PMCL also known as LMC also known as KLMC v. AKK also known as KAK AND ANOTHER

FCMC 11521 / 2015

[2025] HKFC 105

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 11521 OF 2015

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_____________________________________

JUDGMENT

(Preliminary Issues on Beneficial Ownership
& Ancillary Relief)

_____________________________________

A.  INTRODUCTION

1.  This case has taken a long and winding route. After nearly a decade, the parties reached the trial of their ancillary relief dispute (“AR Trial”). The road was still full of twists and turns.

2.  Before me is also the trial of preliminary issues on, inter alia, the beneficial ownership of SSEL Shares (“Preliminary Issues” or “PI”), which 1^st Respondent (“H”) has transferred or caused to transfer to the 2^nd Respondent (“ZL”) in the middle of the ancillary relief proceedings (8 July 2021) without notice to the Petitioner (“W”) or the court.

B.  ABSENCE OF H AND ZL

3.  ZL was represented by counsel at the hearing on 9 March 2023. At that hearing, she was ordered to be joined as a party to the Preliminary Issues (“ZL Joinder Order”), see [2023] HKFC 154. Shortly thereafter, she filed a Notice to Act in person, took out applications for leave to appeal out of time and stay of execution of the ZL Joinder Order. These applications were dismissed, see [2023] HKFC 155. Thereafter, she did not participate in the proceedings, filed no pleadings nor evidence in the Preliminary Issues.

4.  Having read the affirmations on service filed on behalf of W, I am satisfied that ZL was served with the documents in the Preliminary Issues and she has notice of the trial dates. According to the evidence filed by W, ZL was seen in Hong Kong on 3 December 2024 (one of the scheduled trial dates). Her non-participation in the Preliminary Issues proceedings was deliberate.

5.  After the Trials were set down, H attempted twice to adjourn or stay the proceedings but unsuccessful, see [2024] HKFC 125 and Order dated 7 October 2024.

6.  On the first day of the Trial (2 December 2024), H made his third attempt to adjourn the Trials. This time was on medical ground. A short adjournment to 4 December 2024 was granted to give him time to file supporting medical evidence. See: [2024] HKFC 219 (“Adjournment Decision”). The Adjournment Decision was sent to H and ZL on 2 December 2024.

7.  H and ZL did not appear at the resumed hearing on 4 December despite a further short adjournment of 1 hour was given. W sought leave (which was granted) to adduce a report from a private investigator who was engaged to conduct surveillance on H during the adjournment (3 December) for the purposes of ascertaining his mobility and general condition. H was seen walking a few steps on his own and then walking slowly with ZL. It appeared that he drove a car from the FMH to a private hospital. They entered into a building inside the hospital, stayed there for about 30 minutes, then drove back to the FMH.

8.  H continued to be absent from the Trials without filing any medical evidence.

9.  Order 35 rule 1(2) of the Rules of the High Court (“RHC”) (applicable to these matrimonial proceedings by virtue of rule 3 of the Matrimonial Causes Rules) provides that:

“If, when the trial of an action is called on, one party does not appear, the judge may proceed with the trial of the action or any counterclaim in the absence of that party.”

10.  Undoubtedly, H had notice of the Trials. He lodged Opening Submissions dated 25 November 2024 and a Supplemental Opening Submissions dated 28 November 2024. He was given further opportunity to file medical evidence in support of his application for an adjournment of milestone dates. It was his choice not to adduce the necessary evidence and continued to be absent from the Trials.

11.  The petition for divorce was presented in 2015. The trial dates were fixed at the case management hearing on 22 December 2023. There is no reasons for further delaying the Trials. Pursuant to Order 35 rule 1(2) of RHC, the Trials were proceeded as scheduled despite H and ZL’s absence. It was initially ordered that the AR Trial be heard immediately after the PI Trial. Due to their absence, the two Trials should be heard together and were so ordered.

C.  EVIDENCE

12.  W testified at the Trials. I find her evidence reliable.

13.  ZL raised no positive case nor adduced evidence to dispute W’s case in the Preliminary Issues.

14.  H filed his Points of Defence in the Preliminary Issues. He also filed evidence in the PI and AR disputes, and lodged opening submissions for both Trials.

15.  Having regard to the quasi-inquisitorial role of this court and in the circumstances of this case, I agree with Mr Nagpal and Ms Cheng, counsel for W, that this court should consider H’s evidence and disclosure in these matrimonial proceedings notwithstanding the Order dated 14 August 2024[1].

16.  In assessing the weight that should be attached to the evidence provided by H, especially in areas where there is a conflict between the parties’ cases and evidence, this court must bear in mind that due to H’s absence, the reliability of his evidence could not be tested by cross-examination, hence little weight can be given to H’s evidence where it is in conflict with W’s evidence. Further, having considered the inherent probability and consistency of the evidence and the documentary evidence before this court, I find W’s evidence is more reliable than H’s evidence.

17.  W invited[2] the court to draw an adverse inference against ZL for her failure to file pleadings and evidence. She cited M v M & Ors [2014] 1 FLR 439 and Jiang Zhong v Up Cheer Limited DCPI 2047/2011 & DCEC 1267/2010, 5.2.2016 at §§47-52. There is a prima facie case for adverse inference to be drawn, but as analysed in Section E below, it is not necessary to resort to it.

18.  After the close of evidence, W filed and served a 16^th Affirmation (“W-16”) to update the status and balance of some joint bank accounts and the jointly held Tracker Fund shares. She also stated some requirements for restoring the status of KPL from its dissolution[3] after consultation with BVI lawyers.

19.  At direction of the court, W lodged further written submissions to address the admissibility of W-16 filed after close of evidence at Trials. H also lodged his submissions in response.

20.  Mr Nagpal (with Ms Cheng) cited the legal principles on admitting evidence post-hearing as explained in Galsworthy Ltd v Liu Por [2019] HKCFI 2397 §§436-443 and applied in TYT v TLH [2020] HKFC 153 §§78-86.

21.  They submitted that due to H’s unexpected absence from the Trials, W could not ascertain his position on 3 joint bank accounts which were believed to have relatively minor value, and she could not attempt to reach consensus with H on the relief sought in relation to these accounts. W also noted, after enquiries with the bank, that some disclosed information about the joint bank accounts were not correct. W-16 was filed to inform the court of:

21.1.  the closure of a joint account, the correct balance of another joint account, and the correct number of a third joint account. These were done to discharge her ongoing duty of disclosure until the court gives judgment to correct what has been discovered to be inaccurate: Vernon v Bosley (No. 2) [1999] QB 18 at 37D;

21.2.  her decision not to claim any relief in these joint accounts due to the nominal balance therein;

21.3.  updates of the Tracker Fund balance to provide the basis of her proposal for the sale of the fund and equal division of the proceeds; and

21.4.  the result of her enquiries on the steps required for restoring KPL, an issue testified by her at Trials.

22.  In H’s reply submissions, he simply put forward a bare disagreement to W’s submissions without giving any reasons. He advanced the excuse of needing time to consider the transcript of the Trials. Upon his application, the transcript of the Trials has been available for his collection since 15 April 2025 (prior to the lodging of his reply submissions). Thus far, H has not collected it.

23.  The contents of W-16 are not matters that W could not find out before the close of evidence at Trials. It is the parties’ duty to gather and adduce their evidence in time instead of leaving it after the close of evidence.

24.  Having considered the circumstance of this case, in particular the following, I decide to admit W-16 into evidence:

24.1.  this court’s quasi-inquisitorial role;

24.2.  the need to correct previously adduced evidence;

24.3.  the update information relating to the restoration of KPL bears some relevance to the AR order;

24.4.  the limited scope of additional evidence adduced therein;

24.5.  H was given an opportunity to respond and he did so; and

24.6.  the probative value of admitting W-16 in evidence outweigh any possible prejudice that H may have.

D.  BACKGROUND

D1.  The Parties and their early years

25.  W is 59 years old and H is 63. They married in 1990 and separated some 24 years later. The Petition was presented by W in 2015. They have 2 children, both are now adults.

26.  They met in the 1980s when they were studying in a university in California. They both graduated in 1988. H obtained his green card in 1989 and a Master’s degree in paper chemistry in 1990. W worked briefly as an air hostess in Hong Kong and returned to join H in the USA.

27.  The parties married in Atlanta, USA in March 1990. They moved to North Carolina where H worked at a paper mill company and W (who had no work visa) pursued a degree in accounting. They bought their first home (US#44) in joint names in 1991.

28.  In 1992, they returned to Hong Kong and stayed in a flat purchased by W’s mother (“Mother”). They started working in the business of W’s father (“Father”) on selling chemical products and electroplating materials. In 1993, they expanded the business by merging with the business of W’s cousin and incorporated BEL. BEL was successful. The couple earned a substantial part of their family wealth from the business.

29.  W gave birth to their son and daughter in 1998 and 2000.

30.  Since around 1998, H and W started setting up companies and branch offices in various parts of the Mainland. In late 2002, they exited BEL due to some unhappy differences between H and W’s cousin. They received about $9.6 million from W’s cousin for selling MOL, the vehicle through which H and W held their shares in BEL.

31.  The family enjoyed a reasonably comfortable living standard during marriage. They purchased the FMH (HK#9B and 2 car parking spaces HK#41, HK#42) at $6.388 million in 2001. The FMH, which is now occupying by H, is 2,200 square feet with 4 bedrooms. They had 1 helper after the son was born, and 2 helpers after the daughter was born. They went on overseas trips about 5 to 6 times a year.

32.  The wealth generated from their family business of sourcing and selling chemical products culminated in the properties and investment owned by them today, which are mostly held in their joint names or through their jointly-owned companies including SSEL, NEPL, SEL and KPL.

