CKK v. CKF AND OTHERS

FCMC 1556/2014

[2018] HKFC 53

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FAMILY COURT

MATRIMONIAL CAUSES NO.1556 OF 2014

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RULING

(Interlocutory Injunction)

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Introduction

1.  On 7^th March 2017, the Petitioner (hereinafter called “P”) originally made an ex parte application to this Court for an interim injunctive order against the 4^th Respondent (hereinafter called “R4”) in respect of the dealings of some landed property in the mainland China (“the Property”), and was granted on 7^th March 2017 (“ex parte order”).

2.  The relevant Inter-partes summons was later taken out on 8^th March 2017 and returnable on 16^th March 2017 and the ex parte order was continued on the returned date and further continued on 29^th March 2017 and 20^th July 2017 respectively (“the Injunction order“).

3.  At the hearing on 29^th March 2017, R1 and R4 sought direction for the filing of further affirmations in opposition to the continuation of the Injunction order and at the hearing on 20^th July 2017, by consent R1 and R4 agreed to continue with the Injunction order until this present hearing.

4.  The terms of the Injunction order can be found in Bundle A page 73 to 81 which I shall not repeat here.

5.  Apart from P’s claim in relation to the Property, P also claims against R1 and R4 respectively in relation to a number of other properties (other Properties”).

6.  In parallel to the Injunction order, P took out the Amended Inter-partes Summons on 16^th May 2017 in relation to the preliminary issues to be tried by the Court and also joining R2 to R4 as respondents to these proceedings.

7.  However, no application for interim injunctive relief has been made by P in relation to the other Properties claimed by P as forming part of the matrimonial pool.

8.  There shall be trial of preliminary issues of the beneficial ownerships of the Property and the other Properties together with the questions relating to the Power of attorney and the intended Divorce Agreement (as both defined in P’ Points of Claim at para.15 thereof).

9.  P and R1 have different cases on the background leading to the signing of the Power of Attorney and the Intended Divorce Agreement and the validity of the Power of Attorney and the Intended Divorce Agreement are to be tried also in the trial of the preliminary issues.

The issues of the case

10.  Mr. Eric Leung, Counsel for P submitted that R4 essentially agreed with P’s approach that anything P and/or R4 received as a result of the transfer of the buildings in question should be frozen until at least the final determination of the preliminary issue as indicated at paragraph 21 of R4’s affirmation dated 30^th June 2017.

11.  Mr. Enzo Chow, Counsel for R1 and R4 submitted that R1 and R4 did not seek to argue that the Injunction order should not have been granted. They only argued that the amount restrained should not be the whole of the compensation payable to R4 by the relevant authority in the PRC.

12.  Mr. Chow submitted that in R4’s first affirmation dated 30^th June 2017, R4 proposed that RMB44,043,231.38 should be frozen pending the outcome of the further proceedings. R4 disclosed that the total amount to be received by R4 from the relevant authority in relation to the resumption of the Property would be RMB102,431,398.

13.  The basis of R4’s proposal is that there will be trial of the preliminary issue in relation to the ownership of the Property and that P will not be entitled to more than half of the total value of the Property even if the Property forms part of the matrimonial pool. Therefore, even assuming the compensation received in relation to the Property forms part of the family assets of P and R1, P at most can have one-half of the same.

14.  Mr. Leung submitted that since the parties’ are unable to ascertain the size of the matrimonial pot, therefore the above argument advanced by Mr. Chow is incorrect.

15.  Based on what the parties had submitted, the following should be the issues in this case, namely :

(1) the size of the matrimonial pool, and

(2) what amount should be restrained by the Injunction order.

The Legal Principles

16.  Mr. Leung had set out the legal principles regarding a domestic Mareva injunction in his written submission. He stated that in considering whether to grant a Mareva injunction, paragraph 29/1/65 of Hong Kong Civil Procedure 2018 provides a summary of the “requirement for Mareva injunction”, namely :-

“For a domestic Mareva injunction, the plaintiff must show :

1. that he has a good arguable case on a substantive claim over which the court has jurisdiction;

2. that there are assets within the jurisdiction;

3. that the balance of convenience is in favour of grant;

4. that there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, which would render the plaintiff’s judgment of no effect;

5. the plaintiff must comply with the strict duty of full and frank disclosure; and

6. in the case of “worldwide” Mareva injunctions, additional factors become relevant as explained in paras 29/1/76 et seq. below.

