply Ms Remedios for the Wife submits that firstly as the Husband is under a duty to make full and frank disclosure of his financial means for the purpose of the ancillary relief proceedings, hence he should provide full discovery of all assets in his name or legal title so that all the information is made available to the court before the forthcoming hearing to determine whether his assertion of non-ownership is true, as the Wife is also entitled to be provided with such information so that she can take proper advice on whether and if so which of these Disputed assets she seeks to pursue.

26.  Ms Remedios further submits that the test of relevancy is also trite, as disclosure must be given of documents which contain information which may, rather than must, either directly or indirectly enable the party requiring disclosure either to advance his own case or to damage the case of his adversary, or which may fairly lead him to a train of enquiry, hence this test is doubly applicable in this case as third party ownership is a ‘chancery’ issue, and in the train of enquiry at least the following questions arise: Was money paid from the disputed accounts to the Husband, or were dividends declared and paid to him, and what were the underlying company assets and were they purchased with assets under the Husband’s control, or sold with proceeds paid to him? Just some of the relevant queries that it is argued that the Wife is entitled to raise.

27.  As to the suggestion of ‘fishing’, which seems to be the argument of the Interveners, Ms Remedios argues that in addition to the chancery exercise, a party to Family Proceedings is also in a situation ‘quite different from ordinary litigant’, because whereas he/she may know of the other party’s financial position and the sources of wealth in general terms, he/she may not know the details precisely, which is why discovery plays such an important part in financial proceedings in the Family Court, and as cited in B v B supra, ‘fishing’ in that sense is permitted in matrimonial waters.

28.   Above all, Ms Remedios submits, where assets are held in a party’s name, as in this case in the Husband’s, this cannot be “a fishing expedition in the sense of casting a line in the hope that something would be caught. The fish had been identified and the court was endeavouring to spear it”, as it was held in the case of Zakay v Zakay [1998] 3 FCR 35.   

29.  That case involved a divorce proceedings in England where the wife made a claim for financial provision for herself and the child of the family against the husband and alleged that he was wilfully suppressing his real assets, and that he was worth millions of pounds including beneficially interested in a group of companies known as Topland with tangible fixed assets of a net book value of almost £50m. A trust company registered in Gibraltar provided trustee services and in such capacity could hold assets directly or indirectly under the terms of settlements established under Gibraltar law. That trust company held certain shares in the husband’s group of companies. By a letter of request issued by the senior district judge of the Family Division in London the assistance of the Supreme Court of Gibraltar was sought to ascertain the true beneficial owner of Topland. The letter of request sought an order that a named officer of the trust company be examined and required to produce documentation on this matter. A judge in Gibraltar made an order as requested. The officer of the trust company applied to the chief justice to set aside the order on the grounds (i) that the information sought was not sufficiently relevant to the English proceedings to give jurisdiction to the court in Gibraltar; (ii) that the documents requested were not sufficiently particularised and that the wife had embarked on a ‘fishing expedition’; and (iii) that the court ought to exercise its discretion to refuse the request from the English court to examine the witness on the ground of confidentiality and public interest.

30.  In dismissing the appeal by the Supreme Court of Gibraltar, Schofield CJ said this about the issue of relevance in his judgment:

“I do not think there is any doubt that a request will only be granted in respect of evidence which is relevant to the proceedings it is sought to be tendered in. Section 9 of the Evidence Ordinance reads … In the reference to ‘evidence for the purpose of civil proceedings’ the section obviously means evidence relevant to the issues in civil proceedings. I think the court can assume that a requesting court will only ask for relevant evidence. But what is the court to do in the face of an assertion, as in this case, that the evidence is not relevant to the issues in the proceedings of the requesting court? Here we have a situation where this court should only order an examination if the evidence of the witness and the production of documents by him can be shown to be relevant whereas we will only know the relevance of the evidence and the documents once the examination and production has taken place. Mr Bodey in the English proceedings had to wrestle with a similar problem when considering the respondent’s application to vary an order requiring the respondent to give further and better replies to the petitioner’s questionnaire on discovery. He was specifically dealing with the question of beneficial ownership of the Topland shares. He concluded:

‘In the circumstances, I agree with Mr Mostyn’s submission that the court’s approach should be to look to see whether a prima facie case has been made out that the respondent is or may well be beneficially entitled in the relevant entity. Realistically, I can see no other way in which justice could be achieved between the parties before the court, although obviously in such circumstances great care would have to be used to ensure that the rights of third parties were not adversely affected, or only as little as possible, consistently with getting the necessary documents before the court.’