D2.  Family Business and Investments

33.  NEPL was incorporated in 1995. Father, H and W are its founding shareholders. W was appointed a director in November 2002. NEPL was set up to replace an unlimited company and to continue running the business in inter alia chemical sourcing.

34.  In about 1998, W and H set up MOL to manage profits accumulated from their business. MOL was then the 99.99% shareholder of NEPL. In February 2003, W and H set up SSEL to replace MOL. Each of them held one share of SSEL. Both were appointed directors.

35.  SSEL is a 99.99% shareholder of NEPL. W holds the remaining 0.01% in NEPL.

36.  SSEL is also the majority shareholder (88%) of SEL incorporated in December 2002. The remaining shares of SEL were held by W (1%), H (1%) and a former business partner of theirs (10%).

37.  In December 2002, W and H jointly funded the purchase of HK#2506 (a commercial property in Kwai Fong) in the name of NEPL at $2,480,000 by using the proceeds from the sale of BEL and with a mortgage. HK#2506 was initially rented to SEL as its office. It was then rented out to third parties after the office of SEL was closed. W said H has deprived her of, and refused to account for, the rental income received.

38.  W said since around 2000, H had mainly based himself in the Mainland where he formed a new relationship with another woman. Nonetheless, W stood by him and the family.

39.  During marriage, the parties each went through incarceration in the Mainland due to tax evasion charges in relation to their business. H was incarcerated from July 2004 to January 2008. W was incarcerated between August 2013 and September 2014. During the incarceration of one party, the other party took care of the family and the children in Hong Kong.

40.  In around 2012 (after H’s release and before W’s arrest and detention), there was news that the parties’ business might encounter problems with the Mainland customs authorities. Fearing the potential impact on their assets, H and W transferred the 2 SSEL Shares (then held in their respective names) to Father (now deceased).

41.  In August 2013, W was arrested in the Mainland. Father became scared about what happened and did not want to be involved in the parties’ business and companies. In September 2013, believing that H would be unlikely to return to the Mainland, Father transferred the 2 SSEL Shares to H.

42.  In August 2014, before W’s release from incarceration, H, without notice to W, transferred both his and W’s SSEL Share to Madam Hung, a former employee of the parties’ business.

43.  Subsequently, W discovered that ZL became the sole shareholder of SSEL in place of Madam Hung on 8 July 2021. ZL and H became the directors of SSEL and NEPL in place of Madam Hung and/or W. This transfer to ZL is a subject matter of the Preliminary Issues.

D3.  Factual dispute on the parties’ contribution to the family business

44.  Both parties have given a different account on their contributions to the family business. The key differences are as follow:

44.1.  H described Father’s business as a “dying business”.[4] However, W said that Father’s business was highly successful and generated substantial wealth for her maiden family.

44.2.  H said that he built BEL “from scratch”.[5] W disputed and said that all funds and capital were injected into BEL by Father and her cousin when the company was incorporated, which accounted for their largest shareholdings.[6]

44.3.  H said that W has exclusive control over finances, accounting or record keeping. W denied and said that the family business was built and run jointly by W and H.[7]

44.4.  W did not accept H’s characterisation of her as “financial controller”, “asset/financial records keeper” insofar as these descriptions suggest that H was excluded from financial/asset control or access to financial records. W pointed out that these allegations contradicted H’s own case that W played little role in the business.

44.5.  H said that W withdrew $200,000 to $300,000 in salary and perks every month.[8] W said the family business was never so profitable as to allow her to make the aforesaid alleged withdrawals, nor did it generate $65 million of alleged “quick cash” for W or the family, whether in 2013 or at all.[9] To the best of W’s recollection, they were only able to make a profit of about $500,000 a year.[10]

45.  The parties married for over 20 years. The family’s wealth was accumulated by their joint efforts, the fruits of which enabled them to pay for their personal and family expenses, culminated some savings and made property purchases / investments in Hong Kong and the Mainland over the years. I agree with Counsel for W that whoever might have made a greater contribution to the family business can have little bearing on the outcome of this trial, as the Court of Final Appeal have made clear that there is no place for any role discrimination: LKW v DD (2010) 13 HKCFAR 537 at §57.

D4.  H’s Jewellery Business and KPL

46.  After H was released from prison, he ventured into jewellery retail business in Shenzhen by setting up ZJNF. Between March 2009 and November 2010, W, on H’s directions, remitted to H’s personal account in Shenzhen over RMB 12 million from the family companies’ accounts in Hong Kong or her personal accounts for injection into ZJNF. There were receipts issued by ZJNF and signed by H. H did not deny such transfers.

47.  H claimed that he had sold the jewellery business in September 2014 to ZL (whom H claimed to be his employee and creditor, but W said she is his long-time girlfriend). H did not account for the sales proceeds.

48.  On W’s case, back in early 2010s, she was alarmed by H’s requests for substantial transfers of family funds. This coincided with W’s discovery of H’s continued affair with his girlfriend despite his promise to sever the relationship. She then decided to incorporate KPL in October 2012 and transferred family funds into an HSBC private bank account in KPL’s name, to preserve those funds for the parties’ then young children and prevent dissipation by H.

49.  Later, on H’s demand, W allotted 1 share in KPL (50% interest) to H and appointed him as a co-director. He was added as a joint signatory to KPL’s HSBC account in October 2014. The value of the HSBC private bank account stood at about $22,778,969.37 after the parties withdrew the equivalent of $3 million each from the same on 22 October 2024 by agreement.

D5.  Separation

50.  W said that upon her release from incarceration in September 2014, she discovered that her monies in the bank accounts, her valuable items, and financial records had been taken away by H without her knowledge or consent. He also withheld monies that W owed to her relatives and denied W’s access to their family storage place.

51.  The parties’ relationship broke down. They separated in 2013 or 2014. W commenced these divorce proceedings in September 2015. A decree nisi was pronounced in January 2016 and was made absolute on 13 November 2023.

52.  After their son left to attend university in the United Kingdom, W moved out of the FMH in about September 2016. H reported to the police accusing her of stealing all valuables and financial documents of the family companies. W denied these allegations and said she only took away her personal belongings, documents that she could retrieve and some family photo albums with her. No charges had ever been laid against her. H had used this as a reason for his failure to give financial disclosure. W contended that it was H who took away the valuables and financial records.

53.  W also denied H’s allegations that she controlled the family finances, abandoned the family and “cash starved” him. W said that the son was financially supported by her. H has not been paying for the son’s education and living expenses. He has been the cause of her alienation from the daughter, or at least he has done nothing to ameliorate their relationship. The relationship with her daughter remains a matter of profound regret to her.

D6.  Post-Separation

54.  Father passed away intestate on 3 March 2015 (post-dated the parties’ separation). H pursued extensive discovery requests in this action over W’s inheritance from Father (1/8 of his estate). These requests were largely refused in 2019 by HHJ Melloy (as she then was), who considered them unnecessary and/or irrelevant and were attempts at fishing. HHJ Melloy also found that W and her brother had provided H with a great deal of information.[11]

55.  H repeated these requests for discovery in 2022. This court agreed with HHJ Melloy’s rulings and maintained the cut-off date for discovery as held (i.e. September 2014).[12] H also requested for discovery over the estate of Mother (who passed away in January 2021) notwithstanding W is not a beneficiary under Mother’s will. These discovery requests were also dismissed.[13]

56.  On W’s case (not agreed by H), Mother, and later on her estate, had been lending monies to W over the years to see her through difficult times, including when she was incarcerated in the Mainland (to pay her legal fees), and after her separation from H (to cover her living expenses and legal fees in these proceedings). Her situation was made more difficult by H emptying her bank accounts and steadfastly refusing to release money from KPL’s bank account, not even when W needed funds for the son’s university tuition. W had to surrender insurance policies to pay for the tuition fees. H had also unilaterally appropriated some of the rental income from the parties’ US property (US#44) and refused to consent to the release of the other rental income withheld by the real estate agent. W said that she has made partial repayments of the loans from Mother and would continue to repay Mother’s estate when she is financially able to do so.

57.  Although H had persistently ignored W’s suggestion to withdraw the jointly held funds from KPL’s account, shortly before the scheduled trial, he pressed W to do so in October 2024 to meet his purported need to instruct lawyers for the Trials and to meet other expenses. About $3 million was released from KPL to each of them by agreement. H continued to conduct the litigation in person after he received the payment. H mounted an application before this court for an immediate release of all the remaining credit balance in the KPL account to him. This court refused his request on 6 November 2024.

D7.  Satellite litigation instigated by H

58.  In September 2020, H caused SSEL, NEPL and SEL (“the Corporate Plaintiffs”) to institute a High Court action (“HC Action”) against W and members of her maiden external family (including W’s parents, siblings, cousin, aunt, nieces and brother-in-law) or their estates for breach of fiduciary duties by W and restitutionary and accessory liability claims against her family members. The underlying allegations overlapped significantly with those claimed by H herein save for the cause of action and claims for restitutionary reliefs. The subject Hong Kong and Mainland properties in the HC Action were those which H had repeatedly attempted to include in this action.

59.  H left the HC Action in abeyance. Instead of serving the writ, H took out H’s Joinder Summons on 8 October 2021 by which he sought to join W’s parents (or their estate) and siblings in these proceedings to determine the beneficial ownership of 13 Hong Kong and Mainland properties or their sale proceeds (including subject properties in the HC Action), and 3 Mainland bank accounts held in the names of W’s parents and siblings. H’s Joinder Application was dismissed after hearing, see [2023] HKFC 34.