In light of the serious detriment likely to be suffered by a defendant by the making of a Mareva injunction, it is essential for the court to carefully scrutinise the materials placed before it...”

17.  The additional factors are seen at paragraph 29/1/83 of Hong Kong Civil Procedure 2018, p.738 in particular where it states :- 

“Where a plaintiff applies, in the context of Hong Kong proceedings, for a Mareva injunction having extraterritorial effect with an ancillary disclosure order attached, three issues arise :

1. has the plaintiff a good arguable case,

2. has the plaintiff satisfied the court :-

(a) that there are no assets or insufficient assets within the jurisdiction to satisfy his claim, and

(b) that there are assets without the jurisdiction, and

3. is there a real risk of dissipation or secretion of those assets so as to render any judgment which the plaintiff may obtain nugatory.”

18.  Mr. Leung also stated that in Shipman v. Shipman [1991] 1 FLR 250 which was adopted and upheld in Hong Kong by the Court of Appeal in Tan Li Hui v. Tan Kian Chee [1997] 4 HKC 94, Lincoln J. held that :-

“(i) the court has an inherent jurisdiction to freeze assets which might be put beyond the reach of the applicant, notwithstanding the enactment of section 37 of MCA 1973 (i.e. section 17 of MCO of this jurisdiction);

(ii) the court, when deciding whether to exercise its inherent jurisdiction to restrain the husband, was not required to have regard to the many restrictions and safeguards surrounding the use of worldwide Mareva injunctions and to assimilate the use of and procedure for injunction in the family court to those in commercial law. The matrimonial field called for a different approach; and

(iii) if the injunction is discharged it is possible for the husband to change his intention, however genuine and well-disposed to his wife his present state of mind might be; and if left without a job and new responsibilities, will be faced with a temptation to eat into the whole of the fund.”

19.  I trust that there will not be any dispute as to the above principles.

Discussion

20.  P’s case in relation to the Property are set out in paragraph 23 of the Points of Claim of P. P also asserted that the Power of Attorney and the Intended Divorce Agreement are invalid and of no legal effect, and that the transfers by R1 to R4 is invalid, therefore, the total sum obtained by R4 in compensation, grants and/or incentives from the relevant authorities for the sale of the Property are held on trust for and on behalf of P and R1 jointly and should be re-vested to them.

21.  R1 asserted that for an effective transfer pursuant to the Intended Divorce Agreement, it was necessary to also have a power of attorney from P in favour of R1 and thus the Power of Attorney was drafted (see R1 Points of Defence 13d).   

22.  In gist, P asserted that the Property were transferred to R4 without the consent of P.

23.  Mr. Leung stated that in order to show a “good arguable case”, the court has held that “the plaintiff need not go so far as to persuade the judge that he is likely to win”. The plaintiff must show that his case “is one that is ‘more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success” (see: Akai Holdings Ltd v. Ho wing On, unrep. (HCCL 37/40 of 2005).  

24.  R avers that the Property was acquired with Family savings and contributions from the children’s savings (para 9c of R1 points of Defence).

25.  Mr. Leung submitted that in the present case, it cannot be disputed that P has a “good arguable case” that the value or alternatively that the net proceeds received from the transfer of the Property should be included as forming part of the matrimonial pot for distribution between P and R1. I agree with Mr. Leung’s observation.

26.  Despite the fact that Mr. Chow in his submission made comments about the merit of the Injunction Order, Mr. Chow stated that R1 and R4 do not seek to argue that the Injunction Order should not have been granted. In this premises, I cannot see the reason why the whole of the compensation payable to R4 by the relevant authority in the PRC should not be restrained.