That seems to be the only practical course this court can take. We must look at all the available evidence and, taking great care to ensure that the rights of third parties are so far as possible protected, determine whether a prima facie case has been made out as to the relevance of the evidence and documents sought.”   

31.  As regard the argument on public policy to protect third parties to their confidentiality, Schofield CJ said this:

“The last argument against allowing … order to stand is that in exercising its discretion to allow examination of witnesses on the request of a foreign court these courts ought to be extremely cautious to protect the rights of third parties to their confidentiality. This is so, argues the applicant, particularly when one considers Gibraltar’s position as a finance centre where certain confidential relationships are protected by statute. The petitioner has said that in order to protect third parties she is prepared to submit to an order similar to that made by Mr Bodey in the English discovery proceedings, that if the applicant assets by letter that a document is confidential to a third party and requests limitation of disclosure to only the petitioner’s lawyers, then disclosure should be so limited in the first instance but with liberty to the petitioner to apply to the court for the limitation to be lifted or varied. I must say I am not particularly impressed with the applicant’s response to this, that although he has no doubt that the petitioner’s lawyers will not reveal anything to their client which is produced under a limitation as suggested, nevertheless they are bound to take any knowledge so gained with them and such knowledge may unconsciously run in to any future proceedings in the case. His counter suggestion that the production can be made to the court is unrealistic. No doubt names will be revealed and most probably those names will mean nothing to the court whereas they may have great significance to the lawyers familiar with the case and having had their client’s instructions.

Public policy demands that this court should in proper case give effect to requests from foreign courts. I have been referred by Mr Mostyn to a decision of the Court of Appeal for Jersey, a jurisdiction where similar considerations of confidentiality arise in the context of its position as a finance centre. A similar argument was made in Wadman v Dick [1998] 3 FCR 9. In delivering the judgment of the court, Frossard JA quoted the following passage from the opinion of Lord Goff of Chievely in ReState of Norway’s (Nos 1 and 2) [1990] 1 AC 723, [1989] 1 All ER 745; affg Re State of Norway’s Application (No 1) [1987] QB 433, [1989] 1 All ER 661 and rvsg Re State ofNorway’s Application (No 2) [1990] 1 AC 723, [1989] 1 All ER 701:

‘It is accepted on both sides that the question of confidentiality can only be answered by the court undertaking a balancing exercise, weighing on the one hand the public interest in preserving the confidentiality owed by the witness as bankers to their customers, and on the other hand the public interest in the English courts assisting the Norwegian court in obtaining evidence in this country’ (See [1990] 1 AC 723 at 810, [1989] 1 All ER 661 at 762.)

Frossard JA went on ([1998] 3 FCR 9 at 32):

‘We made two observations about this balancing exercise before considering its application in this case. First, every claim to confidentiality to exclude evidence which would or might be relevant is an attempt to limit the court’s ability to get as nearly as possible the truth. One factor to be weighed in the balance, therefore, is the public interest in the power of the courts to investigate fully matters brought before them. The court carrying out the balancing exercise must bear in mind the possibility that respect for a witness’ duty of confidentiality may result in disabling the court from protecting the rights of other parties. We do not believe that the English courts meant to exclude so important and so obvious a factor. It was presumably because of the peculiar features of the State of Norway case that the judges whose words we have quoted did not mention it expressly. Second, it is important to appreciate the part played by public policy in the exercise. It has been submitted to us that we ought to pay particular regard to confidentiality between banker and customer because of the great importance to jersey of its role as an offshore finance centre. In our view, this is not the right approach. The public significance and benefit of the finance industry depend upon considerations (economic, social and even moral) lying right outside the province of a court of law. The basis of the protection of confidentiality between banker and customer is not the public benefit of banking in this sense. It is the law’s recognition that the relation between banker and customer is important for the persons involved on both sides, whose purpose cannot be achieved without confidential communication between them. It is the individual relationship, in which trust is reposed by the one party in the other, which is material. The argument before us transcends that relationship and seeks to import a generalized statement about public policy. The former, not the latter, is the court’s concern.’

With respect, I entirely agree with that passage. In my judgment, the applicant’s concerns regarding the confidentiality of third parties will be met by an amendment to the order of Pizzaello J in the terms suggested by the petitioner.”

