MPY v. WYC

FCMC 3297 / 2022

[2024] HKFC 158

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 3297 OF 2022

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DECISION
(Discovery)

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A.  Introduction

1.  This is the substantive hearing of the summons taken out by the Respondent (“Wife”) on 22 February 2023 (“Discovery Summons”) seeking disclosure for both general ancillary relief and her s.17 MPPO summons filed on 30 June 2022 (“s.17 Summons”). The Petitioner (“Husband”) opposes to the Wife’s Discovery Summons.

2.  The detailed questions/requests sought to be disclosed are listed in Annexure A (“Annex A”) to the Wife’s Discovery Summons, the main items of requests are as follows (see below for definitions):-

(1)  RMB¥200M stakeheld by Lik Gor on behalf of the Husband (Request 1)

(2)  Alleged Agreements with Fong - the YL Agreement & the Buyout Agreement (Requests 2 -3)

(3)  Company charts, assets and liabilities, bank statements of Strength Power and Elite Wide (Requests 4 – 5, 27 - 29)

(4)  Various documents relating to Strength Power and Elite Wide’s acquisition of Lands (Requests 6 - 23)

(5)  General Ledger and bank statements of Merida (Requests 24 and 27)

(6)  Husband’s bank statements (Requests 25 - 26)

(7)  Various documents relating to insurance policies (Request 30)

(8)  Documentary proof of two transfers of US$71,000 and US$70,200 to Husband’s sister and her daughter (Request 31)

(9)  Safe deposit boxes with banks held by Husband, Merida, Strength Power, or Elite Wide (Request 32)

3.  The Wife’s case is straight forward, in which she argues the items she sought to discover as relevant and necessary due to the Husband’s failure to make proper disclosure in his Form E and subsequent Answers thereby poses difficulty in ascertaining the matrimonial pot so that her case may move forward after 2 years since the parties filed their Form Es; in particularly as the various companies holding significant assets are all within the Husband’s control which the Wife suspects he may have disposed of or have embezzled funds.

B.  Background and Procedural History

4.  In order to understand and assess the relevancy of the bulk of the Wife’s requests for discovery, I set out a brief background of the parties, the family and the companies involved below.

5.  The Wife is now 59 years old and the Husband is 68 years old. They married in 1983 and separated in 2016[1]. During marriage, they have together started the family business in textiles and later on real estate investments, and amassed substantial wealth. It is not disputed that this case is described as a big money case. Their three children have all reached majority and thus this is undoubtedly a case where the sharing principle will apply in the determination of ancillary relief.

6.  The parties and their three adult children hold shares in private companies which in turn holds assets. The shareholding structure of the parent company, HTHK, is that the Wife and Husband each hold 35%, with the three children each holding 10%.

7.  HTHK owns another family company named HTSP, and HTSP owns another family company named HTRE – with the latter holding assets concerning the crux of this application, namely rights over a piece of PRC land named the FY Land. In gist, while the Husband says this FY Land was sold by HTSP to HTRE for RMB ¥105M in July 2016[2], the Wife says she later discovered the sale price ought to be at around RMB ¥640M[3], and thereby the Husband has embezzled about RMB ¥535M or, for the purpose of this application, HK$600M.

8.  The Wife says she has responsibly put forward her case concerning this HK$600M at the earliest juncture, namely when she filed and exchanged her first Form E on 4 April 2022. She has annexed a comprehensive statement under Part 5.5 therein, with documentary proof attached, in setting out the basis of her belief, and presented a table identifying up to some 13 items of dealings of the Husband with various parties since the sale of the FY Land in support of her proposition of the existence of this missing HK$600M.

9.  The Husband rejects the existence of HK$600M at all material times and says it is a bare allegation of the Wife. In gist, he takes the view that he has already provided disclosure in accordance with Form E requirements, and it is unfair to him to be asked of further disclosure not based on his own Form E, but the allegations under Part 5.5 of the Wife’s Form E. He made such complaints at an earlier hearing resulting in an order dated 2 August 2022 restricting the Wife’s 2^nd Questionnaire (to not touch upon the said Part 5.5) but without prejudice for the Wife to raise discovery at a later stage on the same. By this application, the Wife is doing exactly that, since despite two rounds of questionnaires and answers, the Wife remains dissatisfied with the disclosure of the Husband.

10.  The Wife took out this present specific discovery application and from Annex A, it can be seen that the said 13 items have broken down into 32 questions/requests therein, which is now the subject matter of this application. They are formulated in relation to and based on the aforesaid table of the Wife in going after the HK$600M.

11.  On the other hand, the Husband has a company named Merida, which was incorporated shortly after the sale of the FY Land, in October 2016. Merida was and is 100% legally owned by the Husband in that he was and is the 100% shareholder as well as the sole director. Pausing here, it has been the Husband’s case that he is in fact only a 10% true owner of Merida, where he was and is holding 90% of Merida for and on behalf of a Mr. Fong (“Fong”)[4]. However, I am told at the hearing that up till now there has been no applications from Fong to assert such beneficial interest of Merida since these proceedings begun in 2022.

12.  Merida in turn wholly owns two companies which are relevant to this application: a company named Strength Power which was incorporated in April 2017 and a company named Elite Wide which was incorporated in March 2017[5]. Strength Power and Elite Wide have identical corporate structure in that Merida is the 100% shareholder and one of the three directors of Strength Power and Elite Wide, with the other two directors being one Madam Yeung (which the Wife alleges is the associate of the Husband) and the Husband’s cousin (“Lik Gor”).

13.  In pursuit of her ancillary relief, the Wife has taken out her s.17 Summons, in seeking to set aside (i) the transfer of 100% shareholding in Strength Power to a company named Super Matrix on 3 July 2019 and (ii) the transfer of 100% shareholding in Elite Wide to a company named Grand Goal on 4 July 2019. I note that the timing of the Wife’s s.17 Summons was just within the 3-year presumptive period under s.17(3) MPPO; in other words the Wife filed this application to beat the timeline so as to put the burden on the disponor (the Wife says the Husband is the alter ego of Merida, Strength Power and Elite Wide) to prove that the said dispositions were not done with an intent to defeat her ancillary relief claims.

14.  It is not disputed that both Super Matrix and Grand Goal were wholly owned by Fong[6]. Since the Wife’s s.17 Summons, the issue of joinder was disputed, interestingly not by the intended third parties but by the Husband. By the Decision of DDJ J. Chow dated 6 March 2024, both Super Matrix and Grand Goal were ordered to be joined as 2^nd and 3^rd Respondents in these proceedings. In my view the relevance of this to the present application is that (i) the Wife’s present application for specific discovery is premised on both ancillary relief in general and her s.17 application; and (ii) Fong is deemed to have knowledge of these proceedings by his ownership of the 2^nd and 3^rd Respondents. Service was not in issue in the joinder application; this in turn means that insofar as his alleged 90% beneficial ownership claim in Merida is concerned, it is his choice that he has up till now elected against joining into these proceedings (under the adopted TL v ML procedure) in asserting the same. In any event, for the purpose of this application I am not tasked to come to a determination as to the true ownership of Merida; it is the Wife’s case that even if the Husband is only a 10% owner as he alleged, he still ought to have disclosed its business activities given the hundreds of millions of dollars involved in Merida’s investments in various acquisition of lands.

15.  The Husband opposes to both the Wife’s discoveries for ancillary relief and s.17 Summons and has filed evidence in opposition respectively. As a preliminary observation, I note that quite often in family proceedings, subsequent to a party taking out a specific discovery application, the parties are often able to agree on at least some of the requests and/or to narrow the scope. This is not unusual in the Family Court and I believe it is for a specifically good reason, in addition to achieving procedural economy and encouraging amicable litigation conduct in family proceedings: this good reason is none other than to pay full respect to the ongoing positive duty to provide full and frank disclosure.

16.  In this application, as I will discuss in more detail below, the Husband refuses all requests in whole, he seeks to inter alia challenge that the Court’s jurisdiction is not engaged as the Wife’s application does not satisfy statutory requirements and he has already affirmed against existence/possession custody or power, that this Court should approach the Wife’s Discovery Summons in the exact same manner as in civil proceedings, notwithstanding accepting he himself has an ongoing duty to disclosure, as well as acknowledging the Court’s quasi-inquisitorial role in performing the s.7 MPPO exercise in ancillary relief proceedings.

17.  The Husband applied to transfer up these proceedings from the Family Court to the Court of First Instance on 9 December 2022. His application was dismissed by the decision of DDJ J. Chow dated 16 June 2023. As at the time of this Decision, I am informed that the Husband has appealed that said decision to the Court of Appeal and the result is pending. The parties have confirmed that in any event the outcome of that appeal would not have a bearing on the disposal of this present application.

C.  The Law

18.  The general legal principles in specific discovery and interrogatories are well established and indisputable. What is disputed by the parties, is the application of these principles in the context of ancillary relief proceedings. Both parties have cited numerous authorities to the Court and I shall focus on what I believe to be most relevant to the disposal of the present application. In short, the Wife has supplied me with the conventional matrimonial cases demonstrating the special nature of matrimonial proceedings and thereby the appropriate approach to be adopted in dealing with disclosure. The Husband on the other hand asks this Court to take the exact same approach as civil proceedings with full rigour, listing out the orthodox requirements under O.24/O.26 on existence, possession, relevance and necessity etc. relying on authorities from general civil proceedings.

19.  The Husband also challenges the use of r.77 MCR in that, on the one hand he says the Wife fails to cite the same on her margin notes to the Discovery Summons and therefore impermissible to rely on the same; on the other hand, he says r.77 MCR does not confer on the Court a greater power in discovery/interrogatories than those contained in O.24/O.26. In his written submission, he stated inter alia that had the Wife placed reliance on r.77 MCR he may have conducted his opposition differently[7]. On that, in the course of the hearing, I asked the Husband at one point would his stance be any different if the Wife came to Court for disclosure on the same requests not by her present Discovery Summons, but instead by way of a 3^rd questionnaire seeking leave, which would also have been a legitimate avenue; the Husband took time and informed me (on the next day, in writing) that in short, “no” – acknowledging questionnaires can be issued under r.77 MCR, the Court when deciding whether to give permission for further questionnaires requesting for documents and/or information, the Court would take into account (a) what are the relevant issues; (b) the need for proportionality and (c) that fishing is permissible[8].

