DOREEN DO YE TONG v. WESLEY WAI HEI WAN AND OTHERS

CACV 124/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 124 OF 2010

(ON APPEAL FROM FCMC NO. 5857 OF 2006)

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Hon Rogers VP:

1.  I agree with the judgment of Le Pichon JA and the order proposed.

Hon Le Pichon JA:

2.  This is the appellants’ appeal from an order of Deputy District Judge T Chan of 7 January 2010 (as varied on 12 April 2010) holding that the Family Court has no jurisdiction to hear a summons dated 26 November 2008 for directions as to the determination of the ownership of and beneficial interests in a house at Horizon Drive, Chung Hom Kok (“the property”) which was the former matrimonial home of the petitioner (“the wife”) and the first respondent, her former husband (“the husband”).  At the conclusion of the hearing judgment was reserved which we now give.

Background

3.  The summons was taken out by the wife in the circumstances described below.  The appellants are the wife, and the second to fifth respondents who are, respectively, the wife’s mother (“the mother”) in her own right and as the sole executrix of the estate of her late husband, Tong Lee Min Raymond, Golden Lake Development (“Golden Lake”) and Fortune Wealth Asia Ltd (“Fortune Wealth”).  Golden Lake is a company owned by the husband and wife.  Fortune Wealth is a company whose shares are held by the wife and her mother.  The wife’s case is that her shares in Fortune Wealth are held by her in trust for her mother.  The sixth respondent Anglo-American Traders Ltd (“Anglo-American”) is a company owned by the husband’s parents.

4.  In 1995 Golden Lake acquired the property which became the second matrimonial home of the husband and wife.  In 2002, Golden Lake transferred the property to Fortune Wealth.  The husband and wife were divorced in 2006.  The wife and children then moved out but the husband continued to reside at the property even to this day.

5.  When the decree nisi was made on 14 August 2006, the court also made a consent order dismissing the claims of the wife and the husband against each other for ancillary relief.  The decree nisi was made absolute on 5 October 2006.

6.  About two months later, on 19 December 2006 Anglo-American commenced an action (HCA 2794/2006) relating to funds it had provided for the husband and wife for the purchase of the first matrimonial home and the subsequent purchase of the property, the second matrimonial home.

7.  This was followed less than a month later by a writ (HCA 22/2007) issued by the husband in his own name and as shareholder of Golden Lake seeking declaratory relief and damages against the wife, the mother, Golden Lake and Fortune Wealth who defended the action, with Fortune Wealth counter claiming damages for trespass by the husband and for vacant possession of the property.

8.  Fortune Wealth obtained an order for interim payment on its counterclaim from Master Hui but that was reversed on appeal by Deputy High Court Judge Gill.  Fortune Wealth appealed to this court.  That appeal was heard on 12 November 2008.

9.  No order was made on the appeal but the onus was put on the husband to make an application to the District Court within seven days, failing which, the wife was to do so, also within seven days, Rogers VP stating that

“[t]he Family Court is the right place not only to sort out exactly who has paid for this house and when and on what basis, but how, at the end of the day, whatever is left out of this house should be divided up between these two parties and possibly the mother-in-law or indeed the husband’s parents, if they indeed have loaned money …”

10.  When the husband failed to take out the requisite summons, the wife did so on 26 November 2008.  On 31 March 2009, HH Judge B. Chan gave directions for all interested parties (namely, those in HCA 2794/2006 and HCA 22/2007) to be joined, for pleadings and discovery and the filing of evidence.  The trial commenced before the judge on 8 December 2009.

11.  At the outset of the hearing below, Mr Egerton (who appeared for the husband) sought an adjournment to enable Financial Statements (“Form E”) to be filed by the husband and wife.  It was that application that prompted the jurisdictional question.  The judge did not immediately rule on the application for an adjournment but commenced hearing evidence from and on behalf of the wife.  The adjournment ruling was given on the second day of the trial.  It was refused on the basis that the Family Court had no jurisdiction to decide any matter under the Matrimonial Proceedings and Property Ordinance (“the MPPO”), absent an application for ancillary relief.

12.  The trial resumed.  On the third day, the judge raised the issue of jurisdiction again and sought written submissions from the parties.  Meanwhile she acceded to the request of Mr Coleman SC (who appeared for the wife) to complete the evidence and allowed the remaining witness, the husband, to give evidence.

13.  The judge held that the District Court has no jurisdiction to hear the summons and, further, that it would not be appropriate for her to determine the ownership of the property, regardless of the ruling on jurisdiction.

14.  It is relevant to mention that at the hearing below, the solicitors for Anglo-American indicated that their client was no longer asserting any claim to the property.  Anglo-American did not appear and was not represented on this appeal.