27.  If P has a “good arguable case” on R4 that R4 are actually held on trust either for P or R1 or both and the Property should be taken into account as forming part of the matrimonial assets between P and R1, my view is that I should not link up the amount restrained with the potential entitlement of P for the present purpose because R4 will be holding the entire assets for P and R1 pending the trial for ancillary relief, if P can succeed in the preliminary issue.

28.  Because the parties do not know what the size of the matrimonial pot will be, Mr. Leung submitted that the potential entitlement of P of the Property is therefore unknown.

29.  P’s case in his 9^th Affirmation is that the total compensation, grant or incentives that are to be received for the transfer of the Property is at least RMB106,534,513.

30.  In R4’s first affirmation in Chinese dated 30^th June 2017, the total amount to be received by R4 from the relevant Shenzhen government authority in relation to the resumption of the Property would be RMB102,431,398.

31.  Mr. Chow argued that the basis of R4’s proposal is that there will be trial of the preliminary issue in relation to the ownership of the Property and that P will not be entitled to more than half of the total value of the Property even if the Property forms part of the matrimonial pool, and if the parties cannot ascertain the size of the whole matrimonial pool now, the only logical assumption will be the total amount of the compensation received by R4 forms the whole of the matrimonial pool.

32.  Mr. Chow had relied on Ghoth v Ghoth [1992] 2 All ER 920 to support his argument that P can only restrain the amount as suggested by Mr. Chow, as P will not be entitled to more than half of the total value of the Property.

33.  While it is trite law that the court would not in any foreseeable circumstances grant either party in matrimonial proceedings a Mareva injunction over all the assets of the other party, even subject to the usual exceptions as to living expenses, since the purpose of a Mareva injunction was to safeguard the plaintiff or petitioner from a situation in which asserts were run down by the opposing party with the intention of making that party judgment-proof or in which without reasonable excuse that was the effect of dealing with the assets, and in matrimonial proceedings it was unlikely that a petitioner would ever get the whole of the respondent’s fortune, my view is that the situation when the assets were held by a third party would be quite different.

34.  Because in the case of husband and wife, the portion that was not being restrained was held by the opposing spouse, any run down of the unrestrained assets by the opposing spouse can be dealt with and regulated subsequently in the trial of ancillary relief between the husband and the wife, but this will not be the case where the unrestrained assets is held by a third party.

35.  Any run down of the unrestrained assets by R4 will ultimately affect the size of the matrimonial pool that will be available to the parties at the trial of ancillary relief.

36.  In particular, in the present case, R1’s stance is that she had only acknowledged that she had received RMB14,000,000 from the sales of the Property.

37.  I therefore do not find that Ghoth v Ghoth should apply in the present case as suggested by Mr. Chow.

38.  Mr. Leung had submitted that it is unclear at this stage what the assets of R4 are, and that until the preliminary issue had resolved the beneficiary ownership of the Property and the other Properties, the balance of convenience must be in favour of granting an injunction against R4 so that any proceeds he may have received related to the Property are preserved for the time being.

39.  Mr. Leung also submitted that there is sufficient reason to infer that R4 is likely in cahoots with R1 and in order to assist her, is likely to dissipate or transfer the proceeds he received from the transfer of the Property.

40.  Despite the aforesaid submissions advanced by Mr. Leung, Mr. Chow had confirmed that R1 and R4’s only issue in the case is the amount restrained. Suffice to say that I am not persuaded that the best case of P’s interim injunction application shall be at most half of the total amount of compensation received and to be received by R4.

41.  I am persuaded by Mr. Leung and find that it is appropriate to continue the Injunction Order until the final determination of the Preliminary issue or further order of the court.

Order

42.  It is ordered that :

1) the application made by R1 and R4 to vary the terms of the Injunction Order be dismissed; and

2) the Injunction Order be continued until the determination of the Preliminary issue or until further Court order whichever is earlier.

Costs

43.  I will make a costs order. Costs shall follow the event.

44.  I will make a decree nisi that costs of this application shall be to P to be borne by R1 and R4 jointly and severely to be taxed if not agreed, and P’s own costs be taxed in accordance with Legal Aid Regulations, such order to be made absolute upon the expiration of 14 days.

45.  There shall be certificate for counsel.Lastly, I thank both counsels for their assistance.