20.  In my view it is helpful to resolve this point first. Firstly, there can be no doubt that the Family Court is empowered to deal with discovery applications under r.77 MCR. The missing margin note in the Wife’s Discovery Summons does not, in my view, confine the Court’s jurisdiction: Premier Fashion Wears Ltd v. Li Hing Chung [1994] 1 HKC 213 per Bockhary JA at §213H.

21.  For clarity, the entirety of r. 77 MCR states that:-

“77. Investigation by court of application for ancillary relief

(1)On or after the filing of a notice in Form 8, 8B or 9 an appointment shall be fixed for the hearing of the application by the court.

(2)An application for an avoidance of disposition order shall, if practicable, be heard at the same time as any related application for financial provision.

(3)Notice of the appointment, unless given in Form 8, 8B or 9, as the case may be, shall be given by the court to every party to the application.

(4)Any party to an application for ancillary relief may by letter require any other party to give further information concerning any matter contained in any affidavit filed by or on behalf of that other party or any other relevant matter, or to furnish a list of relevant documents or to allow inspection of any such document, and may, in default of compliance by such other party, apply to the court for directions.

(5)At the hearing of an application for ancillary relief the court shall, subject to rules 78, 80 and 80A, investigate the allegations made in support of and in answer to the application and may take evidence orally and may order the attendance of any person for the purpose of being examined or cross-examined, and may at any stage of the proceedings order the discovery and production of any document or require further affidavits.

(6)The court may at any stage of the proceedings give directions as to the filing and service of pleadings and as to the further conduct of the proceedings.

(7)Where any party to such an application intends on the day appointed for the hearing to apply only for directions, he shall file and serve on every party a notice to that effect.”

22.  As the wording suggests, r.77 MCR provides a scope in terms of seeking both information as well as document disclosure. It is my view that there is nothing inconsistent when applying r.77 MCR together with the general principles under O.24 and O.26.

In Matrimonial Context

23.  “Discovery” in family proceedings is sometimes used in the loose sense meaning specific discovery, interrogatories, and/or questionnaires – with the latter mechanism available specific to, and only in ancillary relief proceedings and that discovery can be ordered at any stage[9]. But in fact, in ancillary relief proceedings, discovery begins with the mandatory filing and exchange of Form Es where each party is required, by the Court, to volunteer information as well as documents so classified therein, to the Court. The relevant procedure is elaborated in Practice Direction 15.11 and §17.30 of Rayden and Jackson on Relationship Breakdown, Finances and Children (18^th Edn):-

“Discovery of documents : questionnaire

17.30. In ancillary relief proceedings discovery begins with service of the Form E and the documents which are required to be attached to the Form E, and any other documents necessary to explain or clarify any of the information contained in the Form E. Thereafter, discovery is by mutual request by means of a questionnaire served in advance of the first appointment, and by further questionnaire at a later stage of the proceedings with the court’s permission......”

24.  Parties to ancillary relief claims owe to court a duty of full and frank disclosure of their financial situation, such duty is an absolute and continuing one. HHJ I Wong in TCP v. KLS (Ancillary Relief) [2020] HKFLR 254 further elaborates at §47: -

“47. The duty of full and frank disclosure is an absolute and continuing one. The principles are succinctly set out in Rayden and Jackson on Relationship Breakdown, Finances and Children:

[13.101] The importance of the duty of both parties to make disclosure of their assets which is full, frank and clear cannot be overemphasised. Unless a court is provided with correct, complete and up-to-date information on the matters to which, under the MCA 1973, s 25, it is required to have regard, it cannot lawfully or properly exercise its discretion in the manner ordained by that section. The duty on each party is absolute, and it must be discharged regardless of whether the application for a financial remedy is adjudicated upon by the court after full evidence has been heard, or settled after an exchange of financial information between the parties leading to a consent order. The duty is also a continuing one: a party must not mislead the other party and the court into assuming that his financial situation is unchanged if in fact it has changed. Any material changes in the financial situation of either party occurring between the filing of their Form Es and the final dispatch of the claims by the court must be brought to the notice of the other party and the court at the earliest opportunity. A party who seeks to negotiate and secure a settlement without informing the other party about a material change in his or her financial circumstances runs the risk that, if a settlement is reached and a consent order is made, the consent order will be set aside by the failure to provide full, frank and timely disclosure. Shortcomings in disclosure will be visited by orders for costs against the offending party, often on the indemnity basis. Furthermore, deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default.”

25.  The consequence of non-compliance of Form E disclosure is potentially serious with criminal sanctions. On the other hand, it is trite that Form E is not pleadings and that in the context of ancillary relief applications between spouses, there are no pleadings exchanged[10]. The parties are not required to plead their case or to be subject to formalities and/or consequences of what is required of in pleadings in civil cases. This means that, a party, insofar as having complied with the standard requirements of Form E, may choose to further elaborate on his/her case under the narrative parts therein; conversely, a party cannot be criticised of being economical by providing the bare minimum to meet the standard required[11].

26.  In my view, this simply means that it is not a question of right or wrong in setting out a party’s position under the narrative part (Part 5) of Form E, especially when the parties will be given the opportunity to file a s.7 MPPO narrative affirmation at a later stage in ancillary proceedings. Some may argue, as the Wife does in this case, that it is good practice to tell the opponent and the Court her position on certain issues/assets, so that the proceedings can be conducted in a more sensible manner, e.g. by earlier discoveries, bring in third parties, and/or to formulate preliminary issues to be determined separately as well as to save costs. I agree.

27.  Indeed, this resonates with the oft-cited judicial observations in L v. L [2006] 1 HKFLR 12 per DHCJ J. Lam (as he then was) at §§197 – 198: -

“197. ... The party who gives disclosure also carries the obligation to present the information in a way that could be readily comprehensible to his opponent. Straightforward and direct answers could have been given by the Wife to questions like how much has been invested into a business and what were the sources of fund. A good litmus test for distinguishing a bona fide fulfilment of the duty to give disclosure from an attempt to obfuscate is to ask whether the answer or the material can on its own meaningfully assist in informing others as to the means of that party ....

198. It is high time that litigants in matrimonial proceedings and those advising them should appreciate that affirmation of means and answer to questionnaire are not a game of hide and seek. Too much legal costs and judicial time had been spent on such wasteful exercise. As stressed by Mr Mostyn, the onus falls squarely and fairly on a party to give full and frank disclosure of his or her own means. To adopt a wait and see approach with a hope that the opponent might fail to ask the right question is a tactic to be deplored. That by itself is a breach of the positive duty to give disclosure. As Coleridge J put it recently in J v V [2004] 1 FLR 1042, “all cards must be put on the table face up at the earliest stage if huge costs bills are to be avoided.””

28.  The ultimate goal of ancillary relief proceedings is to achieve a fair result in the judicial exercise of division of family assets – or in simple terms – how to distribute what under the well-established guidance from the Court of Final Appeal in LKW v DD [2010] HKCFA 70. Unlike civil cases, the judicial task in ancillary relief proceedings obliges the Court, who assumes a quasi-inquisitorial role[12], to investigate issues which it considers relevant to outcome even if not advanced by either party[13]. Without full and comprehensive financial disclosure, the Court is said to be “left in limbo”[14] when it attempts to discharge its investigative role and function under s.7 MPPO when determining ancillary relief. And the Court cannot be obstructed/disabled from doing so by “any substantial fetter upon its ability to extract relevant document”[15].

29.  Under the latest reforms in the Family Court, such investigative role would begin by the trial judge as early as in Case Management Hearings, in inter alia detecting what disclosures are to be directed and at what rate, all congruent with the quasi-inquisitorial role of the Family Court. In my view it is exactly due to the aforesaid special nature of ancillary proceedings that one should bear in mind when determining the issue of relevance, of all circumstances of the case in discovery; not only evidence available so far by Form Es, answers and affirmations, but also the potential issues to be put before the trial judge at the trial on ancillary relief.

30.  There is no doubt in my mind that I should be guided by the above principles when dealing with this application.

Other relevant legal points

31.  The Husband has raised various legal propositions, and they appear to me to be relevant to the application of discovery principles to this particular case, as opposed to be amounting to so-called jurisdictional challenges. I am not obliged to address every contention taken up by the parties and I shall focus on those I view most relevant here and by doing so, as and when necessary, I shall apply facts of this case for better clarity.

32.  The Husband relied greatly on the Court of Appeal’s decision in C v C (unrep., CACV 410/2005, 23 June 2006). Mr. Chan S.C., leading Mr. Tsang for the Husband says it is a warning in terms of case law that family court should apply the law as in ordinary civil cases. Whilst that is not disputed, with respect, I note that the situation in C v C (supra) is quite apart from the present: (i) there was no formal discovery application taken out by the parties in C v C (supra) (§5); (ii) the appeal succeed, inter alia, because the husband sought company documents, when he was in an equally good position to obtain as the wife, as he was also the company director at all material times. Any discrepancies in the company, the husband would have been aware of (§11); (iii) the husband did not give reasons as to why he required the documents; and (iv) there was no allegation of a lack of proper disclosure or that money has been secreted (§13).

33.  It is submitted by the Husband that a party seeking an order for discovery under O. 24 must make out a prima facie case that the documents or class of documents sought (i) exists; (ii) the party against whom the order is sought has or had the documents in his possession, custody or power; (iii) are relevant to a matter in question in the action; and (iv) is necessary either for disposing fairly of the cause or matter or for saving costs. O. 24 r.7(3) requires an applicant to file an affirmation stating his/her belief to the above.[16] The Husband complains that the Wife has failed to specifically state her belief in affirmation and therefore, the Court’s jurisdiction is not engaged in law.

34.  The Wife says prima facie case may be based merely on the probability arising from the surrounding circumstance or in part on specific facts deposed to. A prima facie case on existence, for example, may be established simply by assessing whether it is business practice for a certain type of document to exist: see Ngan In Leng v. Chu Yuet Wah [2013] 1 HKLRD 717 per DCHJ Au-Yeung (as she then was) at §42.