60.  The Writ and the SOC in the HC Action were served on W in 2022.

61.  After W and her maiden family members had incurred costs to defend the HC Action, H decided to cease instructing lawyers for the Corporate Plaintiffs in 2024 although he was twice refused leave under Order 5 rule 6 of RHC to represent the Corporate Plaintiffs, and was subject to an unless order made by DHCJ Reyes SC that unless the Corporate Plaintiffs cause legal representatives to file a Notice to Act in the HC Action, the Corporate Plaintiffs’ claims against D2 to D5 in that action be struck out: [2024] HKCFI 1752, [2024] HKCFI 1903.

62.  The HC Action was eventually dismissed under Order 35 rule 1(2) of RHC with costs against the Corporate Plaintiffs: Judgment of DHCJ Reyes SC dated 2 September 2024.

63.  H’s pursuit of litigation extended beyond this jurisdiction. He instigated the following litigation in the Mainland:

63.1.  In 2017, H commenced litigation in the Mainland against W for the division of, inter alia, landed properties in Guangzhou held in W’s name. His claim was dismissed by the Mainland court: see Mainland Judgment dated 27 October 2017.

63.2.  In April 2024, H caused the institution of a claim against W for, inter alia, 70% interest in GZ#131-2F (item 12). GZ#131-2F is one of the subject properties in the AR Trial. H has ignored W’s requests to withdraw the Mainland action. This action is still pending.

63.3.  In 2024, H launched Mainland proceedings against Madam Li seeking to set aside earlier transfers to her of NJ#601 (item 7) and SH#808 (item 8) despite Madam Li has never disputed that she held these properties as trustee for W and H. H obtained judgments in August 2024 which required Madam Li to transfer the two properties to him. He has since ignored W’s requests for confirmation that he had not and would not dispose of these properties.

E.  PRELIMINARY ISSUES – SSEL SHARES

E1.  The Parties’ cases

64.  The SSEL Shares had been subjected to several transfers since its incorporation:

Date	Registered shareholders
18 February 2003	W: 1 share (“W’s Share”) H: 1 share (“H’s Share”) (collectively “SSEL Shares”)
2012 or 2013	Father: 2 SSEL Shares
September 2013	H: 2 SSEL Shares
August 2014	Madam Hung: 2 SSEL Shares
8 July 2021	ZL: 2 SSEL Shares

65.  H contended that he was the sole beneficial owner of SSEL prior to the transfer to ZL. He said that the business was conducted by him (as the head) through SSEL and the other companies. It did not belong to the family. W was responsible for finance in the companies. She only held W’s Share on trust for H. The transfers of SSEL Shares to Father was for good consideration. In about 2021, at ZL’s suggestion, he swapped the SSEL Shares to partially paid off his debt by $8.5 million.

66.  W’s case is that she has all along been the beneficial owner of W’s Share and has proprietary interest in it from the outset. All the subsequent transferees of W’s Share were not bona fide purchasers for value without actual or constructive notice of W’s beneficial interest in the share. Each of them received the legal title subject to W’s pre-existing beneficial interest. She commenced the claims in the Preliminary Issues when she discovered from the SOC that ZL became the sole shareholder of SSEL in place of Madam Hung, H and ZL were appointed directors of SSEL in place of Madam Hung, H was appointed a director of NEPL while W was removed from her directorship.

67.  Mr Nagpal (with Ms Cheng) referred to the following well established legal principles summarised in Lewin on Trusts (20^th ed. 2020):

“44-013 Where trust property is transferred to a person in breach of trust, the beneficial interest in the property will persist unless it is transferred to a bona fide purchaser of the legal estate without notice or the beneficial interest is overreached. Whilst the beneficial interest persists a proprietary remedy will be available to recover that trust property or its proceeds, though generally no personal remedy unless, for example, a constructive trust for knowing receipt is imposed on the recipient, or a Diplock personal remedy is available. Therefore, where an asset is held on trust the legal title remains capable of transfer to a third party but the equitable rights, including the right to have the legal title held and applied in accordance with the terms of the trust, remain and are not disposed of unless and until the disposition of the legal title has the effect of overriding the equitable rights. ”

“44-119 If trust property is wrongfully transferred to a purchaser taking with notice of the trust then, whether such notice is actual, imputed or constructive and whether or not he gave full value, and whether or not he acquired a legal estate, he is bound to the same extent and in the same manner as the person from whom he bought. … a bona fide purchaser for value of a legal estate without notice of the trust defeats the equitable interest of the beneficiaries, and so enables the purchaser and his successors in title to defend both proprietary and personal claims in relation to property transferred in breach of trust. The following requirements need to be satisfied:

(1) there is a purchase for value;

(2) of the legal estate in property;

(3) in good faith;

(4) without notice;

(5) at the time of transfer of the legal estate.”

68.  W advanced, for the sake of completeness, 3 possible scenarios of beneficial ownership: (1) SSEL was beneficially owned by W (50%) and H (50%); or (2) SSEL was beneficially owned by W and H as joint tenants or tenants in common in equal shares; or (3) SSEL was 100% beneficially owned by H. She contended that in any event H’s disposition of his beneficial interest in the SSEL Shares to ZL is liable to be set aside under section 17 of the Matrimonial Proceedings and Property Ordinance (“MPPO”).

E2.  The beneficial ownership of SSEL Shares

69.  For the reasons set out in this section below, I find that at all material times,

69.1.  W’s Share is beneficially owned by W. H failed to establish that W had held W’s Share on trust for him. None of the transferees of W’s Share (Father, H, Madam Hung, and ZL) was a bona fide purchaser for value without actual or constructive notice of W’s beneficial interest in W’s Share. Each of them received the legal title subject to W’s pre-existing beneficial interest.

69.2.  H’s Share is beneficially owned by H. H failed to prove that he had transferred his beneficial interest of H’s Share to ZL. Even if he had, the transfer should be set aside by operation of section 17 of MPPO.

69.3.  Thus, SSEL was and is beneficially owned by W (50%) and H (50%).

70.  The starting point of equity follows the law is trite. The one who alleges that the beneficial interest vests in a person other than the legal owner bears the burden of proof.

71.  When SSEL was set up, W was allotted W’s Share and H was allotted H’s Share on 18 February 2003. This is not in dispute.

E2.1  Whether W held W’s Share on trust for H

72.  I reject H’s claims that W had held W’s Share on trust for him for the following reasons.

73.  Firstly, H’s bare assertion that W held W’s Share on trust for him (“Trust Contention”) was unsubstantiated.

74.  Secondly, the Trust Contention was raised for the first time in H’s Points of Defence in the Preliminary Issues filed in June 2023, almost 8 years after the Petition. This is inconsistent with H’s own case in the AR proceedings and the HC Action that:

74.1.  H deposed in §53 of his 7^th Affirmation filed in October 2021 (“H-7”) that “The Petitioner and I were equal shareholders and directors of SSEL. Bank accounts were set up for the company to which both parties could access independently … This is a fund house for our business operations.” There was no mention of any trust over W’s Share held in favour of H.

74.2.  It was pleaded in §2.3 of the SOC (filed in the HC Action in 2022 and verified as true by H on behalf of, inter alia, SSEL) that H and W were SSEL’s only two founding directors and shareholders. There was no plea in the HC Action that W’s Share was held by W on trust for H.

74.3.  In §2.4 of the SOC, it was pleaded that when Father became SSEL’s sole shareholder and director on 6 May 2013, “Father was [W]’s nominees in both capacities”.

74.4.  In Part 2.4 of H’s 2016 Form E, H asserted in a remark that the shares in SSEL were held by Madam Hung on trust for him. The same remark was in his 2020 Form E. However, he did not state the basis for the assertion nor did he make mention of the Trust Contention.

75.  Thirdly, H attempted to justify his Trust Contention by saying that W had not asserted her beneficial ownership in SSEL in Part 2.4 of her first Form E filed in December 2015. Mr Nagpal (with Ms Cheng) rightly pointed out that this was misleading as W had actually set out her case on the SSEL Shares in Part 6.3 as follows:

“Since the incorporation of [SSEL], [W] held 1 out of 2 shares (consideration US$1 per share) of the company. As [W] was involved in disputes in PRC in August 2013, she transferred her shareholding of the company to her father, who held the shares on trust for his daughter. In September of the same year, [W]’s father transferred the shares to [H] to hold on trust for [W]. However, in August 2014, [H] transferred the [W]’s share to [Madam Hung] without [W]’s consent. To this date, [Madam Hung] remains as the named legal owner of the shares.”

76.  W has been consistent in her case that she never lost her beneficial ownership in W’s Share despite the series of transfers from H and W to Father in 2012 or 2013, then to H in September 2013, then to Madam Hung in August 2014 and recently to ZL on 8 July 2021.

77.  Fourthly, H appeared to have criticised W for not having commenced action to claim her interest in SSEL Shares and the rights in HK#2506[14] (item 2) within the statutory limitation period and before the FDR in 2020 despite her knowledge of the transfers[15].

78.  The time bar point is a non-starter.

78.1.  A defence of limitation was required to be specifically pleaded under Order 18 rule 8(1) of RHC. H has not pleaded this defence and is not entitled to take an unpleaded point on time bar.

78.2.  W is enforcing her right as beneficial owner against ZL, but not against Father or Madam Hung. The relevant time is the transfer took place on 8 July 2021.

79.  Further, H could not gain any mileage if his criticism was directed to the lack of prior litigation by W to recover the SSEL Shares or HK#2506.

80.  A Form F has been issued to Madam Hung on 17 May 2017. Both H and Madam Hung have acknowledged that the SSEL Shares were held by Madam Hung as trustee only. W has correctly adopted the view that the SSEL Shares (and thus HK#2506 through SSEL and NEPL) were matrimonial assets irrespective of whether the SSEL Shares were held by Madam Hung on trust for H and/or for W.

81.  It is also correct for W to deal with the dispute over SSEL Shares (and hence HK#2506) in these matrimonial proceedings instead of commencing a separate action in another court.

