LKY v. YLP

FCMC 4352 & 18284/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 4352 & 18284 OF 2013

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REASONS FOR DECISION

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1.  For the purpose of today’s hearings, I have to deal with the following 3 matters:

(1)   The Respondent Wife (“the wife”)’s summons dated 19 September 2016;

(2)   The Petitioner Husband (“the husband”)’s summons dated 26 October 2016; and

(3)   The pre-trial review of the parties’ ancillary relief applications.

2.  For the parties’ 2 summonses, they are essentially concerned with 3 matters:

(1)   The filing of the parties’ up-dated Form Es before trial, which is to take place on 24 November 2016 in this court for 10 days.

(2)   The valuation of certain landed or other properties owned by the parties.

(3)   The valuation of a listed company (“S”) in which the husband owns a controlling shareholding.

3.  The issues concerning (1) and (2) in the preceding paragraph are less controversial and the parties can come to some form of agreement save and except for some minor details.  But the same cannot be said of the last issue concerning S.

4.  Due to the constraints in time, I am not prepared to go into the details on the facts and the submissions of Ms Yip SC for the wife and Mr Pang SC for the husband. Instead, I will go directly to my decisions and the reasons on which those decisions are being made.

Updated Form E

5.  There is no dispute that updated Form Es should be filed and exchanged by 8 November 2016.  But the parties cannot agree on the time for filing.   The wife asks for filing by noon whilst the husband wants more time for the document to be filed by 5:00pm.   It is regrettable to note that the parties cannot agree on even such a minor issue.  I direct that the updated Form E to be filed and exchanged by 5:00pm on 8 November 2016.

Valuation of properties (except S)

6.  The parties agreed that there should be valuation by a single joint expert (“SJE”) on the market value of the following properties:

(1)   Rose Court property;

(2)   Ventris Road property; and

(3)   Hennessy Road property.

7.  As to the valuation of the Perkins Road property, the wife agrees to the valuation of the current market rental whilst the husband asks for its full market value to be obtained as well.

8.  I agree that it is a prudent course to take to obtain the full market value as well.

9.  There is disagreement on whether the Mission Hills Golf Club membership and the Pacific Club membership (both held through S) should be valued at all.   The wife said it should, unless there will be valuation of the S shares as requested by her. The husband said it should not for the simple reason that these memberships belong to S which will be reflected in the value of the company.

10.  I agree with the husband that these memberships form part and parcels of the company assets and there needs not to be any separate valuation of them.

11.  There was also a property in Shenzhen in the name of the husband.   The wife asks for its valuation.   The husband said it was sold already and they are prepared to provide the documents evidencing such sale to the wife.  In that event, there is no need for such valuation.

12.  I have no reason to disbelieve the husband.   I expect such documents to be provided before trial but in the event that they are not forthcoming, I will have no hesitation to reopen this issue.

Valuation of S

13.  This is the most controversial topic of today’s argument.

14.  It is common ground that the husband is the single biggest shareholder (holding over 36%) of S, which is a listed company in the Hong Kong Stock Exchange.   There should not be any serious dispute that he is also the controlling shareholder.   The wife now asks for a SJE to be appointed to evaluate the husband’s shareholdings in S.

15.  The first objection by Mr Pang is that the wife is somehow shifting her request for valuation.   In the summons, she asks for the valuation of “value of the shell of the listed shell company, namely S Holdings Limited”.   But in Ms Yip’s written submissions, which were repeated and elaborated upon in her oral submissions today, the wife is now asking for the valuation of the husband’s shareholdings in S.  To be fair to Ms Yip, she did include “the value of the shell of the listed company” in paragraph 1(b)(i) of her written submissions.  But I think it is right to say that by judging from what Ms Yip has said in court, the focus of the wife’s application must be for the valuation of the husband’s shareholdings in S, but not the “shell”.

16.  In this regard, I agree with Mr Pang’s submissions that the wife is now shifting the goalpost, so to speak.   That should not be allowed and I will therefore only consider the wife’s application for the valuation of the “shell” of S.