35.  The Husband also criticises the Wife’s requests for being imprecise, too wide and says a class of documents must be classified by its nature and the documents must have sufficient identification, i.e. adequately specific, so as to form a class. Discovery of a class of document which relate to an issue is not allowed in the sense that “one cannot simply identify an issue and ask for all documents relating thereto”.[17] To this, the Wife says the relevant test here is ‘reasonable certainty’ citing Seabrook v. British Transport Commission [1959] I WLR 509 per Havers J at 512:-

“ ... It is clear that there is never any necessity for the deponent to the affidavit to set out in detail each item with its date; it is sufficient to put them into their proper class of document, provided that the description is sufficient to identify them with reasonable certainty.”

36.  Pausing here, it is also noteworthy the observations by Wilson LJ in Charman (supra) at §47 that “the wife will seldom have the knowledge with which to disprove the existence of a document which, if it does exist, may have a crucial being on the outcome of her financial application….It may be relevant for the court to learn, if it be the case, that there is no such document in the possession”. I agree. With the duty to discharge the quasi-inquisitorial role of the Court in mind, for the purpose of the requests below, I am satisfied on the documentary evidence (see my discussion below) raised by the Wife that she has satisfied the test on existence and she has identified her requests in seeking a class of documents with reasonable certainty.

37.  The Husband contends that his affirmation denial on existence possession custody or power is conclusive to the matter. I agree with the Wife’s view that while affidavit evidence is said to be conclusive at interlocutory stage, where the affidavit can be shown to be “a lie or is illusory or wilfully defective, displaying no evidence of a conscientious effort to meet the party’s discovery obligations”[18] the Court is entitled to look at the evidence as a whole and may not bound by the affidavit.

38.  The Husband submits that the issue of relevance is assessed applying the standard Peruvian Guano test. Even civil cases, relevance shall be primarily, not solely, determined by pleadings. For discovery purpose, “it is the pleaded case of the parties in the broad sense that one should be concerned with. A document may be generally relevant to a party’s case as pleaded although its relevance cannot be specifically pinned to some pleaded particulars.”[19] In matrimonial cases, I repeat CWK (supra) at §23, and as stated earlier, my view is that in the context of discovery applications in ancillary relief applications in the Family Court, the Court is entitled to consider relevance by reference to the disclosure of assets under the parties’ Form E or answers to questionnaires or affirmations, as well as the potential issues to be put before the trial judge at the trial on ancillary relief.

39.  On ‘fishing’, it is trite that generally, it is not allowed. It appears to me that what amounts to fishing in ancillary relief cases shall be approached bearing in mind the difference in nature between a party to ancillary relief proceedings compared to a party to a normal litigation: B v. B (Matrimonial Proceedings: Discovery) [1979] 1 All ER 80 per Dunn J at 809J – 810E: -

“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 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 approximate 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.”

40.  As well as, the observations by Schofield C in of Zakay v. Zakay [1998] 3 FCR 35[20]where he held that it is not fishing if: -

“the documents requested for production ... are narrowly confined to the single issue they are aimed to support. The documents are more than likely in the possession of the applicant and are readily identifiable. Of course, it is impossible for the petitioner to know the specific identity of individual documents. But the applicant is being asked a specific question and is being asked to produce the documents to prove his answers. That is not a fishing expedition in the sense of casting a line in the hope that something will be caught: the fish has been identified and the court is endeavouring to spear it.”

41.  The Husband’s other complaint is that the Wife has taken discovery into her own hands by surreptitiously taking his papers from the former matrimonial home (“FMH”), citing Hildebrand v Hildebrand [1992] 1 FLR 244 in support. It is useful to note the recent guidance on the point of unlawfully obtained documents in the context of ancillary relief applications as helpfully summarised by HHJ I Wong in LNE formerly known as LKPBB v CKLM (unrep., FCMC 13477 /2019, 18 April 2024) at §62:-

“(1)The court’s role in ancillary relief proceeding is inquisitorial.

(2)Parties have the duly to give full and frank disclosure.

(3)Unlawfully obtained documents/information, subject to the questions of privilege and relevance, are admissible.

(4)The court has the power to exclude admissible evidence if satisfied that it is in the interest of justice to do so.

(5)In considering whether to exclude admissible evidence, the court has to carry out a balancing exercise.

(6)In doing so, the court is guided by what is “necessary for disposing fairly of the application for ancillary relief or for saving costs”, the importance of evidence, “the conduct of the parties” and other relevant factors. subject to the questions of privilege and relevance, are admissible.”

42.  I consider the facts of Hildebrand (supra) is distinguished from the present case, as rightly pointed out by the Ms. Yip S.C., leading Ms. Yu for the Wife. The conduct of the Wife in these proceedings are quite different from the husband in Hildebrand (supra). In that case the husband who was a former lawyer broke into the wife’s residents a few times and took away a crate a documents, but instead of showing the wife these documents for discovery purposes, he served lengthy questionnaires to the wife without showing her these documents. The court refused the wife’s application and asked the husband why he would ask the wife for answers for which he already knows.

43.  In this case, firstly, I bear in mind it was the FMH, and there is no allegation from the Husband that the Wife broke into the FMH and/or to take the documents illegally to later ambush the husband for her ancillary relief claim. The Wife in this case has elected to show all her cards facing up, being documents she had access to at the FMH as early as her Form E. Further, unlike Hilderbrand (supra), the Wife has affirmed that she has already disclosed all the documents she had obtained from the FMH[21]. I am satisfied that having considered all the circumstances, and the principles under LNE (supra.), it is fair for the Wife to rely on these documents to substantiate her requests.

44.  The Husband also contends that insofar as Super Matrix and Grand Goal having joined into these proceedings as third parties, for any and all documents in relation to them (the Husband has reduced these items into his Annex 1) requests should be made to them and not to the Husband[22]. To this, I note by ordering joinder in another Court, the Court found the Husband to have ‘absolute and uncontrolled power to procure disposition of shareholding of companies’[23]. This rings with the Wife’s contention that the Husband is the alter ego of Merida, Strength Power and Elite Wide. The fact that Super Matrix and Grand Goal may disclose certain documents in due course, this in my view does not mitigate against the Husband’s absolute duty to disclosure in ancillary relief proceedings on his part.

45.  The Wife says the Husband is the sole shareholder and director of Merida and in control of the board of directors of Strength Power and Elite Wide and is the alter ego of these companies. Even if he only has 10% interest in Merida (which she denies) the Husband is still required to disclose these documents.

46.  The Wife took me though extensive documents to demonstrate the Husband’s authority and personal involvements in Strength Power and Elite Wide[24]. Ms. Yip describes these documents show the Husband has his fingerprints everywhere and that these documents, discovered in the FMH, showed existence, possession custody or power to access documents of these companies on the part of the Husband, as well as surrounding evidence showing these companies are his alter ego.

47.  What I believe the Wife wishes to demonstrate by the various documents is ‘unfettered control’ by the Husband. As illustrated in Cmbicdhaw Investments Ltd v. Li Lei And Others [2023] 2176 HKCFI per Cheng J at §28: -

“28.1 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.

28.2Whether or not documents of a company are in the power of a director who is 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.”

See also: Arboit v. Koo (unrep., HCMP 2749/2012, 8 March 2016) per Au-Yeung J at §§139 – 141, SLA nee S v. HKL [2013] HKFLR 445 and A v. B [2017] HKFLR 66 at §§14-17

48.  Therefore, notwithstanding the Husband’s denial of existence, possession custody or power of the requested documents or to have these requests directed to Super Matrix and Grand Goal, it is my view that he is still liable to use his best endeavours to provide the same.

49.  I agree with the Wife that the company documents sought would be relevant and assistive to the understanding of the parties’ positions in going forward. Insofar as possession is concerned, it is clear that the Husband had been in sole control of Strength Power and Elite Wide. Whether such control is unfettered is a question of fact and on the evidence before me[25], I am prepared to view that the Husband does have unfettered control over Strength Power and Elite Wide. My findings here would be applicable to the rest of this Decision insofar as they relate to Strength Power and Elite Wide. In the event the Husband has parted possession, he ought to use his best endeavours to provide the documents requested here.

50.  For avoidance of doubt, my findings above lead me to the conclusion that the Court’s jurisdiction is engaged, and these findings will apply to the rest of the discussions on specific requests below as and when it appears appropriate and will not be repeated.

D.  Discussion

51.  I would like to preface the discussion with some general observations. Focusing on discovery and the matter before me, it is clear to me that in relation to procedural history, the Wife has elected to put all her cards on the table facing up regarding her claim of HK$600M with prima facie supporting evidence. The Wife’s position, as I understand it, is that given this is a large sum in any view, unless she is otherwise convinced by the Husband’s disclosures, which now she seeks, it would certainly be one of the live issues at trial; so it is appropriate that she states her claim under the narrative part of her Form E, and thereby forming a legitimate basis for her to request information and/or documents from the Husband.

52.  With respect, I agree with the Wife. I do not accept the Husband’s contention that he does not need to accede to the Wife’s requests since all of them are based upon the singular allegation of the HK$600M and that by his denial of the existence of this HK$600M in his affirmation, that is the end of the matter. Nor do I find it reasonable to accept the suggestion of the Husband to engage in a valuation exercise of the FY Land as at the time of sale so as to resolve the entire application here. It appears to me that even if this is done, and even presumably with a valuation more in favour of the Husband, it is likely that the Wife will continue pursuing her claim based on the evidence she has been able to put on the table so far, since the Wife’s case is not merely whether the Husband has or has not secreted HK$600M from the FY Land sale; but rather, she has identified this HK$600M through evidence[26] and not only she is entitled to investigate further, the Court will also have to investigate ultimately whether or not this HK$600M is hidden somewhere, spent recklessly or otherwise. By focusing on the Wife’s allegation of stolen money, the Wife says the Husband has misunderstood her case and I agree. It follows that the Husband’s argument concerning reflective loss is irrelevant in my view, not to mention no such company law related litigation is pending in the Court of First Instance. I note that this is also consistent with the findings in DDJ J. Chow’s decisions on transfer[27].