82.  In a claim for ancillary relief between spouses, the Family Court has wide discretionary power to decide how the assets of the spouse should be apportioned in accordance with MPPO section 7 factors and the well established principles held in LKW v DD.

83.  Sections 4 to 6A of MPPO give the Family Court wide discretionary power to make orders for financial provision including periodical payments, lump sum payments, property transfer order and sale of property orders etc. The provisions under section 17 of MPPO empowers the Family Court to make an injunction order to restrain a party from disposing of assets or an order to set aside the disposition made with the intention of defeating the other party’s claim for financial provision.

84.  In cases involving corporate vehicles owned by a spouse or any of them (as in this case HK#2506 was held by corporate vehicles), the Family Court has the power to order the transfer between spouses of the shares of the company holding the asset if it is considered to be a fair and equitable result (bearing in mind the commercial realities) to allow both or any of the parties to have a fair share of the available corporate and non-corporate assets.

85.  This is not to be confused with the concept of piercing the corporate veil: Prest v Petrodel [2013] 2 AC 415. An asset placed into a company structure and held by a company is the company’s asset. There shall not be an order compelling the company (which is not a party to the proceedings) to transfer the asset to a spouse. The asset may be directly available for distribution through the company if the company was found to be holding the asset on trust for a spouse as bare trustee. In Prest v Petrodel, it was held that the properties had been bought by the companies with the husband's money (rather than the companies' money), by operation of trust law principles, the properties were held for the husband on bare trusts or on resulting trust. See also YYT v CCM [2022] HKFC 230 on the distinction between assets held in a corporate or non-corporate context.

86.  This does not bar the parties’ agreement to use the value of the assets held by their company as the value of the company or their shares in the company. In this case, the parties took the value of the landed property (HK#2506) as the value of their interests in SSEL. The parties were not seeking a direct transfer of HK#2506 to any of them. The assets in issue are their shares in SSEL (through its shareholdings in NEPL owns HK#2506).

87.  When a dispute over certain assets can be resolved in the matrimonial proceedings, commencement of separate action by a spouse over these assets may be liable to be struck off for duplicity of proceedings, or may be referred to be heard together in the matrimonial proceedings (for example the TL v ML type of cases).

88.  As it was pointed out by DHCJ William Wong SC in Ng Christina v Capella Capital Ltd [2020] 2 HKLRD 274 §50 (a companies winding up proceedings), in cases where the subject company is owned by the parties who have also commenced a divorce proceedings in the Family Court, unless there is relief that a party can only obtain in the Companies Court, the Companies Court will normally remit the matter to the Family Court so that one court will deal with all the issues between the parties.

89.  For reasons of case management and avoidance of duplicity of proceedings, save where there is a valid reason to litigate a dispute over matrimonial assets in a Civil Court or a Companies Court (e.g. relief that could only be obtained by a party in these courts), the spouse’s dispute over matrimonial assets should, in my view, be litigated in the Family Court to avoid inherent risk of inconsistent finding of facts, duplication of legal costs, delay and wastage of judicial resources.

90.  The court has repeatedly marked its disapproval on unnecessary satellite litigation. The dispute over a matrimonial asset litigated in the Civil or Companies Court is often just a part of their disputes on financial remedies upon divorce. The delay that would be caused by litigating different parts of the disputes in separate courts could be significant. The well-established dispute resolution mechanism in the Family Court also provides added advantage to assist the divorced couple to resolve their entire dispute in a more cost effective manner.

E2.2  The transfers to Father, Madam Hung and ZL

91.  H claimed for the first time in his Points of Defence in the Preliminary Issues (some 8 years after the Petition) that the SSEL Shares were sold to Father for $20 in May 2013 and were resold by Father to him for the same amount in August 2014. This unsubstantiated assertion was inconsistent with H’s claims that Father held 100% SSEL Shares on trust for him.

92.  It is common ground that Madam Hung held the SSEL Shares as trustee without any beneficial interest at all material times.

93.  H failed to prove that ZL had given consideration for the transfer by paying and consolidating H’s debt.

93.1.  Neither H nor ZL had ever particularised or substantiated the debts that were said to have owed to ZL despite:

(a)  H had stated in his 13^th Affirmation §28 that “[he has] asked [ZL] to gather the statement of account and records of current debt and borrowings. In order to not take things lightly, [he] will rely on [ZL] to produce the same, as she has the resources to perform the accounting work.”;

(b)  specific questions have been directed to him in W’s 3^rd Questionnaire for the provision of a full breakdown of his loan of $41,538,000 with documentary proof; and

(c)  an order[16] that he may be treated to have refused to file the answer if he did not do so within the stipulated time.

93.2.  There is a complete lacuna in evidence to support the suggestion that ZL had the financial ability to provide or pay off this huge debt for H. Quite the contrary, the Acknowledgment of Debt dated 8 September 2014 produced by H showed that ZL was unable to pay for the purchase of his jewellery business and required a loan of RMB 4 million with a 3 year interest free period from H.

93.3.  The way that H conducted the HC Action was inconsistent with his stance that he had transferred his beneficial ownership of SSEL Shares to ZL for good consideration. H twice applied unsuccessfully in the HC Action for leave to represent the Corporate Plaintiffs under Order 5 rule 6 of RHC. It does not make sense for him to do so if he, as he contended, only has 1% shareholding in SEL. If ZL was indeed the sole owner of SSEL which indirectly holds property of substantial value, there is no conceivable reason for her not to fund the litigation for the Corporate Plaintiffs given her financial ability as suggested by H.

94.  The alleged transfer of beneficial ownership of H’s Share to ZL in 2021 remained the bare assertion of H without evidence in support, whether on the circumstances surrounding the transfer to ZL or the particulars of the debt asserted to have settled as consideration for the transfer. I have no difficulty to reject such bare assertion.

95.  Even if H had somehow transferred the beneficial ownership of H’s Share to ZL, the disposition should be set aside under section 17 of MPPO. The disposition was made when the divorce proceedings was on foot. H concealed the disposition for at least some 10 months. His assertion once made in the correspondence of solicitors then acting for H that W was “notified” of the “change of company structure in 2021” was not supported by any objective evidence. The presumption under section 17(3) of MPPO is engaged and not rebutted. This is a clear case that the disposition was made with the intention to defeat W’s ancillary relief claim and is therefore liable to be set aside.

96.  It follows that ZL should be ordered to transfer back the SSEL Shares. The terms of the order and the identity of the transferee will be determined after consideration of the AR claims below.

F.  THE ANCILLARY RELIEF CLAIMS

97.  The legal principles and the five-step process set out in LKW v DD are well established. It is not necessary to repeat them here.

98.  This is a case of long marriage. Given the size of the matrimonial pot, there will have surplus after catering for the parties’ reasonable needs.

99.  The key issues are:

99.1.  the parties’ dispute on certain items of assets and liabilities;

99.2.  the parties’ allegations on non-disclosure of assets;

99.3.  any reasons to depart from the starting point of equal distribution, especially in view of H’s financial and litigation conduct; and

99.4.  what is the fair and equitable outcome.

G.  THE PARTIES’ ASSETS AND LIABILITIES

G1.  Landed Properties

100.  The schedule of assets and liabilities show that the parties have the following interests in landed properties held either directly by them or through corporate vehicles:

	Descriptions	Ownership	H’s interest	W’s interest
1.	HK#9B[17], HK#41[18], HK#42[19]	H & W	$9,500,000	$9,500,000
2.	HK#2506	NEPL[20]	$11,998,800[21]	$1,200
3.	HK#2902	H & W	$2,700,000	$2,700,000
4.	HK#13	H & W	$270,000	$270,000
5.	US#44	H & W	$1,537,801.20	$1,537,801.20
6.	GZ#225	W	-	$154,000
7.	NJ#601	Madam Li on trust for H & W (see also G1.1 below)	$4,097,500	$4,097,500
8.	SH#808	Madam Li on trust for H & W (see also G1.1 below)	$742,500	$742,500
9.	HK#86	W (50%)	-	$2,250,000
10.	GZ#3-3, GZ#3-4, GZ#3-5, GZ#3-9	W (22%)	-	$3,288,780
11.	GZ#175	W (36.7%)	-	$1,964,234
12.	GZ#131-1F, GZ#131-2F	W (16.4%)	-	$7,817,700
13.	GZ#285	W (100%)	-	$212,300
14.	GZ#289	W (50%)	-	$101,200
15.	GZ#284	W (10%)	-	$21,230
16.	GZ#211	W (10%)	-	$16,500
		Sub-total:	$30,846,601.20	$34,674,945.20

G1.1  NJ#601 (item 7) and SH#808 (item 8)

101.  Madam Li was the legal owner of NJ#601 (item 7) and SH#808 (item 8) when the parties filed their Form E. By a notarised written statement dated 22 May 2017, Madam Li declared that these two properties are 100% owned by H and W, she only held them on trust for H and W, and she was willing to transfer these 2 properties to H and W at any time.

102.  H’s recent assertion that these two properties belong to his parents by way of gift in the year of 2000 was unparticularised and unsubstantiated. This assertion was in contradiction with his own claims in a lawsuit commenced by him against Madam Li in the Mainland in 2023, wherein he claimed to be the owner of these two properties. No mention was made of the alleged gift to his parents.[22] H failed to prove his allegation of gift. I find that these two properties are part of the matrimonial assets.

G1.2  GZ#284 (item 15) and GZ#211 (item 16)

103.  W asked to deduct the value of her interest in GZ#284 (item 15) and GZ#211 (item 16) from the pool for distribution because she obtained them by inheritance and are non-matrimonial assets. This court agrees.

G2.  Bank account balance

104.  H’s bank account balance (including securities) was $354,482.27, and W’s was $270,609.16, after excluding the joint accounts that have been closed and those joint accounts with small value on which W did not seek any relief.