32.  With respect I too entirely agree with that passage, but let me first say this: In my view any person who elects to place his/her property under the name of another person without any express declaration of its beneficial ownership has or can be said to have given up his/her right to privacy or confidentiality vis-a-vis the other party when there is a dispute with that party over the ownership of the property, in particularly when the dispute arises from the ancillary relief proceedings of the person given the legal title who is under an obligation to make full and frank disclosure of his financial resources to the court and hence cannot refuse disclosure of any information or documents in his name or legal title, so as to enable the court to achieve justice between him and his spouse who may very often not even be present when such legal ownership was created and has no personal knowledge or information thereof, as is the situation of the Wife here.

33.  In my judgment the relevancy of the information and documents sought by the Wife against GC Ltd can only be known once production and examination have taken place, and in that situation the only practical course is for the court to look at all the available evidence to determine whether a prima facie case has been made out as to the relevance of evidence and documents.

34.  The evidence from the Husband’s mother has indicated that GC Ltd was used by the father to purchase agricultural land and/or grassland in the New Territories in the 1980s as long term investments with the parents each held 1 share, and that in 2001 the mother transferred her 1 share to the Husband allegedly to hold on trust for her as she allegedly wanted him to explore into the development potentials of the investment land and the feasibility to purchase neighbouring land to create better value for the investment [A1/330 – 331].

35.  Given the fact that parents had already applied for divorce in 1999 which was just 2 years prior to the mother’s transfer of her share to the Husband, and that according to her their divorce was in fact finalised in the same year with an amicable financial settlement, and given the close proximity in time between the events, I agree that the Wife is entitled to look to see whether the transfer was part of the parents’ financial settlement to gift the share to the Husband, and that legitimate queries may be raised as to why the parents still remained as shareholders of the company or to continue with their investment after their divorce and the mother’s remarriage, or why was it necessary for her to resign as a director under the circumstances? It is my judgment the Wife is entitled to seek the answers to these questions from the company’s documents, and I agree that the evidence indicate that such discovery is relevant to the preliminary issue whether the Husband is the beneficial owner of that share and should be allowed against GC Ltd.

36.  The same argument can be made of the Wife’s discovery against the parents’ divorce settlement, as Ms Remedios submits that what the parents said about the ownership and devolution of the Disputed Assets at the time of their own divorce is highly relevant, not least where the allegations of ownership of those assets are that it predated their own divorce, hence the Wife is entitled to their list of assets at the time of their divorce and their ancillary relief order disposing thereof, for which the Wife has given an undertaking to the court that such disclosure be limited only to her legal representatives so as to alleviate the Interveners’ concerns over the privacy or confidentiality of their own divorce.

37.  It is undisputed that after the parents divorced in 1999, the following of their assets had been transferred to the Husband:

(a) 1 share in GW Investment in May 1999 giving him 1/3 shareholding in the company which purchased the Po Garden Property 6 months later in November 1999 and later became the parties’ 2^nd matrimonial home in 2005 after the birth of their elder daughter;

(b) 2 shares in HF Consultants in January 2002 giving him 2/3 shareholding in the company which then purchased the Regent on the Park Property in February 2002 which later became the parties’ 1^st matrimonial home upon their marriage in November of the same year, and after it was sold in 2007 part of its sale proceeds were used to pay off the mortgage of the Po Garden Property and to pay the Husband HK$1 million for his contribution towards the renovation of that property.

38.  Under those circumstances and in the train of enquiry clearly at least again this question arises: Were those transfers of shares to the Husband part of his parents’ ancillary relief settlement to make financial provisions for their children? The only practical mean to answer that question with certainty is to look at that resultant ancillary relief order, and in my judgment the parents’ concerns regarding their own privacy and the confidentiality of their own divorce can be met by the Wife’s said undertaking or better still by an order limiting that disclosure to her legal advisers only but with liberty to the Wife to apply to the court for this limitation to be lifted or varied.

39.  Accordingly and in conclusion I allow the Wife’s discovery applications against the Husband regarding GC Ltd and against the Interveners regarding their ancillary relief order pursuant to their divorce with the limitation referred to above, but not her request for a list of their assets prior to the divorce which I find unnecessary, and accordingly the Wife shall have her costs of both applications respectively against the Husband and the Interveners, which are order nisi to be made absolute at the expiration of 14 days.

Husband’s Summons against Wife

40.  I shall now turn to the 3^rd and last matter which is much more straight forward: The Husband’s summons against the Wife for disclosure of certain cheques and/or transfer slips and for her answers to his 3^rd Questionnaire filed on 23^rd March 2015, both of which have by the time of the hearing been complied with by the Wife and hence satisfactorily resolved, and for which the Husband now seeks costs of his summons, to which I see no reason why he should not be entitled and I so order.

41.  What remains is my gratitude to counsels for all parties no doubt for their valuable assistance rendered to this court throughout the hearings.