53.  As to the period of discovery, in general the Wife asks for documents since 2016, the year when the FY Land sale took place. The Husband himself stated 2016 as the year the parties separated and has not put forward arguments on the period of discovery, if discovery is granted. His arguments are premised on no discovery is to be ordered. While I am aware that sometimes, in big money cases, a three-year period may be adopted reflecting the presumption under s.17(3) MPPO, meaning in this case would be from 2019, I do believe that owing to the claim of HK$600M involved by comparison of the Husband’s own reported disclosure of assets in about HK$130M under his Form E[28], it is proportionate and in fact costs saving in the circumstances, to ‘get to the bottom of it’ at an early stage in potentially avoiding huge legal costs as well as court resources at later stages.

54.  I raised my query at the hearing and the Wife explains that 2016 is an eventful year and the Husband, who is the Petitioner here, says the parties separated in about August. By now it is also clear that it was the year where the alleged agreement between the Husband and Fong began, which is hotly disputed. To this, and in consideration of proportionality given this is a big money case, I think it is appropriate in the circumstances to agree to the respective periods of disclosure sought by the Wife on the Husband and the companies as she has submitted[29].

55.  Insofar as the Husband raises objections in relation to him having no possession, custody or power by reason that Strength Power and Elite Wide are separate legal entities, I have dealt with these arguments above and shall not repeat.

56.  As to where and when the Husband says he does not have possession, custody or power of the documents requested and has affirmed the same, I have also dealt with this earlier and shall not repeat. In short, owing to his duty to disclosure he ought to use his best endeavours to provide the same. From the affirmation evidence before me, as a whole, I do not see a willing husband who has tried his best to serve his duty to disclosure. Quite the opposite, it gives me the impression that he is trying his best to hide behind all possible legal arguments whenever he is met with the Wife seeking information/documents. He has tasked his lawyers to perform a masterclass in the game of hide and seek, in an attempt to promote the game so meticulously as if it is to be graced as a sport. It may be useful for me to reproduce here, as one example to illustrate the manner in which the Husband is resisting this entire application, the Husband stance on one of the items under this request (Request §1(1)) as found in his affirmation[30] :-

“200M ALLEGEDLY WITH COUSIN

12. The Respondent cannot put the interrogatories at §1(1) of Annexure A.

12.1. Parties have not even exchanged witness statements for the AR trial, so this interrogatory is prematurely put.

12.2. In any event, the Respondent is not entitled to put this interrogatory, as it does not seek admissions to facts on any matter in question:

(i) The Respondent’s case is I had allegedly stolen RMB 535m from HTSP, and deposited RMB 200m thereof with my cousin. I have denied this, so there is nothing left to admit to.”

(ii) In substance, the interrogatory asks me to disclose the evidence I will adduce in support of my denial at trial. That is impermissible.”

57.  The Husband’s written submissions, oral submissions and table of objections maintain this stance, and that his stance on the rest of the requests (including sub-requests) are by and large repetitive. Suffice to say I have considered the Husband’s various objections in full.

58.  The Husband said he has already denied he stole the RMB¥535M and thus he has met the Wife’s case. To me, this is plainly wrong. Under the umbrella of ancillary relief proceedings, the question I ask myself here is whether this is a husband who has shown ‘conscientious effort to meet the party’s discovery obligations’?[31]I cannot stress more that such obligations rest on him and him alone. In the course of the oral hearing, the Husband did not put focus on the documentary evidence pertinent to specific requests and instead focused on legal arguments on jurisdiction and discretion. This is after the Wife having taken me through numerous documents (most of them being the Husband’s own documents found at the FMH) in support of their respective individual requests. To me, this is an example of the Husband turning a blind eye to the reality before the Court and thereby ignoring his duty to disclosure.

59.  Bearing in mind the above discussion and findings, it is my view that insofar as insofar as necessity is concerned, I do think the Husband’s ongoing duty to full and frank disclosure would outweigh any oppression and/or prejudice (if any) caused to him in the circumstances. I now turn to the requests.

RMB¥200M held by Lik Gor (Request 1)

60.  The Wife produced hand-written documents of the Husband recording various withdrawals from his cousin Lik Gor to the Husband, between December 2016 and December 2017 and these withdrawals amounted to about RMB¥200M. These documents were located in the FMH by the Wife. The Wife, who has been involved in the family business over the past 30 years or so, recognises the Husband’s handwriting and signature[32]. These documents bear the letterhead of one of the family companies. The Wife now asks for details surrounding this arrangement between the Husband and his cousin, and that the timing of these withdrawals is prima facie suspicious. In gist, the Wife wants to know why there was such a large sum parked with Lik Gor in the first place, and why the balance of these withdrawals (at least 29 of them as found), went down from RMB¥200M to RMB¥25M within 12 months.

61.  The Wife submitted that while the Husband denied he had stolen RMB¥535M, he had not specifically denied the existence of this RMB¥200M amount in the possession of Lik Gor, nor the withdrawals to the Husband. I agree with the Wife that other than a generic denial in relation to the RMB¥535M, the Husband has been silent as to the existence of this RMB¥200M after these handwritten documents were made known to him. The Wife is concerned of the very fact that Lik Gor has been holding RMB¥200M for the Husband, which goes to the ascertainment of the size of the family pot in the context of ancillary relief in general and forms a separate point from the allegation of the stolen RMB¥535M.[33]

62.  This is a very large sum of money even in the context of this big money case. It is necessary for the Court to understand further on this financial arrangement in discharge of its quasi-inquisitorial duty. It is also appropriate in my view to have these requests acceded to at an early stage. By answering this request, I believe it will assist the Court and the parties to focus on the live issues in going forward. Request 1 is allowed.

Agreements with Fong (Requests 2 – 3, 24)

63.  These requests concern the alleged agreement between the Husband and Fong in the joint purchase of some lands in Yuen Long, Hong Kong, in mid-2016 (“YL Agreement”). According to the Husband, this was the reason Merida was set up, and subsequently Strength Power and Elite Wide were set up in 2017 for the purpose of holding lands under this YL Agreement. It was said that Fong invested HK$162M and the Husband invested HK$18M into Merida, apparently reflective of the 90% and 10% ownership. Strength Power purchased two pieces of land in June 2017 (“Land 1”) and with two other acquisitions apparently fell through (“Land 2 ”and “Land 3”); Elite Wide purchased two pieces of land (“Land 4” and “Land 5”) in June 2017 and on a date unknown.

64.  In her Request 2, the Wife inter alia requests confirmation, with proof, of Fong and the Husband’s alleged investments of HK$162M and HK$18M. The Wife has studied the general ledger of Merida disclosed by the Husband and did her own calculations and came up with HK$161,487,022.44 and HK$13,290,278.20 as the amount Fong and the Husband paid into Merida[34]. The Wife asks for confirmation on this, as well as raw documents to verify the entries to the general ledger.  

65.  Then in early 2019, the Husband says he and Fong reached a buyout agreement where Fong would purchase Strength Power and Elite Wide from Merida, and a consideration of HK$13M was agreed but on condition that Fong would pay the Husband only after the pieces of land held by these subsidiaries are sold. (“Buyout Agreement”) It is the Husband’s case that by reason of this Buyout Agreement, he caused Merida to transfer Strength Power and Elite Wide to Fong in July 2019.

66.  In her Request 3, similar to the YL Agreement, the Wife asks for all records in relation to the Buyout Agreement and also an explanation as to why the Husband would transfer the assets now subject to s.17 application before receiving any consideration, with documentary support.

67.  The Wife also asks for explanations with documentary proof concerning the relevant general ledger of Merida (Request 24).

68.  In my view insofar as requests for raw documents are concerned, the scope is too wide and imprecise. When I asked Ms. Yip what ‘all the written correspondence or messages or records’ mean under Request 2(a) and 3(a), she says it could be anything like WhatsApp, WeChat, memos, attendance notes at law firms etc. and the Wife wants these documents to verify the general ledger entries, since they are ‘processed’ in the sense that they are unaudited. The general ledgers produced by the Husband so far run into some 50 pages consisting of hundreds if not thousands of entries. Substantial costs will be incurred when there is not an allegation that these ledgers are false. In my view, this appears to be disproportionate.

69.  On the other hand, I believe it is important for the Wife to ascertain the remaining requests in relation to Fong. This is because, as stated earlier, the starting point is the Husband is the 100% registered legal owner of Merida. The Husband is running a case of trust where he holds 90% of Merida on trust for Fong and relies on an express written agreement reflecting the same. The Wife is entitled to challenge this. Equally, Fong is entitled to apply to participate in these proceedings to assert his interest and have it determined. Substantial sums are at stake. While I should not speculate how this matter will develop as the case goes on, I see it only fair in such circumstances that the Husband produce the information/documents as requested.

70.  Accordingly, I shall disallow Request 2(a) and 3(a) and allow Request 2(b), 3(b) and 24. In disallowing the raw documents, I bear in mind that at a later stage of these proceedings, perhaps prior to FDR, it is likely that Merida will be subject to valuation. By then, the accounting status of Merida may become clearer and it may bring more clarity to the Wife without having to spend ample resources for verification purpose at this stage.

Company Organisational Charts (Requests 4-5)

71.  W asks for list of organisation charts and list of asset and liabilities of Strength Power and Elite Wide. The Wife’s reasons are that the Husband is the sole shareholder and director of Merida and in control of the board of directors of Strength Power and Elite Wide and is the alter ego of these companies. Even if he only has 10% interest in Merida (which she denies) the Husband is still required to disclose these documents.

72.  As I have mentioned earlier, notwithstanding the Husband’s denial of possession of the requested documents, he is still liable to use his best endeavours to provide the same. To this request, the Husband says the evidence is insufficient to point out the Husband had a role to play in the management of Merida (and thereby Strength Power and Elite Wide) when he was holding 90% of Merida’s shares on behalf of Fong and was managing these affairs on Fong’s behalf.

73.  I agree with the Wife that existence of company organisational charts and assets and liabilities are within common business practice in the circumstances and that they would be relevant and assistive to the understanding of the parties’ positions in going forward. I therefore allow Requests 4 and 5.  

Acquisition of Lands by Strength Power & Elite Wide

74.  This part concerns the carrying out of the investment as explained earlier between the Husband and Fong, by using Merida, Strength Power and Elite Wide as corporate vehicles to execute various acquisitions of lands in Yuen Long area. The Wife now seeks discovery on the details surrounding five pieces of lands in connection thereto.