G3.  KPL

105.  KPL is a BVI company. Its shareholders are H and W. There were about $28 million in its bank account. Upon H’s requests in about October 2024, the parties agreed to each withdraw US$385,000 (about HK$3 million) from the bank account of KPL.

106.  Shortly before the Trials, W discovered that KPL was “dissolved”. She intended to restore KPL and understood that the process would take about 9 months. As mentioned above, she deposed in W-16 some evidence on the step required for the restoration after enquiries with BVI lawyers for the purpose of facilitating proper formulation of proposed orders to deal with the assets in KPL. The issue relating to restoration of KPL is addressed in Section J1 below.

G4.  SSEL, NEPL, SEL

107.  It was held in the Preliminary Issues that each of H and W holds 50% beneficial interest in SSEL. SSEL is 99.99% shareholder of NEPL, and the remaining 0.01% share is held by W. NEPL holds HK#2506 (item 2).

108.  The parties took the value of HK#2506 as the value of SSEL and NEPL. None of them contended otherwise although W told the court at her oral testimony that NEPL and SEL are still operating the business of electric conductor and electroplating chemicals.

109.  SEL is owned by SSEL (88%), W (1%), H (1%) and a former business partner of the parties (10%). None of the parties contended that a value should be given to SEL.

G5.  H’s indebtedness

110.  In H’s latest Form E filed on 4 June 2024, he claimed to have incurred the following indebtedness:

110.1.  $41,538,000 being outstanding loan used to pay for daily living expenses, child support and education, and litigation fees related to the divorce over the past 11 years since their separation;

110.2.  $661,940 being outstanding legal fees;

110.3.  $351,426 being outstanding credit card expenses.

111.  H failed to prove that these claimed indebtedness are true:

111.1.  H merely set out a total figure of claimed indebtedness without breakdown or details of the lender(s). Neither had he adduced any documentary support.

111.2.  H has been given ample opportunities to substantiate his claims but he refused to show any proof.

111.3.  In his Form E filed on 7 July 2020, he claimed to have borrowed $19.576 million. In the 2024 updated Form E, the total claimed indebtedness was increased to $41.538 million. There is no conceivable explanation for such a drastic increase of $21.96 million indebtedness within 4 years.

111.4.  H did not provide any breakdown or documentary proof for his alleged outstanding legal fees.

111.5.  The credit card bank statements produced by H were redacted without details of the transactions shown. There is no means to verify what these expenses were and whether they were incurred by H.

111.6.  H has been receiving rental income earned from some of the matrimonial properties. He refused to disclose the amount of rental income received by him. There is no basis to assume that H could only rely on loans to pay for his expenses and legal costs. He should not have incurred any legal costs after his acting in person in May 2023.

G6.  W’s indebtedness

112.  W claimed an indebtedness of $10,426,375.30 being loans owed to her parents and maiden family members. W said that the bulk of the loans was used for the payment of her and the son’s expenses, as well as her legal fees. She provided a breakdown on the loans and the repayments. She adduced documentary evidence on part of the loans. There was no documentary evidence in support of items amounting to a total of $6,945,187.36[23]. Out of this sum, a total sum of $4,911,529.86 was incurred in or prior to 2014[24], the rest was incurred in 2017 and 2020 respectively.

113.  The same principle that this court applied to H’s claimed indebtedness should also apply to W’s claimed indebtedness, thus only those supported by documentary proof are allowed.

114.  The amount of W’s indebtedness is found to be $3,481,187.94.

G7.  H’s claims in opening submissions

115.  H made various allegations in §§14, 16 and 18 of H’s Supplemental AR opening submissions (“H’s Supplemental Opening”). Many of these allegations were made belatedly in the affirmations filed for his 2023 MPS application which application has been dismissed, see [2024] HKFC 125.

116.  Even if we put aside the issue on admissibility of these claims, H failed to establish these allegations.

117.  In §14 of H’s Supplemental Opening, H claimed that the following sums should be attributed to W’s assets:

117.1.  $816,677.40: H said that this sum was pleaded in Part 2.13(7) of W’s 2015 Form E as monies from her bank account and should be added as W’s assets. This allegation is an unmeritorious distortion of W’s statement in Form E. Part 2.13(7) relates to parties’ liabilities. W pleaded that this sum was owed to her parents which had been taken away by H from her Mainland bank account. There is no evidence suggesting that H returned this sum to W.

117.2.  $98 million: this is the subject claims in the HC Action. The HC Action was dismissed with costs in September 2024. There is no conceivable basis for H to take the subject of a dismissed claims as assets.

117.3.  $65 million “liquid assets”: this is another distortion of W’s statement. H alleged that W admitted to have controlled this fund. What W had stated in her July 2016 email was that the amount was made up of the value of various landed properties (such as FMH, HK#2506 and US#44 etc) and KPL’s account, there was never any additional HK$65 million or hidden “treasury” of wealth as H contended. H did not prove the existence of the alleged additional funds.

117.4.  $16 million allegedly returned from ZJNF: this was first alleged by H’s affirmations filed in support of his 2023 MPS application which was dismissed. In H’s 17^th affirmation dated 7 December 2023 §§30-31, he claimed that this sum was shown in documents provided to him by W. He did not produce these documents until in his 19^th Affirmation dated 12 April 2024 wherein he exhibited some typed documents/tables. There is no evidence to show who prepared these documents nor evidence in support of their veracity. ZJNF is the entity set up by H in Shenzhen after his release from prison for the operation of jewellery business. H did not say how and why this sum should be treated as W’s asset. H was absence from trial. W did not have the opportunity to respond or to cross examine H on this matter.

117.5.  $1.46 million cash: H asserted that W took this away in 2014 but he had not provided any particulars or evidence.

117.6.  $20 million alleged receivables of SEL: this appeared to stem from a bare assertion in H-7 at §43 in which he deposed that “Around the end of 2008, [W] told me in tears that SEL had run into cash-flow problems and there was a substantial amount of aged receivables in the sum of about HK$25 million. I started a debt collection plan and managed to recoup about HK$20 million back to SEL in the following years.” H did not provide any evidence to prove that there was this sum recouped back to SEL, and if so, why this sum shall be attributed as W’s assets.

117.7.  $3 million mortgage on HK#9B (FMH): H did not prove how this, if true, shall be treated as W’s asset. HK#9B was jointly owned by H and W. H has been residing in HK#9B.

117.8.  $7 million from the sale of HK#11A: HK#11A is a property jointly owned by H and W. There was no particulars nor evidence to show how this property could have been unilaterally sold by W in 2009. H was released from prison in January 2008, prior to the sale in 2009. H has referred to the sale of HK#11A in §83 of H-7 (narrative affirmation filed for AR dispute), but he has not contended that the sale proceeds shall be treated as W’s assets.

117.9.  money from the sale of HK#502, HK#C1, HK#A, HK#25D: these properties had been owned or co-owned by W’s maiden family members prior to the sale to third parties. H had attempted to join W’s maiden family members for the disputes over the sale proceeds of these properties by H’s Joinder Summons, but his application was dismissed on 13 February 2023: [2023] HKFC 34. There is no basis for H to resurrect his claims by assertion in submissions.

117.10.  a cheque dated 15 March 2011 for $7.338 million payable to W and her parents, and a sum of $3 million that H said to be funds purchased in 2013 through a joint account of W and “WM”: H’s bare assertion that these are family assets controlled by W was not particularised nor supported by any evidence.

118.  H’s unparticularised and unsubstantiated requests in §16 of H’s Supplemental Opening for an assessment of rental incomes earned from HK#41, US#44, and other properties owned or co-owned by W’s parents are not entertained.

119.  In any event, on W’s case (which H did not appear to deny), H has unilaterally pocketed some of the rental income earned from US#44 and refused to consent to release those rental income withheld by the estate agents. Over the years, H had pocketed the rental income from various jointly owned properties, including HK#2506, US#44 an HK#13 to W’s exclusion. I agree with Counsel for W that it lies ill in H’s mouth to ask the court to take into account the rental received (or allegedly received) by W, but give no credit for the amounts that he has pocketed which W said should be much higher than those received by W over the years.

120.  I reject H’s suggestion in §18 that this court cannot or should not deal with properties in the Mainland or the USA.

121.  H never raised any challenge on forum non conveniens. It is too late for him to make this challenge. He had submitted to the jurisdiction of this court. He had asked this court to deal with the disputes on beneficial ownership of Mainland properties and failed, see H’s Joinder Summons. See also RKL v WL [2015] HKFLR 474. It is further of note that this court is exercising an in personam jurisdiction over the parties in respect of all their assets, whether in Hong Kong or abroad: see Hewitt, Family Law and Practice in Hong Kong (3^rd ed, 2018) §4.074 (which observes that “property” under MPPO section 7(1)(a) covers properties in Hong Kong or abroad); DX v LN FCMC 7870/2014, 30.11.2015 §§16, 24-48, 68; SL v CPYD [2020] HKFC 105 §§28-30.

122.  The new documents that H attached to his Supplemental Opening are not admissible in evidence. The issue of admissibility aside, these documents do not add to or assist his case.

123.  The emails by which he demanded W to bear expenses for HK#2902 or provide documents for NEPL and SEL had not been raised in evidence nor the Table of Assets and Liabilities. Neither had he produced any documents to support his case. The requests in the name of NEPL and SEL for production of W’s personal particulars and identity documents are not understood. W had been removed as a director of NEPL and SEL. Such requests are not scope of the PI or AR Trials.

124.  The issue shown in another email about his request in October 2024 for a release of funds in KPL’s account has been addressed in Sections D6 and G3 above.

125.  It is unclear what point H wished to make with reference to certain utility bills and management fee receipts attached to his Supplemental Opening. Some of these bills relate to the FMH where he has been residing.