This appeal

15.  Mr Sheih SC who appeared for the appellants submitted that the issue for determination falls within a very narrow compass.  The consent order still stands and has never been set aside.  Its effect is that ownership of properties not specifically covered by the consent order is to be dealt with under the general law of property so that assets in the name of the husband would remain with him and those in the name of the wife would remain with her.  Prima facie, that also would be true of assets in the names of third parties.  That would appear to correspond to the understanding of the husband who, in his affirmation made on 27 April 2009, stated as follows:

“92. The Petitioner and I had only one brief discussion of the settlement of the divorce proceedings. We both agreed to settle as soon as possible by consent. For distribution of assets, the general consensus was what belonged to one party would, by consent, be allowed to remain with that person.”

16.  Undoubtedly, the consent order was made pursuant to the Family Court’s jurisdiction under the MPPO to grant ancillary relief.  Following HCA 2794/2006 and HCA 22/2007 and the claims made in those proceedings, the question that needed to be resolved and determined is the beneficial ownership of the property as at the date of the consent summons, specifically, whether the property or any part of it constitutes “matrimonial assets” of the husband and wife so as to fall within the consent order which would be the case if, for example, Golden Lake were to be held to be the true owner.  In other words, it is the ambit of the consent order that needed clarification.

17.  On this analysis, the Family Court clearly does have jurisdiction.  What it is being asked to do is to clarify the ambit of the consent order made.  Normally such claims would have been decided as a preliminary issue to an order for ancillary relief so that it will be known whether the property is within the dispositive powers of the court under the MPPO.  As to the procedure for this type of claim, reference should be in the decision of TL v ML (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, §§ 33-37 and, in particular, to §34 which states the proper approach to be adopted where there is an ownership dispute with a third party:

“[34] It is to be emphasised, however, that the task of the judge determining a dispute as to ownership between a spouse and a third party is, of course, completely different in nature from the familiar discretionary exercise between spouses. A dispute with a third party must be approached on exactly the same legal basis as if it were being determined in the Chancery Division.”

18.  In my view, both the husband (on his own behalf and on behalf of Golden Lake) and Anglo-American ought to have asserted those claims prior to or at the time of the consent order.  Be that as it may, I can see no jurisdictional objection to the Family Court dealing with this issue subsequently, by way of clarification of the ambit of its earlier order.

19.  It does not follow from the fact that the Family Court would be exercising its jurisdiction under the MPPO for that purpose that the Family Court will have to exercise its powers for ancillary relief afresh and to have regard to the matters specified in section 7.  However, that would appear to have been the premise underlying the ‘Form E’ request of Mr Egerton (who appeared for the husband) in the court below and § 2 of the order sought by the husband’s respondent’s notice on this appeal.  During the course of the hearing the matter was put to Mr Egerton.  On instructions, Mr Egerton disclaimed any intention on the part of the husband to reopen the whole issue of distribution of matrimonial assets.  He confirmed that the only issue that is going to be looked at is the property.

20.  Mention was made of a remortgage taken out after the date of the consent order as a result of which banking facilities of a very substantial nature have been obtained.  Mr Egerton submitted that how the property has been dealt with or used subsequent to the consent order would have some bearing on the ownership of the property and evidence and discovery ought to be allowed for this purpose.

21.  In the event that the property is found to belong to Golden Lake, no doubt an accounting exercise will have to be undertaken to work out the respective entitlements of the husband and the wife if, indeed, the property is encumbered and monies have been borrowed against it and expended by the wife.  As to the relevance of post consent order use of the property to the beneficial ownership issue, those matters should have been ventilated at trial and relevant questions put to the wife and mother.  If that has not been done, it is now too late to do so as oral evidence has been completed.

Order

22.  It is regrettable that the judge did not see fit to make findings of fact and almost a year has now elapsed since evidence was received.  Nevertheless that does not justify an order that the trial be commenced afresh.  It would be unfair to the witnesses who have given evidence.  Accordingly, I would propose that an order be made as follows:

        (1) The appeal be allowed and the order below set aside.

        (2) Deputy District Judge T Chan (who presided over the trial and heard the evidence) do determine whether the property held under the name of Fortune Wealth is an asset of the husband and/or the wife at the time of the consent order.

        (3) There be an order nisi of costs that the husband do pay to the appellants their costs of this appeal, the costs of the application for leave to appeal made to this court and below and the costs occasioned by the submissions on jurisdiction in the court below.

Hon Cheung JA:

23.  I agree.

Hon Rogers VP:

24.  Accordingly, there will be an order in terms of §22 above.