75.  Given the various findings I have made above, I would prima facie be inclined to allow questions on these lands. I remind myself that one main purpose of disclosure in this matter is to assist the Court in the exercise of its duty under s.7 MPPO at trial. I also remind myself of the Husband’s ongoing duty to full and frank disclosure.

76.  With the above in mind, I turn to individual requests concerning the lands.

Land 1 (Requests 6 - 8)

77.  The Wife asks for the source of money for the acquisition of Land 1 and has identified a specific transaction of HK$98,942,660 on 25 January 2018 and asks for details. In support of its relevance, the Wife has taken me through her detective work to show a sum of HK$68M was transferred to Strength Power from Merida on 25 January 2018[35]. As this sum was not sufficient to satisfy the purchase of Land 1, it meant Strength Power must have had money prior to the transaction date and according to her detective work, those monies paid into Strength Power came from unknown sources[36]. The Wife’s point here is that, if it is as alleged by the Husband his agreement with Fong where they each contribute in the ratio of 10% and 90%, the tracing of the general ledger of Merida do not show but rather, implies Strength Power has other sources of money. The Wife therefore requests for further documents regarding the source of money to see if the agreement with Fong can hold water. I have already commented on the Husband’s alleged trust agreement with Fong to be in a premature stage; on the other hand, these are not small sums of transactions at all even in the context of these proceedings and I can appreciate the Wife’s need to know about these withdrawals/deposits to see if they amount to any irregular financial activities which may be relevant to ancillary relief.

78.  Similar can be said regarding Ngai, someone the Wife has identified specifically and in relation to a particular transaction of HK$34.5M paid by the Husband to Ngai. The Wife has shown this is in relation to Land 1 and she has done her best with the general ledgers of Merida yet unable to find this said entry, which causes her worries. The Wife says this HK$34.5M is ‘under-table’ thus warrant further investigation. Her allegation is based on the Husband’s documents she discovered at the FMH, evidencing payment of this HK$34.5M in 4 tranches, as well as written signed undertakings by Ngai in relation to the dealings with these tranches.[37] Incidentally, these documents also support the Wife’s contention that the Husband has unfettered control of Merida and Strength Power.

79.  I do agree it is necessary for the Court to know the details surrounding this transaction, as well as the Husband’s arrangement with Ngai in order for the Wife to consider, for instance, if any third-party applications are required given the timing and the amount involved. It will also be desirable for the Court to identify if any such potential third parties are in issue at an early stage of the proceedings for better case management. Accordingly, I will allow the requests sought under Land 1.

Land 2 (Requests 9-12)

80.  The requests sought by the Wife for Land 2 is under similar circumstances to Land 1, save and except it is the Husband’s case that the acquisition fell through for Land 2. For this, the Wife has identified a specific transaction of HK$10M advanced by Merida on 20 October 2017[38] purportedly as part consideration for the purpose of this acquisition, with cheque issued by Merida on behalf of Strength Power and signed by the Husband[39]. Other than the above, the Wife does not know the other details of this acquisition, like how it fell through, its original purchase price, and most importantly the whereabouts of this HK$10M, whether or not it is refunded.

81.  My finding here is similar to Land 1. These are large sum transactions and the Husband owes a duty to the Court to explain the source and whereabouts of the sums involved in the acquisition of Land 2, especially when it is his own case that the acquisition turned out to be unsuccessful he should volunteer further documents/information regarding the same. I will allow the requests sought under Land 2.

Land 3 (Requests 13-18)

82.  The Wife’s requests are similar to Land 1 and Land 2. The Wife accepts for Land 3 the acquisition failed, and has identified specific sums of HK$11M as deposit paid on 2 January 2018, as well as an arrangement of cash payment by the Husband in the sum of HK$16,380,000. The Wife showed me documents of the Husband evidencing the total consideration for this intended acquisition to be HK$28,957,500, including an agreement detailing the intended sale price per square foot upon acquisition. There is also a receipt of the said deposit paid signed by Ngai as witness.[40] From these documents, it cannot be deduced whether or not the ‘cash payment’ was ever paid, as such the Wife also asks for details of the same.

83.  My findings here are consistent with Land 1 and Land 2 and for the same reasons, since it is clear to me that these acquisitions (or intended acquisition in this case) form a chain of events concerning large sums transactions at a time close to the beginning of the Husband’s alleged post separation period. Whether or not they originated from an embezzlement of RMB¥535M or otherwise, it is still the function of the Court to investigate at trial as part of ancillary relief in general. The Court will benefit from information/documents in this respect in order to fairly dispose of the parties’ ancillary relief matter in going forward. I will allow the requests under Land 3.

Land 4 (Requests 19-20)

84.  In essence Land 4 and Land 5 are within the same chain of events as the lands above, with Elite Wide being the vehicle used instead of Strength Power. For Land 4, it is not disputed there was such an acquisition. The Husband has not provided details and the Wife now seeks the same, based on documentary evidence she has so far. The Wife tells me that it can be seen from the relevant land search that the consideration is HK$2M, and the Husband himself applying for electricity for this land. She could only trace from the Merida general ledgers part of this consideration[41] thus she seeks for details from the Husband. In line with my earlier findings and having considered the above, I allow the request in relation to Land 4.

Land 5 (Requests 21-23)

85.  For Land 5, the Wife is not even provided with the full address nor land search. Again, owing to her own detective work on the Merida general ledgers, she is able to locate evidence in relation to this piece of land, showing Elite Wide paying government rent on Land 5.[42] The Wife says the Husband is caught red-handed insofar is Land 5 is concerned and is a prime example of his shortcomings in full and frank disclosure.

86.  The Wife, in passing, made a further point here using the same page on the ledger, showing that Merida was paying various fees for Super Matrix on dates after the alleged s.17 MPPO disposition in July 2019, and further, given it is the Husband’s case that Merida went defunct in 2019 (but without documentary proof), these ledgers show prima facie that the Husband continued to make transfers at least up to 2021 (where the ledgers end). The Wife says this raises many questions regarding the version of events the Husband put forward on his entire case. With respect, I agree. For the reasons above, I allow the requests in relation to Land 5.

Bank Statements (Requests 25-29)

87.  My findings earlier have sufficiently dealt with the granting of these requests.

88.  However, before leaving this heading, I note that Request 25 represents the Husband’s bank accounts he has disclosed in his Form E, 12 in total, total value at HK$785,307.69[43]. Request 26 listed out the bank accounts the Husband has failed to disclosed in his Form E, amounting to 19 bank accounts in total. As at the time of the hearing, the Husband has not produced any bank statements in relation to these latter 19 accounts. I asked Mr. Chan whether the Husband would at least see it as reasonable to disclose bank statements of these 19 accounts for the period specified in Form E, i.e. the ones he ought to have disclosed under standard Form E requirements, and I was given to understand that the Husband would not.

89.  What troubles me here is that, at the beginning of this Decision, I commented that it is not unusual for parties facing specific discovery applications in matrimonial proceedings to come to consensus on at least some of the items and narrowing the scope. With respect, it appears to me that the Husband here could have no excuse whatsoever to refuse disclosure of his bank statements in the same manner as if he was required under his initial Form E, leaving aside why he had failed to do so in the first place. It was his own non-disclosure of these 19 accounts to begin with, to say the least, that prompted further discoveries. It would be most difficult to persuade any reasonable mind either that such omission was inadvertent in nature.

90.  The Husband did not personally attend this hearing but it appears to me that he has given clear instructions to his lawyers to fend off any requests in issue at all costs. It took Mr. Chan no time to reply to me that he could not say anything more on this and we will have to leave it as that and moved on. This is not a criticism of Mr. Chan or any of the Husband’s lawyers, who have dutifully acted in accordance with their instructions received, but to me, this speaks volumes about the stance of the Husband in the context of disclosure overall.

Insurance Policies (Request 30)

91.  The Wife brought me to her Form E showing initially she discovered 3 insurance policies of the Husband purchased in 2017 on behalf of Merida with total premiums value at around HK$41,203,960[44]. These 3 insurance policy agreements were exhibited in the Wife’s Form E, each showing the Husband’s signature on behalf of Merida[45].

92.  The Husband failed to disclose any insurance policies in his Form E[46] and upon being asked, he first disclosed in his 1^st Answer, 6 insurance policies, describing them as ‘The Petitioner is the policy holder of the following..’ as opposed to Merida and/or a 10% owner. Some of the details of his insurance policy numbers appeared inaccurate and he clarified the same in his 2^nd Answer, consistent with the ones the Wife discovered.[47]

93.  Subsequently the Wife discovered from documents that some of the insurance polices have expired and there ought to have been payout to the Husband but he has failed to disclose the same to date.

94.  I have no hesitation in granting Request 30 to the Wife by the simple reason that these are basic disclosure in ancillary relief which the Husband ought to provide. His non-disclosure in Form E, or arguably a ‘better late than never’ approach in his Answers cannot be condoned especially given the large values. The timing of these purchases and/or payout warrants further investigation. As to any policies expired with payouts to the Husband at dates after his Form E/Answers, I can only repeat myself that the Husband owes an absolute duty to ongoing disclosure.

Documentary proof of two transfers to Husband’s sister and her daughter (Request 31)

95.  The Wife identified two specific withdrawals from one of the Husband’s non-disclosed bank account (Account 31), one to his sister and one to the daughter of his sister. The dates of withdrawal were 13 and 17 February 2017 respectively. The amount was USD$70,200 and USD$71,000 respectively.

96.  Notwithstanding this is a big money case with transactions over hundreds of millions at centre stage, I cannot say these two sums, each amounting to some HK$500,000, are negligible small sums. Accordingly, I would allow this request.

Safe deposit boxes (Request 32)

97.  This is a straightforward request asking for confirmation on whether or not deposit boxes were held. I do not see why the Husband cannot provide a straightforward answer to this. This request is allowed.

E.  Conclusion

98.  Based on the above, the order is straightforward. I make an order in terms of the Wife’s Discovery Summons, save for Request 2(a) and 3(a). I direct the Wife to draw up the Order within the next 21 days, and the Husband shall comply with the sealed order on discovery within 28 days from the service of the same on him.