G8.  Summary of parties’ assets and liabilities

126.  In summary, the parties’ assets and liabilities are as follows:

Descriptions	H’s interest	W’s interest
Assets
Landed properties	$30,846,601.20	$34,674,945.20
Bank account balance (including securities)	$354,482.27	$270,609.16
KPL (including the funds withdrawn in Oct 2024)	$14,389,484.69	$14,389,484.69
Stocks/Investment	$287,626	$319,087.40
Insurance	$727,350	$1,558,441.19
MPF	$536,760	$775,052.27
Less Loan owed to W’s parents & maternal family	-	($3,481,187.94)
W’s (non-matrimonial) interests in GZ#284 & GZ#211		($37,730)
Sub-total:	$47,142,304.16	$48,468,701.97
Total:	$95,611,006.13

H.  CONDUCT

127.  In the exercise of discretion for determination of financial provision on the parties’ divorce, the court has a duty to give regard to their conduct where it was “both obvious and gross” or in such category that disregard of which would be repugnant to anyone’s sense of justice: section 7(1) of MPPO; Wachtel v Wachtel [1973] Fam 72; LKW v DD.

128.  Mostyn J has identified in OG v AG (Financial Remedies: Conduct) [2020] EWFC 52, [2021] 1 FLR 1105 the following four distinct situations where conduct is relevant in claims for financial provision:

128.1.  Firstly, gross and obvious misconduct meted out by one party against the other. This will only be taken into account in very rare circumstances and will only be reflected where there is a financial consequence to its impact. This can extend to economic misconduct.

128.2.  Secondly, the “add-back” jurisprudence, which arises where one party has wantonly and recklessly dissipated assets which would otherwise have formed part of the divisible matrimonial property. It will only be in a clear and obvious, and therefore rare, case that this principle is applied.

128.3.  Thirdly, litigation misconduct. Where proved, this should be severely penalised in costs, although it is very difficult to conceive of any circumstances where litigation misconduct should affect the substantive disposition.

128.4.  Fourthly, the evidential technique of drawing inferences as to the existence of assets from a party’s conduct in failing to give full and frank disclosure. The taking of account of such conduct was part of the process of computation rather than distribution. The court should strive to quantify the scale of undisclosed assets but it is not obliged to pluck a figure from the air where even a ballpark figure is evidentially impossible to establish.

129.  Situation 4 (failure to give full and frank disclosure) and situation 3 (litigation misconduct) are relevant to this case. These are addressed in Sections H1 and H2 below.

H1.  Failure to give full and frank disclosure

130.  It is widely accepted that where a party was found to have failed to discharge his duty of disclosure, the court may draw adverse inference against him as to the existence of certain assets as part of the process of computation: Prest v Petrodel. A non-discloser should not be allowed to gain advantages from his non-disclosure. The drawing of such inferences must be reasonable, proper and with sound supporting evidence. This is a tool to achieve the ultimate goal of reaching a fair and equitable financial outcome to both parties, and to prevent from arriving at an outcome that a non-discloser obtained a better result than which would have been obtained if disclosure obligations were complied with.

131.  In NG v SG (Non-Disclosure) [2012] 1 FLR 1211 at §16, Mostyn J stated that the court must be astute to ensure that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told. Mostyn J took the view that:

“16(i) The court is duty bound to consider by the process of drawing adverse inferences whether funds have been hidden.

(ii) But such inference must be properly drawn and reasonable. It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the court is satisfied he has not got.”

(iii) If the court concludes that funds have been hidden then it should attempt a realistic and reasonable quantification of those hidden funds, even in the broadest terms.”

132.  In Hong Kong, HHJ I Wong has emphatically expounded in CCYL v CCSR [2023] 1 HKC 335 at §84 that:

“… a strong message must be sent out that a non-discloser should not be able to procure a result form his non-disclosure better than that which would be ordered if the truth were told. But the court must be realistic and there must surely be some finding, soundly based on admissible evidence, as to the broad extent of the hidden funds. This finding can be as broad or precise as the facts of the case demand.”

133.  On quantification of hidden funds, it is acknowledged that there are cases where such quantification is not possible irrespective of how broad the terms may be. Moylan LJ has held in Moher v Moher [2020] Fam. 160 that the court is entitled, in appropriate cases, to infer that the resources are sufficient or are such that the proposed award does represent a fair outcome.

134.  It is well established that where a party’s misconduct involves the wastage of matrimonial assets, the court may pursue either of the following routes with the ultimate goal to achieve fairness, viz. to make an order to add the funds back to the joint assets before distribution; or to take the misconduct into account when evaluating whether it is fair to depart from the equal sharing principle: see ARAV v VP [2011] 3 HKLRD 759 at §7, MKKWH v RKSH (Ancillary Relief: Addbacks and Claw Backs) [2013] HKFLR 540. The threshold for notional add-back requires clear evidence of dissipation with a wanton element, as this technique does not re-create actual money and is recognised to be in truth a process of penalisation: LCC v LTLA (Ancillary Relief: Add Back) [2024] 2 HKLRD 1177.

135.  Where conduct is an issue in ancillary relief claims, the Court of Appeal in LCC v LTLA (Ancillary Relief: Add-back) found that the two- stage approach set out by Peel J in Tsvetkov v Khayrova [2023] EWFC 130 are helpful. The approach slightly modified by the Court of Appeal set out in §48 of the judgment is as follows:

“Stage (1)

A party asserting conduct must prove:

(i) the facts relied upon; and if established,

(ii) those facts meet the conduct threshold, which has consistently been set at a high or exceptional level; and

(iii) that there is an identifiable (even if not always easily measurable) negative financial impact upon the parties which has been generated by the alleged wrongdoing. A causative link between act/omission and financial loss is required. Sometimes the loss can be precisely quantified, sometimes it may require a broader evaluation, but it is doubtful that the quantification of loss can or should range beyond the financial consequences caused by the pleaded grounds.

Stage (2)

If Stage (1) is established, the court will go on to consider how the misconduct, and its financial consequences, should impact upon the outcome of the financial remedies proceedings, undertaking the MPPO section 7 exercise which requires balancing all the relevant factors.”

136.  The above principles are adopted and applied in Sections H1.1 and H1.2 below to the facts in the respective allegations against H and W.

H1.1  Allegations against H

137.  W took issue on H’s refusal to disclose his true financial position. Specific examples are his refusal to disclose the particulars and whereabouts of the rental income he received from the properties owned by the family companies throughout the years, the value of the jewellery business which he admitted to have sold, the monies he admitted to have received from a lawsuit in the Mainland, and the inheritance that he would receive from his late mother’s estate. He also grossly exaggerated his debts.

138.  It is obvious that such conduct of H will have an impact adverse to W in this ancillary relief claims.

139.  W invited the court to draw adverse inference that H still has at least (1) the RMB 4 million that H claimed to have received from ZL for the sale of his jewellery business; and (2) the RMB 1.3 million that H claimed to have recovered from a Mainland lawsuit. Thus W asked this court to add an additional sum of RMB 5.3 million to H’s assets. W made it clear that she was not seeking an add-back relief as for cases of wanton dissipation of assets.

140.  I am satisfied that the court is entitled to draw an adverse inference against H for his consistent failure to give full and frank disclosure of his financial position. However, one problem of W’s proposal was that the jewellery business was sold some 10 years ago. Even if we took into account the 3 years grace period for payment, it was still far from the date of the Trials. There is a lack of sound evidential basis to draw an inference that H still has this sum.

141.  The recovery from the Mainland lawsuit happened closer to the Trials. While it may not be entirely unreasonable to draw an inference that H still has this sum with him, it is fairer and hence more desirable to consider the totality of H’s non disclosures, balance them together with the other section 7 factors at the final step, and draw an inference that the award determined below represents a fair outcome between the parties. This exercise will be done at the final step below.

H1.2  Allegations against W

142.  H claimed that W has hidden or siphoned off assets to her maiden family members or other third parties, secretly kept her “little coffers” or (in H’s own words) “Piggy Bank” (小金庫), and has taken away financial records of the family companies when she left the FMH. H also said that W controlled the family finances and caused him to suffer from “cash starvation”. These allegations are recurring themes in H’s case, but with very scanty supporting evidence.

143.  W strenuously denied these allegations. Her case is that:

143.1.  During marriage, both H and W had the passwords to access the bank accounts of the companies for their family business, either of them could sign cheques for the companies. H was therefore able to operate and control the companies’ accounts independently even when W was incarcerated in the Mainland in August 2013 to September 2014, not long before the petition in 2015.

143.2.  W’s parents did not require funds from her as they were independently wealthy. W admitted that she had helped her parents in the past by remitting RMB from the family companies’ Mainland accounts to Mother for the purchase of properties, assisted them in the logistics of the purchase and management of properties and used NEPL to obtain a mortgage for Father. However, her parents repaid the monies to her which she deposited back into the parties’ personal or joint accounts or the companies’ accounts. The arrangement was convenient to both W’s late parents and the family companies, as conversion between RMB and HKD could be difficult at that time.

143.3.  When W was in prison, H emptied her bank accounts (except one to which H did not have the password), took away her valuables items and financial records, withheld monies she owed to her relatives, removed from the FMH her bank passbooks, financial and corporate documents including those of the family companies and denied her access to the family’s mini storage at Kwai Chung.

144.  W admitted that she did not have the necessary documentary records to show that she had repaid or reimbursed the amounts which had been lent or advanced for use of other persons or entities, including her maiden family members. She said that it was because H had taken away the necessary financial records and deprived her of access to these records.