17.  Mr Pang further submitted that the wife’s application must fail because S is simply not a shell company.  It is a company holding 20 odd subsidiaries and carrying out various active and substantial business activities.   The valuation of its “shell” is meaningless because there is simply no “shell” to be valued.

18.  I see no valid answer to this objection and on this ground alone, the application has to be refused.

19.  That should be enough to dispose of the application but I think I need to say something on the wife’s submissions that the said application is absolutely necessary for a fair disposal of the ancillary relief applications and the issue of delay.

20.  Ms Yip submitted that the husband’s shareholdings in S is the single most important and valuable assets in the family pot and without its valuation, the court will not be able to carry out the first step of its adjudication process, namely the ascertainment of the value of the total family assets.  

21.  I agree that if there can be an agreement on the value of the S shareholdings, or failing which, a SJE report on their valuation, will be of much assistance to the court.  However, I do not agree that they are the only means of valuation.  As argued by Mr Pang, the multiplication of the number of shares by the market price quoted in the Hong Kong Stock Exchange can be one way of valuation.  That may be perceived by the wife to be prejudicial to her interest but if that is the case, she certainly has a duty to make an application as early as possible, but not wait until we are 3 weeks away from trial.

22.  As can be gleaned from the documents and transcript of proceedings, the issue on the husband’s shareholdings in S is not a new matter.   The wife first raised the issue of “shell value” in November 2015, but it was not pursued thereafter.   There is no good reason offered for such delay and the change of legal team is certainly not a reasonable explanation.

23.  More importantly, the wife’s application, if acceded to, will no doubt affect the trial which will start on 23 November 2016.  To be realistic, even if the court should allow the preparation of the SJE report now, the identity of the SJE may still be argued upon, and another hearing may become necessary.   It is rather doubtful whether the actual appointment of the SJE can be made before trial.  But even if that can be done before trial, there is also the issue on when the report can be made available, and even if available, whether its contents and conclusions will be challenged.  Simply put, there is no way for the trial not to be adversely affected.

24.  Ms Yip tried to argue that any prejudice caused by delay can be compensated by a proper costs order and such procedural hiccup should not be allowed to affect the overall fairness of the case.

25.  I agree with Mr Pang’s submissions that such argument cannot be entertained, especially in the post- CJR era.  

26.  By way of conclusion, I am not persuaded that a SJE should be appointed at this late stage to prepare a valuation on the “shell value” or the husband’s shareholdings in S.

Directions for trial

27.  The parties cannot agree on the sequence of witnesses to be called.   The wife asked for 2 of her witnesses to be called first because they are overseas witnesses.   The husband objected, saying that they should follow the normal sequence, namely that they should testify after the wife, and certainly not before the husband.

28.  If the parties fail to agree on the sequence of witnesses to be called, I think the normal order should be followed, namely that the wife’s witnesses should be called after the wife has finished her evidence.

Orders

29.  These are the orders to be made:

(1) The parties to file and exchange their updated Form E by 5:00pm on 8 November 2016.

(2) A SJE to be agreed between the parties to prepare valuation reports on:

(i) The market value of:

(a) Rose Court property;

(b) Ventris Road property; and

(c) Hennessy Road property.

(ii) The market value and market rental of Perkins Road property.

(3) The wife’s application for the valuation on the shell value of S, Mission Hills Golf membership and Pacific Club membership is refused.

(4) No order is made on the application concerning the valuation of the Shenzhen property.

(5) For the coming trial:

(i) Written opening submissions to be exchanged and filed by 5:00pm on 18 November 2016.

(ii) Order of the trial and witnesses:

(a) Opening by the husband;

(b) Opening by the wife;

(c) The husband;

(d) The husband’s witnesses;

(e) The wife; and

(f) The wife’s witnesses.

Costs

30.  The wife fails in most of her applications.  Costs to follow event.  The husband shall have the costs of both summonses.   Almost all the time of the PTR was used for the argument of the 2 summonses.  The husband shall have the costs of the PTR as well.  There shall be certificate for 2 counsel.