F.  Costs

99.  The Wife is the successful party in this application, I do not see why I should depart from the usual principles of costs following the event. Accordingly, I order that the Wife’s costs of this application including reserved costs be paid by the Husband, with Certificate for two Counsel, to be taxed if not agreed.

100.  This is a Costs Order nisi which will be made absolute if no application to vary it is made within 14 days.

101.  I thank Senior Counsel and Counsel for their assistance.

Mr Anthony Chan SC leading Mr Cristian Tsang instructed by Haldanes for the Petitioner Husband

Ms Anita Yip SC leading Ms Lily Yu instructed by Withers for the Respondent Wife

FCMC 3297 / 2022

[2024] HKFC 26

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER FCMC 3297 OF 2022

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----------------------------

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DECISION
(Joinder of Parties)

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Introduction

1.  This is the respondent’s (“the Wife’s”) application to join two companies, namely Super Matrix Limited (“Super Matrix”) and Grand Goal International Limited (“Grand Goal”) as the 2^nd and 3^rd respondents of the Petition for the purpose of her section 17 application pursuant to the Matrimonial Proceedings and Properties Ordinance, Cap 192 (“MPPO”). Both Super Matrix and Grand Goal are companies registered in Samoa.

Background

2.  The respondent (“the Husband”) and Wife have had a long marriage, their children are all over 18 years old. Briefly, in or about 1983, they set up their family business carrying on trading fabric materials, the business went well and had reached out to landed properties developments. This is a big money case where both parties claimed the value of matrimonial assets are over millions of RMB, amongst them, the assets involved companies and properties all over mainland China. I am given to understand the matrimonial pot is over RMB 500 million.

3.  Decree absolute was pronounced On 3 March 2023, the outstanding matter is ancillary relief.

4.  The Wife says, one of the matrimonial asset, Fuyong Plot was a was sold in late 2016 for some RMB 535 million. The sale proceeds went to Merida Limited (“Merida”), a company set up by the Husband. The Husband is the sole director and shareholder of Merida.

5.  Other than Merida, the Husband acquired two other companies, namely Strength Power Group Limited (“Strength Power”) and Elite Wide Corporation Limited (“Elite Wide”). Strength Power and Elite Wide were subsidiary companies and fully owned by Merida.

6.  The Husband, on his own evidence, confirmed Strength Power is also holding a piece of land in Hong Kong, namely, section A and B of the Remaining Portion of Lot 11XX in DD1XX whereas Elite Wide is holding another piece of land, namely, Lot 72X in DD 1XX. Apart from the above, the Wife said both companies are holding other pieces of land in Hong Kong.

7.  The Husband disclosed the value of the aggregate asset of Merida, Strength Power and Elite Wide is about RMB 357 million.

8.  The Wife took out her section 17 application because the Husband disposed the shareholdings of both Strength Power and Elite Wide to Super Matrix and Grand Goal respectively. In other words, a substantive part of the matrimonial asset was disposed away from Merida.

The Dispositions

9.  Precisely, the 1^st disposition took place on 3 July 2019, the Husband parted his ownership by causing Merida to transfer 100% shareholdings of Strength Power to Super Matrix (“the 1^st Disposition”). One day later, on 4 July 2019, the 2^nd disposition took place in the same way where the Husband caused Merida to transfer 100% shareholding of Elite Wide to Grand Goal (“the 2^nd Disposition”).

10.  Two years later, the Husband petitioned for divorce on ground of 2-year separation.

11.  On 30 June 2022[1], the wife applied for an order to set aside the 1^st and 2^nd Dispositions pursuant to section 17 of the MPPO. This decision is solely on issue of joining Super Matrix and Grand Goal as the 2^nd and 3^rd respondents in the ancillary relief proceedings.

The Husband’s opposition

12.  The Husband opposed joining Super Matrix and Grand Goal because Merida has been deregistered in November 2019, it is legally incapable of holding Strength Power and Elite Wide’s shares.

13.  Secondly, the Husband argued he did not effect the 1^st and 2^nd Dispositions, the Wife is wrong to ignore Merida’s separate corporate personality and somehow proceed on the premise that the Husband was the one who had made the 1^st and 2^nd Dispositions.

14.  The Husband further claimed he was not the beneficial owner of Merida by introducing one Mr Fong (“Mr Fong”) into the scene. Pursuant to an agreement between the Husband and Mr Fong dated 2 June 2016, Mr Fong agreed to inject funds to Merida for assets acquisition. They had also agreed the Husband to retain 10% shareholding where the remaining 90% shareholding was held for and on behalf of Mr Fong. In other words, Mr Fong is the beneficial owner of Merida.

15.  Thirdly, the Husband said it is neither necessary nor just and convenient to join Super Matrix and Grand Goal because the Wife is capable to seek an order to add back the value of the 1^st and 2^nd Dispositions to the matrimonial pot.

The legal principles

16.  Order 15 rule 6(2)(b) of the Rules of High Court states the requirement of a joinder application:

“Misjoinder and nonjoinder of parties (O. 15, r. 6)

…..

(2) Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application—

(a) order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b) order any of the following persons to be added as a party, namely—

(i) any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon,

or

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.”

17.  While it remains a discretionary power with Court, it is understood that the test of joining a party, being Super Matrix and Grand Goal, is whether there is a bona fide claim and a proper question to be tried between them, the joinder must be necessary or just and convenient to reach a resolution. HHJ Melloy in NLT v. LYKJ (FCMC 8680/2012; [2020] HKFC 75) in light of a Court of Appeal case, LLC v. LMWA [2019] 2 HKLRD 529 as follows:

“8. In addition, it is accepted by both sides that the correct approach to matters of this nature was originally set out by Mostyn J in Fisher Meredith v JH and PH (Financial Remedy: Appeal: Wasted Costs) [2010] 2 FLR 536. This approach has also been recently approved by our own Court of Appeal in LLC v LMWA [2019] 2 HKLRD 529, where Lam J said that generally speaking it was not necessary to join a third party unless there was a request for a particular order to be made against him or her. In that judgment Lam J stated inter alia as follows:

[25] Further, even in cases where a spouse seeks a proprietary order in respect of the disputed property, the third party must be involved only if he or she has a competing claim to that property. In this respect, there is a difference between cases where the third party is the legal owner or one of the legal owners of the disputed property and cases where a spouse claims that the third party has a beneficial interest in a property legally held under the name of that spouse. In the former case, the third party should be joined as a party since the legal title of the disputed property would have to be transferred or subject to encumbrance if the ownership issue is resolved by the making of a proprietary order. In the latter case, the third party should be notified of the claim and if he or she decides to contest the ownership issue, he or she should apply to be joined as party to the proceedings. If the third party does not apply to be joined, he or she shall be bound by the judgment: see Order 15 Rule 13A (4) of the Rules of the High Court, applicable by virtue of Rule 3 of the Matrimonial Causes Rules.

Discussions

18.  First and foremost, I remind myself this decision concerns the issue of joinder only, it is unnecessary for the Husband to articulate his argument on the substantive section 17 application because it shall be determined at trial. The said application simply focus on whether the Wife has a bona fide claim and whether it would be necessary or just and convenient to join Super Matrix and Grand Goal as the 2^nd and 3^rd respondents in the ancillary relief proceedings.

19.  Prior to the 1^st and 2^nd Dispositions, Strength Power and Elite Wide held substantive assets including cash, insurance policies, fixed deposits and landed properties. The prima facie fact that the transfer of shareholdings of Strength Power and Elite Wide (held by Merida of whom the Husband is the sole director and shareholder) to Super Matrix and Grand Goal will certainly defeat the Wife’s ancillary relief claim. I am satisfied the Wife has demonstrated a bona fide claim in the ancillary proceedings.

20.  That said, the Court has to consider the 2^nd limb – whether it is necessary or just and convenient to join Super Matrix and Grand Goal.

Deregistration of Merida

21.  On the Husband’s admission, Merida was deregistered because of his failure to pay the prescribed registration fees. However, I am not persuaded that for this sole reason, being an administrative consequence, would affect Merida’s ability to hold assets. The Husband has failed to give evidence on this part to justify a de-registered company is unable to hold assets should an order of setting aside is made.

22.  In fact, the Husband has submitted general ledgers of Merida after the de-registration until 31 December 2021[2]. After Merida being deregistered, substantive properties are still vested with Merida.

23.  Moreover, the Wife has deposed in her affirmation on Merida’s activities after de-registration: (i) Merida bank accounts are still operation since November 2019; (ii) Merida paid the annual fees and miscellaneous expenses for Elite Wide, Super Matrix and Grand Goal; (iii) up till the end of 2021, Merida was still holding insurance polices worth HK$40,999,980 with the Husband as sole beneficiary; and (iv) at the same time, Merida was reported to have accumulated amounts due from other related companies[3].

24.  I accept, on these evidence, the status of Merida, even being deregistered, has no impact on the Wife’s section 17 application should an order of setting aside the 1^st and 2^nd Dispositions is made after the substantive trial.

Separate legal entities

25.  The Husband went on to argue Merida and himself are separate entities and that the 1^st and 2^nd Dispositions shall not be caught by section 17 of the MPPO.

26.  Both parties cited Kemmis v. Kemmis [1988] 1 WLR 1037. The wife in Kemmis applied for an order pursuant to section 37(2)(b) of the Matrimonial Causes Act 1973 (equivalent to section 17 of MPPO) to set aside a mortgage on a property that had been executed by a company which the husband controlled. Nourse LJ decided at paragraph 1331F-H,

“In the present case the property was vested in the company as such a nominee or trustee for the husband. That gave him an absolute and uncontrolled power to procure the company to dispose of the property for such purpose and in such manner as he might direct. He did procure the company to create the mortgage. In these circumstances, and while it is true that the company is not the other party to the proceedings. I baulk at construing section 37(2)(b) so as to allow and encourage its avoidance by the simple devise of vesting assets in a mere nominee or bare trustee. That was the approach of Wood J. and I entirely agree with him. I think that the most satisfactory basis for a decision of this may to hold that section 37(2)(b) looks to the effective disposition, which, in the circumstances of this and similar cases, is made when the other party to the proceedings at one and the same time procures the nominee or trustee to make the actual disposition; and see section 37(6), which provides that the expression “disposition” includes any assurance of property of any description, whether made by an instrument or otherwise. Alternatively, it could be said that “the other party to the proceedings” must include a mere nominee or bare trustee for that party.”