145.  Mr Nagpal (with Ms Cheng) submitted that W’s case is inherently credible:

“Had W intended to fritter away funds as H alleges, it would not have made sense for her to involve the family companies’ accounts or her joint accounts with H. Further, H’s own deployment of over RMB 12 million from the family companies’ accounts purportedly for his jewellery business confirms that the parties treated monies from the Family Business as being deployable for purposes other than those of the family companies where necessary.”[25]

146.  To refute H’s allegations that W had taken away the financial records, W drew support from H’s disclosure in these proceedings and the pleas in the HC Action as follows:

146.1.  H produced in this action various documents (which W said was done selectively as and when it has suited him) including (1) historical records and information of some of W’s previous bank accounts which (on W’s case) she had not been using for years and thus forgotten about; (2) documents in relation to the family companies (such as numerous cheque stubs); and (3) confidential information such as account details and PIN codes of the bank accounts in the name of W and/or the family companies. W said this supported her case on H’s withdrawal of all the monies in the bank accounts during W’s incarceration.

146.2.  In the HC Action, H provided some details of alleged transfers and loans involving the family companies at annexes to the SOC, the veracity of which was not admitted by W.

147.  The lack of documentary evidence and the depravation of opportunity to test evidence on cross examination due to H’s absence from the Trials enhanced the difficulty in finding the facts on this point. Having evaluated the available evidence, I agree with Counsel for W that the objective fact that H has produced many financial records relating to the family companies or family business over the years defeated his own allegations that the financial records have been taken away by W.

148.  It was H who raised the allegations that W dissipated or hid family assets. He has the burden of proving the same, and he failed to discharge this burden.

H2.  Litigation misconduct

149.  A quick review of the procedural history of these proceedings shows that much delay and escalation of costs have been caused by the manner in which H conducted this dispute.

H2.1  AR proceedings

150.  Firstly, H had used his change of solicitors and counsel as an excuse for multiple time extensions. These had been done repeatedly despite courts’ clear deprecation against parties using a change of legal representation as a ground for delay (see e.g. Mimi Kar Kee Wong Hung v Severn Villa Limited HCMP 243/2011, 12 April 2012 at §1; Beijing Hantong Yuzhi Convention Centre Ltd v Lao Yuan Yi HCA 1208/2010, 1 February 2013).

151.  There has been a pattern whereby shortly before a scheduled FDR, H changed representation and/or served a substantial questionnaire or discovery requests on W. Consequently, the FDR was derailed and adjourned 5 times.

152.  On 27 July 2020, right before the FDR hearing, H’s then solicitors applied to HHJ Melloy for leave to cease acting for him. This led to yet another adjournment to 17 August 2020. The FDR finally happened but it did not result in a settlement. The proceedings were then ordered to proceed to trial. H continued to delay the trial by taking out different interlocutory applications.

153.  Secondly, the mounting of multiple interlocutory applications, which are repetitive and unmeritorious, at different stages of the proceedings.

154.  H had relentlessly persisted in issues over certain Hong Kong and Mainland properties co-owned by W and her maiden family members.

155.  In 2017, W agreed that the interests under her name in certain of these properties co-owned with his maiden family members are matrimonial assets beneficially owned and belonging to her. An Order by consent was thus made by HHJ Melloy on 5 June 2017.

156.  H continued to mount substantial discovery applications against W, targeted directly or indirectly to these co-owned properties. These discovery applications were largely dismissed by HHJ Melloy with costs and direction that discovery should only go back to September 2014, which was when W was released from prison.[26]

157.  Notwithstanding that, H kept targeting on transactions happened as early as in 2006 and revived various requests which were held to be fishing expeditions by HHJ Melloy in an application before this Court for leave to file a third questionnaire.[27]

158.  H further took out H’s Joinder Summons against 6 members of W’s maiden family (3 of whom were deceased) on 8 October 2021. H’s Joinder Summons was dismissed by this Court on 13 February 2023.[28]

159.  Even after the case was set down for trial, H persisted in bringing hopeless applications, including[29]:

159.1.  an application for MPS for himself and interim maintenance for the adult children notwithstanding the lack of jurisdiction to grant him MPS after Decree Absolute was issued upon his own application, as well as his prior undertaking to maintain the adult children given when he applied for a decree absolute;

159.2.  twice for a stay or adjournment of the Trials, and

159.3.  an order to allow him to pocket the entire balance in the KPL account before the Trials.

160.  Thirdly, he unilaterally transferred or procured the transfer of the SSEL Shares to ZL on 8 July 2021, necessitating the trial of Preliminary Issues on the disputes over the ownership of SSEL Shares in addition to the ancillary relief disputes.

161.  Fourthly, he undertook certain steps and omitted to take certain other steps in these proceedings that led to an escalation of W’s costs and delay of the proceedings. Take for instance:

161.1.  His abrupt change from using English to simplified Chinese in all his court documents and correspondence. He did so even though he had studied and lived in the USA for years, is well-versed in the English language, and was able to correct the interpretation given to him by court interpreter during court hearings.

161.2.  His refusal to file an updated Form E until after an unless order compelling him to do so.[30]

161.3.  H (and ZL) did not cooperate in reaching agreement on documents ordered by the court for preparation of the Trials. Pursuant to the Order dated 14 August 2024 §§9-10, 13-14, they as defaulting parties are deemed to have agreed to the documents.

H2.2  HC Action and other satellite litigation instigated by H

162.  Section D7 sets out the other litigation commenced or caused to be commenced by H in Hong Kong and the Mainland which relate to the same subject matters in this action.

H2.3  The impact of H’s litigation misconduct

163.  A party who uses litigation tactics to delay the proceedings or to exert financial pressures on the other side in terms of costs, instigates unmeritorious claims to obtain tactical advantages, or pursues unwarranted satellite litigation at great costs, are considered as engaging in litigation misconduct that would be inequitable to disregard it (situation (3) identified by Mostyn J in OG v AG) and should be penalized in costs.

164.  The general approach is to reflect the impact of litigation misconduct in orders for costs rather than directly in the scale of the awarded sum: M v M (Financial Provision: Party Incurring Excessive Costs) [1995] 3 FCR 321, per Thorpe J; TT v CDS [2021] 1 FLR 996, [2020] EWCA Civ 1215, per Moylan LJ.

165.  The costs rules in England and Wales has changed significantly with one of the objectives to enable the court to take the effect of costs into account when determining the fairness of the proposed award. There is no equivalent statutory provisions in Hong Kong.

166.  Money spent on legal costs would no longer be available for distribution between the parties whether to meet their needs or for sharing between them. An order for costs essentially reallocates the remaining assets between the parties. It does not necessarily remedy the effect of there being less assets to be distributed due to the depletion of matrimonial assets as a result of litigation misconduct: TT v CDS supra, at §63, §78; R v B [2017] EWFC 33 at §84, per Moor J.

167.  Whether the court reflects the litigation misconduct in the award or in costs order, the ultimate importance, as reminded by Moylan LJ in TT v CDS, is to achieve a fair outcome properly reflected all the relevant circumstances and to give first consideration to the welfare of any minor children.

168.  Counsel for W invited this court to depart from equal distribution in favour of W to reflect H’s financial and litigation misconduct and indicated that W does not seek a costs order against H if it is found in W’s favour on her claims for indebtedness and her proposal in the distribution of assets. As explained in Section G6 above, I did not allow the deductions of all indebtedness claimed by W.

169.  I have held that H’s financial misconduct should be balanced against the other section 7 factors when considering the assets distribution at the final step. I do not think the same approach should apply to H’s litigation misconduct under the current rules in Hong Kong. I am not satisfied that the general approach should be departed in this case.

170.  I bear in mind that this is not a “needs” case and does not involve any interest of minor child, as otherwise, the court shall see that the final award is one that can meet the reasonable “needs” of the party and/or the minor child. This is not to be interpreted as confining the approach of reflecting litigation misconduct in the final award to “needs” case.

171.  H’s litigation misconduct is deplorable. It has undoubtedly caused very substantial delay and extra costs. A large part of his misconduct relates to the instigation of unmeritorious interlocutory applications and other parallel satellite litigation. These applications and litigation have their own costs orders which penalised H for his unmeritorious and irresponsible conduct. It would not be fair for this court to reflect the litigation misconduct in the AR award without having regard to the costs orders that had already been made. This court would not be able to do so as the costs orders made on litigation other than this action are not privy to this court.

172.  It is in my view fairer to follow the general approach by reflecting H’s litigation misconduct in the costs order to be made below.

I.  DEPARTURE FROM EQUAL SHARING PRINCIPLE

173.  Both parties had contributed to the accumulation of the family assets during this long marriage. Both of them should share the fruits of their contribution. The starting point of equal distribution applies.

174.  As I have held above, having regard to H’s financial misconduct, it is inevitable to conclude that there shall be a departure from equal distribution in favour of W in order to achieve a fair and equitable financial outcome.

175.  I also note that a substantial part of W’s assets (over $15 million) is tied up in properties in which she has a minority interest and hence has issue on liquidity.

176.  Having carefully weighed all the relevant factors, I consider it is fair to distribute 57% of the total assets worth $ 54,498,273[31] to W, and 43% worth $41,112,733[32] to H.

177.  H has not lodged any proposal for distribution for this court’s consideration. I have taken into account W’s proposal and the circumstances of this case.

178.  In regard to the companies, none of the parties suggested that a value should be attached to SEL although W testified that SEL continued to have business operation. Counsel for W informed the court in their closing submissions that W had taken legal advice and fully understands the risk that by taking the companies (including SEL), she will be taking any possible liability which the companies may have incurred. On this basis, I accept W’s requests on the allocation of the interests in the companies.

179.  I find it is fair to distribute the assets as follows:

179.1.  The landed properties: HK#2902, US#44 and HK#13 be transferred to W, and NJ#601, SH#808 HK#9B, HK#41 and HK#42 be transferred to H.