27.  I see a clear case that the Husband has absolute and uncontrolled power to procure disposition of shareholding of companies. By disposing the entire shareholdings of Strength Power and Elite Wide to Super Matrix and Grand Goal, being nominees or receptacles to receive sale proceeds of the sale of landed properties (and also vehicle to hold other family assets). I accept the Wife’s case falls squarely within the Kemmis scenario.

28.  The Husband, on the other hand, put forward an argument that he has never admitted to be the beneficial owner of Strength Power and Elite Wide, because of this, no section 17 order can be ordered against him. The Husband further introduced one Mr Fong as the beneficial owner of Merida, Strength Power and Elite Wide.

29.  The Husband’s argument is flawed. I am aware the Husband relied on the 2 June 2016 agreement to demonstrate he has no beneficial interest in Merida. However, in the said agreement, the Husband alleged he is holding 90% beneficial interest of Merida for and on behalf of Mr Fong only, he kept the remaining 10%. It could not be said he has no interest in Merida at all. In any event, I expect this issue on beneficial interest of Merida will be disputed and shall be canvassed at trial.

30.  Moreover, I see from Merida’s general ledgers furnished by the Husband has recorded only entries from 30 November 2016[4], I failed to see there is evidence on how Mr Fong has injected funds to Merida pursuant to the 2 June 2016 agreement. I expect evidence on whether Mr Fong is the beneficial owner shall be elicited from the Husband at the substantive trial.

31.  Furthermore, the Husband submitted it is unnecessary for the Court to lift Merida’s corporate veil[5] (See: Prest v. Petrodel [2013] 2 AC 415).

32.  In the Family Law context, I shall rely on the judgment of SLA nee S v. HKL [2013] HKFLR 445, DDJ Carlson summarised Prest in paragraph 12 of his judgment and decided Prest should be followed here.

“12. In Prest there were properties that belonged to companies that were said to be controlled by the husband in that case and that these companies were his alter ego. On this basis, following the long established approach of the Family jurisdiction in England on applications for ancillary relief, the trial judge, Moylan J, ordered the husband to procure the conveyance to the wife of a valuable residential property belonging to one of those companies into the wife’s name. On appeal to the Court of Appeal, by a majority, the court held that such an approach ran counter to the old-established Saloman principle (see Saloman v A. Saloman & Co Ltd [1897] AC 22) that a company is separate from its shareholders and is therefore not amenable to orders such as that made by the judge. On appeal to the Supreme court, a bench of seven justices upheld that reasoning but, on the particular facts of this case, Lord Sumption, with whom the other justices were in agreement, decided that all the properties owned by the companies were held on trust for the husband and, as such, he was in a position, as beneficiary, to direct the companies to do as he required, or as in this case, he had been ordered. Such a simplistic analysis by me does not do, and is not intended to do, justice to such an important decision but I believe it will suffice for the purposes of this case. Also, I apprehend that although not binding in our courts in Hong Kong, this decision will be followed here. It is persuasive authority of the highest order and insofar as it now becomes relevant to this case I respectfully propose to follow it.”

33.  Then, DDJ Carlson in SLA nee S v. HKL ruled that the husband was the beneficial owner of a company named L&H, the disposition of 100% shares of L&H to one Mr C and one Mr L was a sham. L&H was found to be a family asset of the parties and directions of valuation of L&H were given.

34.  I am of the view the same situation happens here.

35.  The Husband, on the other hand, put forward the following arguments in his written submissions:

“20. Applying the test in Prest, Merida’s separate corporate personality is fatal to the W’s S17 Application. There is no cause to pierce the corporate veil:

20.1. H has plainly not under an existing legal obligation to share Strength Power and Elite Wide with W when Merida was incorporated on 11 October 2016:

(i) Strength Power and Elite Wide were not yet incorporated when Merida was incorporated.

(ii) There was (and still is) no financial provision order against H requiring him to share the value of Strength Power and Elite Wide with W whom Merida was incorporated; nor when the Alleged Dispositions took place on 3 and 4 July 2017.

20.2. In any event, it is clear that H did not have Merida incorporated to evade his obligations against W. There is no dispute that Merida was set up to carry out a land investment project.”

36.  In fact, I find the Husband’s argument has diverted tangentially away from the Wife’s case of joinder of parties. The Wife has submitted her case does not go so far to touch upon the issue of lifting corporate veil, the Wife has repeatedly formulating her case in the section 17 application that Merida is the husband’s nominee only. The Husband’s argument of lifting corporate veil is irrelevant. As the sole owner of Merida, when two of its wholly owned companies were parted to Super Matrix and Grand Goal, this fact is already sufficient to make an order to join them as parties.

37.  Whether the Husband has intended to share Strength Power and Elite Wide with the Wife is also irrelevant. This issue, should the Husband chose to put forward, shall be decided at trial of the ancillary relief proceedings.

Add back

38.  Finally, the Husband submitted the Wife could seek an order to add back the amount transferred out as alleged to the matrimonial pot. I agree with the Wife that this technique is only deployable when the value of relevant dispositions are much less than the available assets. At this stage, the values of assets of Strength Power and Elite Wide are still unknown, it is premature to say the add back is workable.

Conclusion

39.  With reasons of the foregoing, I am satisfied it is necessary to join Super Matrix and Grand Goal to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon in the ancillary relief proceedings. It is also just and convenient to do so. I therefore exercise my discretionary power to grant an order that both Super Matrix and Grand Goal be joined as the 2^nd and 3^rd respondents of the ancillary relief proceedings.

Costs

40.  The outcome of this application warrants costs to follow event, I make an order nisi that the Husband to pay the Wife’s costs of her summons, with certificate for counsel, to be taxed if not agreed. Both Super Matrix and Grand Goal did not file their affirmation(s), nor did they lodge written submission(s) to oppose, I shall reserve their costs. This costs order nisi shall be made absolute in absence of application to vary by way of inter parte summons within 14 days from the date of this decision.

Orders

41.  With reasons of the foregoing, I make the following orders:

(i)  Super Matrix and Grand Goal be joined as parties in the ancillary relief proceedings and be named as the 2^nd Respondent and 3^rd Respondent, limited to the issue of ancillary relief.

(ii)  The Wife be named as the 1^st Respondent.

(iii)  A costs order nisi that the Husband (the Petitioner) do pay the Wife’s (the Respondent’s) costs of this summons, with certificate for counsel, to be taxed if not agreed; the costs of both Super Matrix and Grand Goal be reserved.

(iv)  This costs order nisi shall be made absolute in absence of application to vary by way of inter parte summons within 14 days from the date of this decision.

Mr Bernard Man SC and Mr Cristian Tsang instructed by Messrs Haldanes for the petitioner  

Ms Anita Yip SC and Ms Lily Yu instructed by Messrs Withers for the respondent

The intended 2^nd and 3^rd respondents, did not appear

FCMC 3297 / 2022

[2023] HKFC 151

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER FCMC 3297 OF 2022

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Leave to Appeal

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Introduction

1.  The petitioner (“the husband”) applies for leave to appeal by way of a summons filed on 30 June 2023 against my decision handed down on 16 June 2023 dismissing the husband’s application to transfer this proceeding to the Court of First Instance (“the Decision”).

Background

2.  The background of the parties has sufficiently appeared in the Decision, briefly the husband and wife had a long marriage for more than 30 years, their children are all over 18 years of age. Their family business started from garment manufacturing and has extended prosperously to landed properties development.

3.  The husband applied for an order to transfer the proceeding to the Court of First of Instance for reason of (i) huge amount of family asset; (ii) complicated factual and legal issues and (iii) wife’s consent to transfer. I dismissed the husband’s application with reasons in the Decision.

Applicable legal principles on granting leave to appeal

4.  Leave to appeal shall not be granted unless the court is satisfied the appeal has a reasonable prospect of success or there is some other reason in the interest of justice why the appeal should be heard. (See section 63A(2) of the District Court Ordinance, Cap 336).

5.  Reasonable prospect of success connotes the prospect of succeeding in the intended appeal and must be reasonable and more than fanciful, without having to be probable. An applicant is required to show more than just an arguable case, but he does not have to demonstrate the appeal will probably succeed. Even if the court takes the view that there is a reasonable prospect of success, it still remains adiscretion as to whether to grant leave, though the fact that there is, ex hypothesi, a reasonable prospect of success would heavily influence the court in exercising its discretion. (See commentary of Hong Kong Civil Procedure 2023, §59/2A/4)

Discussion

Ground 1

6.  The precise ground of appeal is reproduced as follows:

“The learned judge erred in holding that the court can simply ignore the Respondent’s allegation that the Petitioner misappropriated the RMB535,000,000 from HTSP, and let the Respondent claim that amount as if it belongs to the Petitioner. This wrongly ignores the fact that this money (on the Respondent’s allegations) belongs to HTSP, and in any case HTSP would have a valid claim for the same against the Petitioner.”

7.  With due respect, I fail to see there is such holding in the Decision. On issue of ancillary relief, the wife alleged the husband has misappropriated RMB 535 million from the matrimonial pot to HTSP company. The wife’s allegation has raised an issue on hidden asset on the part of the husband in this proceeding and such sum should be added back to the matrimonial pot if the wife succeeded. The rights of HTSP irrelevant here.

Ground 2

8.  The husband further submitted,

“The learned judge further erred in holding that the rules against reflective loss would not preclude the Respondent from claiming the value of the RMB535,000,000.”

9.  Again, such holding was not found in the Decision. I repeat paragraph 7 above.

Ground 3

10.  Finally, the husband said,

“The learned judge erred in holding that the above company law considerations would only affect the Respondent’s ancillary relief claims if HTSP has commenced proceedings against the Petitioner in the Court of First Instance. The rule against reflective loss (and its associatied principles) does not depend on whether the company has initiated or will initiate a claim.”

11.  I do not accede to this. The husband’s attempt to run the ancillary relief claim in the context of company perspective in the Court of First Instance, at this stage, is unmeritorious.

Conclusion

12.  The husband has no reasonable prospect of success in the appeal. I refuse to exercise my discretion to grant him leave to appeal. I also failed to see there are some other reasons in the interest of justice why the appeal should be heard.

Costs

13.  I make an order nisi that the husband shall pay the wife’s costs of the summons, with certificate for counsel, to be taxed if not agreed. Such order shall be made absolute in absence of application to vary by inter parte summons within 14 days.

Orders

14.  With reasons of the foregoing, I make the following orders:

(i)  The husband’s (petitioner’s) summons for leave to appeal filed on 30 June 2023 be dismissed.

(ii)  An order nisi that the husband (the petitioner) do pay the wife’s (the respondent’s) costs of this summons, with certificate for counsel, to be taxed if not agreed. This costs order nisi shall be made absolute in absence of application to vary by way of inter parte summons within 14 days from the date of this order.

Mr Bernard Man SC and Mr Cristian Tsang instructed by Messrs Haldanes for the petitioner

Ms Lily Yu instructed by Messrs Withers for the respondent

FCMC 3297 / 2022

[2023] HKFC 107

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER FCMC 3297 OF 2022

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________________________

________________________

DECISION
(Transfer of Proceedings)

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Introduction

1.  The petitioner (“the husband”)  applies for an order to transfer this proceeding to the Court of First Instance pursuant to rule 32(1)  & rule 80 of the Matrimonial Causes Rules (Cap 179A)  (“the MCR”)  with reference to Practice Directions 15.14.

Background

2.  The husband and wife met at very young age when studying in an evening school in 1981, after getting married in 1983, they set up family business carrying on trading in fabric materials. Apparently the family business went well and had extended to landed properties developments. The husband is now in his sixties whereas the wife in her late fifties, they have two sons and one daughter who are all above 18 years of age.

3.  On 11 May 2022, the husband filed a petition on ground of unreasonable behaviour, decree nisi was granted on 12 October 2022. The only outstanding issue to be determined is ancillary relief.

4.  This is a big money case where both parties claimed the value of matrimonial assets are over hundred million of RMB, amongst them, the assets involved companies and properties all over mainland China. One of the items with significant value was RMB 535 million, being sale proceeds of a piece of land in mainland China in which the sale has already been completed in or about July 2019. The wife claimed the husband has deposited the said sale proceeds to a bank account of a family company (“the HTSP company”)  of which the husband was a director and a shareholder. There have been allegations made by the wife that the husband has dissipated the proceeds by selling and transferring the shares of the HTSP company to third parties.

5.  Because of this, the wife is dissatisfied that a large extent of family asset, being RMB 535 million, has been depleted. The wife also disagreed the husband has only some RMB 131 million left with him now. On 30 June 2022, the wife took out a section 17 application for setting aside the transaction relating dissipation of the abovementioned family asset.

6.  Three months later, on 9 December 2022, the husband applied for an order to transfer this proceeding to the Court of First Instance for determination. Briefly, the husband submitted apart from the huge size of family pot, there existed complicated commercial issues to be canvassed, coupled with the fact that the wife has, at some point, agreed to transfer, his application should be granted.

Applicable legal principles

7.  Rule 32(1)  of the MCR reads,

“The court may order that a cause or application pending in the District Court be transferred to the Court of First Instance, where, having regard to all the circumstances including the difficulty or importance of the cause or application or of any issue arising therein, the court thinks it desirable that the cause or application should be heard and determined in the Court of First Instance.”

8.  Rule 80 of the MCR is the general provisions for a transfer application from District Court to Court of First Instance.

9.  It is accepted that the Family Court has an unfettered discretion at any stage of the proceedings to order a transfer up the proceedings to be determined in the Court of First Instance. Paragraph 2 of Practice Directions 15.14 clearly stated the fundamental principle of such transfer is whether in light of the overall circumstance including the nature of the issues of fact or law involved, the proceedings or part of them are more desirable to be dealt with in the Court of First Instance.

10.  Such principles have in fact widely laid down in H v. H (FCMC 7173 of 2000, 1 February 2002, unreported), the test is that there must be cogent reasons why a case should be removed from the ambit of a group of specialist judges. On sole reason that very large sums of money alone will rarely be sufficient to justify an order of transfer.

11.  The principles stated by HHJ Hartmann in Jack v. Jack (DJ No. 3782 of 1995)  are still good law and such were cited by DDJ Jenkins in B v. B (FCMC 3105 of 1999, unreported).

“I believe that the following matters referred to by HH Judge Hartmann (as he was then)  in Jack v. Jack and another (DJ No 3782 of 1995)  are relevant considerations and should properly be taken into account in deciding whether to order a transfer, they are:

“where there is a matter of public interest; where there are novel or difficult points of law to be resolved; where delay will work a clear injustice and/or where there is unduly complicated or conflicting evidence the resolution of which is likely to be so protracted that it will unduly prejudice the Family Court lists and this work against the interests of other litigants”.

In my view none of these factors are present in this case and further none of the specific matter matters in r.80(5)  apply either.”

12.  In summary, in granting an order of transfer up, there must be cogent reason(s)  for this Court to exercise its unfettered power to remove this proceeding from specialist judges and to order a transfer up in whole or in part, issues on law or on fact to the Court of First Instance for determination. In considering such reason(s)  and seeing all circumstances, the Court shall particularly look into matters in light of (i)  public interest; (ii)  difficult point of law; (iii)  injustice caused by delay; and/or (iv)  complicated or conflicted evidence which the resolution is likely to be protracted and prejudiced the interest of other litigants. Solely on size of matrimonial pot is certainly not a good reason for transfer. The conclusion drawn must be that it is more desirable for the proceeding (whole or in part)  to be determined in the Court of First Instance.

Discussions

Misappropriation of RMB535 million

13.  Firstly, on the wife’s allegation that the husband had misappropriated more than RMB535 million by transferring HTSP company to third parties, the husband envisaged proceedings will be taken out by non-parties on company issues. The husband particularly raised the following complex issues in his affirmation:

“(i)  whether the Family Court can make orders purporting to let the wife, an indirect shareholder, recover losses allegedly suffered by HTSP, when HTSP is not even a party to these proceedings, and any recovery by the wife on HTSP’s and any recovery well established company law principles;

(ii)  whether the rule against reflective loss precludes the wife from using these proceedings to obtain monetary relief against the husband in respect of the alleged misappropriation; and

(iii)  whether the wife is allegedly entitled to share in the allegedly misappropriated sum, when on her own case, the sum rightfully belongs to HTSP rather that to either of the parties.”

14.  In essence, the wife sees the above issues are unrelated to the ancillary relief proceedings, her case concerns the husband’s hidden asset of RMB535 million and if the Court found in favour of her, such amount should be added back to the matrimonial pot.

15.  I share same view with the wife. Although the husband has raised the issues broadly from company law perspective, I am not aware there is litigation pending in the Court of First Instance. The best case the husband is putting forward here is only an anticipated scenario which might be happening in the future. As at this stage, the husband’s evidence does not justify a transfer. This ground has no merit.

Complex factual issues & conflicts of laws

16.  Secondly, the husband said the issues raised above would generate complex factual disputes, this is particular so when the family companies and landed properties are all over mainland China. Inevitably, a high likelihood cross boarder elements would surface because he has connections with  mainland authorities for more than 16 years. Issues on conflict of laws may also arise.

17.  On this point, I only see the husband has stated in his supporting affirmation that he has anticipated a likelihood of such phenomenon. I failed to see the husband has substantiated the precise complex factual issues or the conflict of law issues in his affirmation. Again, I see no merit here.

Substantive matrimonial pot

18.  This case concerns a huge size of matrimonial pot. The husband said it is worth around HK$250 million whereas the wife has pitched as high as  HK$800 million. Nonetheless, it is clearly stated in in H v. H, the size of the matrimonial asset is by no means a good reason why this case should be removed from the ambit of a group of specialist family judges.

The wife’s consent

19.  Lastly, the husband relied on the wife’s consent in (i)  letters by the wife’s solicitors dated 6 December 2022 and 9 December 2022 and (ii)  speaking note lodged by the wife’s counsel for the First Appointment hearing on 15 December 2022. Broadly, she has accepted “the issues involved warrants a transfer of this case to the Court of First Instance” save and except such order is premature. 

20.  Nonetheless, the wife’s stance has no bearing. Although the wife might have indicated (at some point in the future)  that the proceedings is appropriate to be transferred up, this Court will not grant such order by consent handily. An order of transfer up should be granted in light of the legal principles stated above.

Outcome

21.  With the foregoing reasons, I am not persuaded in light of all circumstance of this case that this cause, wholly or in part, on issue of law or fact, is more desirable to be determined in the Court of First Instance. The husband has failed to substantiate the precise complex legal or factual issues to be heard. There is nothing relating to public interest. I can see at this stage this Court is to make decision on voluminous matrimonial assets both within and outside jurisdiction, be it complicated, the task is assumed by specialist judges in the Family Court regularly. What is left behind is the mega amount of matrimonial pot which the husband has some concern. It is trite that solely on the amount of matrimonial asset could not justify a transfer up of proceedings. I see no prejudice will be caused to either parties that the ancillary relief be determined in this Court, and as a result, the husband’s summons shall be dismissed.

Costs

22.  The outcome of this application warrants costs to follow event, I make an order nisi that the husband to pay the wife’s costs of his summons filed on 9 December 2022 forthwith, to be taxed if not agreed. I also grant the usual order that this costs order nisi shall be made absolute in absence of application to vary by way of inter parte summons within 14 days from the date of this decision.

Orders

23.  With reasons of the foregoing, I make the following orders:

(i)  The husband’s (petitioner’s)  summons filed on 9 December 2022 be dismissed.

(ii)  A costs order nisi that the husband (the petitioner)  do pay the wife’s (the respondent’s)  costs of this summons forthwith, to be taxed if not agreed.  This costs order nisi shall be made absolute in absence of application to vary by way of inter parte summons within 14 days from the date of this decision.

Mr Bernard Man SC and Mr Cristian Tsang instructed by Messrs Haldanes for the petitioner  

Ms Lily Yu instructed by Messrs Withers for the respondent