179.2.  All the interests in SSEL and NEPL being the companies holding HK#2506 be transferred to W.

179.3.  Both parties share 50% of the joint tracker funds.

179.4.  All the interests held by H in SEL and KPL be transferred to W.

179.5.  W will give H a lump sum of $7,526,514.

179.6.  Each of the parties continue to own the other assets under their respective names.

180.  The distribution and their respective values are set out in the table below:

W		H
HK#2902	$5,400,000	NJ#601	$8,195,000
US#44	$3,075,602.40	SH#808	$1,485,000
HK#13	$540,000	HK#9B, HK#41 & HK#42	$19,000,000
SSEL Shares, reflected in value of HK#2506	$12,000,000	Other assets in H’s name	$1,687,258.27[33]
KPL	$22,778,969	50% of Joint Tracker Fund[34]	$218,960
Cash withdrawn from KPL on 23.10.2024	about $3,000,000	Cash withdrawn from KPL on 23.10.2024	about $3,000,000
50% of Joint Tracker Fund[35]	$218,960	Lump sum from W	$7,526,514.48
Minority interest in properties that W co-owns with others	$15,421,914[36]
Other assets in W’s name[37]	$3,070,530.02[38]
Less
W’s liabilities	($3,481,187.94)
Lump sum to H	($7,526,514.48)
	$54,498,273		$41,112,732.75

J.  ISSUES RELATING TO IMPLEMENTATION OF ORDERS

J1.  Restoration of KPL

181.  A substantial part of the family assets is held in the bank accounts of KPL, which would very likely be the source of funds for the lump sum payment to be made to H.

182.  W intended to take steps to restore KPL (which according to her was “dissolved” due to the failure to comply with filing requirements). On W’s understanding, the process of restoration takes about 9 month. She is willing to undertake to inform H in writing when the restoration is completed.

183.  She asked this court to make a mandatory injunction by exercising the power under Section 52B(1) of the District Court Ordinance (“DCO”) to compel H to provide a certified copy of his Hong Kong Identity Card to the registered agent to satisfy its Know Your Client verification, failing which the registered agent would not be able to act in the restoration and the compliance of necessary filing requirements.

184.  Section 52B(1) and (2) of the DCO provides that:

“(1) The Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in any action or proceedings in the Court and within its jurisdiction in which the Court considers it just or convenient so to do.

(2) The order may be made either unconditionally or on the terms and conditions the Court thinks just.”

185.  The discretion to grant a mandatory injunction should not be exercised lightly. It is trite that the granting of a mandatory injunction usually requires a higher standard of proof than a prohibitory injunction. The ultimate question is what is the course to adopt that involves the least injustice in case of the grant or refusal of the relief: Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD1041, as applied in China Shanshui Cement Group Ltd v Zhang Caikui [2018] HKCA 409; Hong Kong Civil Procedure 2025 Vol. 1 §29/1/29.

186.  The evidence provided by W on the restoration requirements is piecemeal. There is no evidence on all the requirements under the BVI laws for the restoration, nor evidence that enable this court to conclude that the provision of certified copy of identity document by H is the only means to ensure the completion of restoration. I am not satisfied that the above mandatory injunction requested by W should be granted.

187.  It is in the interest of both parties to restore KPL properly. Both parties are shareholders and directors at the time of the default in compliance with the filing requirements. It is also expected that the lump sum payment payable to H (or a substantial part of which) would come from the funds in KPL. To address the likelihood of H’s uncooperative attitude (as he has demonstrated in the conduct of these proceedings), I am prepared to order the final payment of the lump sum be made to H after KPL is restored if W is willing to give an undertaking that she will take steps to restore the status of KPL with reasonable diligence. This should give H some incentive to cooperate in the restoration process. W had unambiguously indicated her intention to restore KPL and requested the court to make an order in aid of the restoration, I do not see any difficulty in her giving this undertaking. If W is not willing to give this undertaking, the final lump sum payment cannot be linked with the restoration of KPL.

J2.  Unpaid/ untaxed costs orders

188.  W submitted that H has not complied with the costs orders made against him in these proceedings, and further multiple costs orders against H are subject to taxation.

189.  According to W, H currently owes her a total of $175,626.70 of unpaid costs that had been summarily assessed and awarded to W. I allow W to set off this taxed sum of costs from the lump sum payable to H: WC v HC (Costs) [2022] EWFC 40 §16 per Peel J.

190.  W’s solicitors estimated the untaxed and unpaid costs orders amounts to around $1 million in total. W asked the final instalment of the lump sum be made after the net amount of costs owed is crystalised either by taxation or by agreement so that she can effect a set off. I am not prepared to make this order. This court cannot control the conduct of the taxation process. There is no evidence on when and how W will commence the taxation proceedings.

J3.  Other matters

191.  W asked this court to make the following injunction order and order for execution of documents to facilitate the implementation of the financial orders.

192.  I am not persuaded that an injunction to restrain H from incurring further encumbrances or liabilities for and on behalf of the family companies from the date of this judgment should be granted. Decree Nisi has already been made absolute. The transfer order made in this Judgment has the effect of conferring the beneficial interests of these assets on W: Mountney v Treharne [2003] Ch 135; [2002] EWCA Civ 1174.

193.  I am also not satisfied that orders for execution of specific transfer documents should be made against H and ZL at this stage because (a) this is premature; (b) the court has no evidence on the accuracy and appropriateness of the draft documents provided by W and (c) there is an established mechanism for enforcement of orders should H and ZL act in default.

K.  ORDER

194.  I therefore make the following orders. The timing and sequence of the transfers and payment are determined after having regard to the principle of fairness bearing in mind the past conduct of H and ZL as well as the real likelihood of their refusal to cooperate.

(1)  H do forthwith transfer all his beneficial interests in the following companies to W:

(i)  SSEL;

(ii)  NEPL (if any);

(iii)  SEL; and

(iv)  KPL.

(2)  ZL do (a) forthwith transfer all her beneficial interests in SSEL (if any) to W, and (b) within 28 days from the date of this Judgment, transfer all her legal interests in SSEL to W and take all steps including execution of all documents required to effect the above transfer.

(3)  50% of the costs of the transfers in (2) above be borne by H and ZL jointly and severally and the other 50% be borne by W (and if necessary be set off against the lump sum payment in (9) below).

(4)  Within 28 days from the date of this Judgment, H do deliver all the original title deeds of the following properties, if any, to W:

(i)  HK#2902;

(ii)  HK#13; and

(iii)  US#44.

(5)  Within 35 days from the date of this Judgment, H do provide and/or execute all necessary documents to effect the transfer to W of his legal and beneficial interests in the landed properties in (i) to (iii) and all of H’s legal interests in (iv) below:

(i)  HK#2902;

(ii)  HK#13;

(iii)  US#44;

(iv)  SEL.

(6)  Upon W’s undertaking to notify H in writing within 7 days when the restoration of KPL is completed, H do, within 28 days from such written notification, transfer to W any legal interest H may have in KPL by executing all necessary documents to effect the transfer.

(7)  Within 21 days upon H’s compliance in full with the orders in (4) to (6) above, W do provide and/or execute all necessary documents to effect the transfer of her legal and beneficial interests in the following properties to H:

(i)  HK#9B;

(ii)  HK#41; and

(iii)  HK#42.

(8)  Costs of the transfers in (4) to (7) above be borne equally by H and W (and if necessary be set off against the lump sum payment in (9) below).

(9)  Upon H’s compliance in full with the orders in (4) to (5) above, W do pay H a lump sum of HK$7,526,514 by two instalments in the following manner:

(i)  1^st instalment: within 7 days after H’s full compliance with orders in (4) and (5) above, W do pay HK$1,824,400, being part of the lump sum (HK$2,000,000) less the unpaid costs of HK$175,600 owed by H to W (rounded down from HK$175,626.70);

(ii)  2^nd instalment: (a) Upon W’s undertaking to the court and to H that she will take the necessary steps with reasonable diligence to restore KPL from its status of having been dissolved/struck out and to inform H in writing within 7 days upon the completion of the aforesaid restoration of KPL, W do pay H the remaining part of the lump sum (HK$5,526,514) within 21 days after KPL is restored or 21 days after H’s full compliance with orders in (4) to (6) above, whichever is the later; or (b) if W is not willing to give the above undertaking, the 2^nd instalment of lump sum shall be paid within 90 days after the 1^st instalment payment.

(iii)  W do inform the court in writing (copy to H) within 10 days from the date of this Judgment of whether she will give the undertaking set out in (ii) above.

(10)  Save as provided in the above, all ancillary relief claims of H and W against each other are dismissed.

(11)  Liberty to apply for the implementation of the above orders.

L.  COSTS

195.  There is no reason to depart from the starting point of costs follow the event. W is the successful party in the Preliminary Issues and the ancillary relief claims. She is entitled to the costs of these proceedings to be paid by H and ZL respectively.

196.  But for H’s unilateral transfer of the SSEL Shares to ZL while this action is on foot, there is no need to incur costs in litigating the Preliminary Issues. H and ZL have been uncooperative in the conduct of the Preliminary Issues. These give rise to the justification for an order of costs in the Preliminary Issues on an indemnity basis.

197.  On a nisi basis to be made absolute in 14 days from the date of this Judgment, H and ZL do pay W’s costs in the Preliminary Issues jointly and severally (including all costs order reserved, if any) on an indemnity basis, to be taxed if not agreed, with certificate for two counsel.

198.  H’s deplorable litigation misconduct in this action have been set out above. Such misconduct calls for an award of costs on an indemnity basis.

199.  H do pay W the costs of the ancillary relief disputes (including all costs order reserved, if any) on an indemnity basis, to be taxed if not agreed, with certificate for two counsel. This is an order nisi to be made absolute in 14 days from the date of this Judgment.

200.  I express my gratitude to Mr Nagpal and Ms Cheng for their helpful assistance.