MIOKO SAKURADA LOUVET v. LOUIS ARISTIDE CHARLES LOUVET AND ANOTHER

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JUDGMENT

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Sir Derek Cons, V. P., delivered the judgment of the Court:

1. This is an appeal from an order made by Mayo, J., on the 6th February this year. It arises from matrimonial proceedings between a French husband - we use such terms for convenience although the divorce has been made absolute - working in Indonesia and a Japanese wife now living in Paris. The 2nd Respondent, who lives in Hong Kong, was made party to the suit as a woman named. Litigation as to which jurisdiction was appropriate was finally settled by this Court, differently constituted, last November.

2. The proceedings before Mayo, J., are part of the wife's application for financial relief. Of principal concern was a sum of HK$4.6 million which the husband had, in his own words, "bestowed upon his natural children", i.e. two daughters by his first wife and one by the 2nd Respondent, and a further sum of approximately HK$1.2 million owed by a company, Modern China Limited., to another company, China Concept Limited. The former company is owned and controlled by the 2nd Respondent, the latter by the husband. We are satisfied that despite the rule in Salomon v. Saloon [1897] A. C. 22, for the present purposes the companies may be taken as one and the same as the 2nd Respondent or the husband as the case may be.

3. The HK$4.6 million are part of HK$8.1 million which the husband derived from the sale at the end of 1987 of a stock option given to him in lieu of pension by his previous employer. It was "bestowed" upon the daughters by way of a capital injection into a Liberian shelf company - Melanic Incorporated - purchased by the husband and transferred to his three daughters, the two elder receiving 43% of the shares each while the remaining 14% are held by the husband in trust for the youngest. At much the same time, i.e. in February 1988, "Melanic loaned the HK$4.6 million to Modern China which, as one of its objects, has the business of a money-lender. The loan was repayable in two-and-a-half years, i.e. in August this year, with monthly interest in the meantime at 10%, which is paid on to the husband who holds what we would look upon as a life interest in the capital. By an application dated the 13th April, 1989, and directed to the husband, the wife has sought to set aside a disposition in favour of the daughters. We understand that the application will be dealt with on the 28th of this month.

4. Those parts of the order of Mayo, J., of which complaint is made - namely that he lacked appropriate jurisdiction - may we briefly summarised as orders that

5. When the appeal was called on Mr. Payne, who appears as he did below for the wife, applied to introduce three affidavits by way of fresh evidence. The first was by the General Manager of Modern China made in compliance with orders 4 and 5 above; the second was by a solicitor acting for the wife. The object, as we understood it, was to show that the company was heavily insolvent, thereby confirming the correctness of the judge's order. While accepting that even with due diligence the wife's advisers could not have discovered the company's insolvency before disclosure was made in response to the judge's order, we declined to admit the evidence for the reason that it did not go to confirm the correctness of the judge's order, which was the basis of the application, but at best went to support some other order for which application neither had then nor has yet been made. The third affidavit was by a chartered accountant, who deposed that he had been asked by the wife's solicitors to give his opinion as to whether the information given in the affidavit of the General manager complied with the order 5 above. We declined also to accept that affidavit, compliance with the order not being a question for our consideration.

6. A question that is for our consideration is whether or not the order of the judge that the 2nd Respondent be served with the application to set aside (order 1 above) made her a party thereto. (Neither Modern China nor Melanic have joined in this appeal.)

7. It is convenient here to set out Section 17 of the Matrimonial proceedings and Property Ordinance, Chapter 192 and Rule 74 of the Matrimonial Causes Rules, upon both of which Mr. Payne so much relies:

8. In Wyler v. Lyons [1963] P.274 a wife applied to set aside a trust set up by her husband in Liechtenstein and served notice of the application on the trust manager, who was resident and domiciled in Switzerland. Upon the hearing of a preliminary issue Sir Jocelyn Simon P. set aside the service on the ground that the English court could make no effective order against the manager. As the majority of us understand the reasons for his decision he accepted, although the point was not argued, that the service of itself made the respondent a party to the application.

9. This authority was not referred to in the more recent decision of Ward, J., in Re T [1990] 1 F.L.R. 1 where the judge comprehensively surveyed the English legislation and came to the opposite conclusion. Our legislation is slightly less extensive, but is based on the same framework and leads us to the same opinion. The permissive aspect of Rule 74(4) in particular indicates that a person served under the rule would only be a party thereto if advantage was taken of the subsection.

10. Closely allied to this discussion is the question of whether in the present circumstances the 2nd Respondent is an apt subject for a direction for service. Miss Leong, who appears now for the 2nd Respondent, contends for a restrictive interpretation of the court's power and instances Green v. Green [1981] 1 W.L.R. 391 as an illustration of how far that power does, or does not, extend. There a wife was seeking to set aside a conveyance by the husband to a limited company which in its turn had charged the land to a bank. On the hearing of a preliminary issue Eastham, J. ruled that he would have had no power to set aside the charge under Section 37(3) of the Matrimonial Causes Act 1973, which is the equivalent of the last three lines of our Section 17 (1) (b), Matrimonial Proceedings and Property Ordinance. However at the conclusion of his judgment the judge appears to accept that there would be jurisdiction under the section if the bank had "continued to advance monies to the husband after having full knowledge of the wife's claim" and he directed points of claim to be served setting out the grounds "upon which it is contended that the charge should be reduced, partially or entirely, as a result of misconduct on the part of the bank".

11. For ourselves we see no reason to read any restriction into the plain words of the rule. The criterion to be adopted should be that mentioned by Sir Jocelyn Simon P. in Wyler v. Lyons at p. 283, "any such person or body who might be adversely affected." If the loan by Melanic was a normal commercial transaction it is difficult to see how Modern China would be adversely affected by the setting aside of the original disposition to the daughters. But the case of the wife is that it was not; it was instead part of a series of bogus transactions intended to defeat the wife's interests and to which the 2nd Respondent was a knowing party. These allegations have not yet been spelt out in blank and white, but no doubt that will be done before the hearing of the application later this month. We are told they were raised before the judge below and Mr. Payne has certainly not shrunk from making the wife's position clear before us. Where fraud is alleged against a person it is naturally right that he or she should have an opportunity to be heard. For this reason we would not interfere with the first order made in the court below.

12. Section 17 is also relied upon to support the preservation of assets and discovery orders. Great weight is placed upon the court's powers to make orders "or otherwise for protecting the claim". These words occur in paragraph (a) of Subsection 1. They can therefore have no application to the HK$4.6 million which falls within paragraph (b).

13. As to the HK$1.2 million there seems to be no need for further restraint. By an earlier order of the judge, in October last year, the husband was injuncted from dealing with either sum until further order, and that order still stands. Both the 2nd Respondent and Modern China are aware of the terms of that order for they were made subject to it as well. Furthermore we have great doubts, despite the width of the words ''otherwise for protecting the claim", whether they could support the orders in the present case. We put it no higher than that because the point was not argued in this way, but the husband's "property" in the HK$1.2 million is a cause of action for the return of money lent. There has been no suggestion that he is about to transfer that to anyone else.

14. As alternative or additional source of orders reliance was placed late in the argument upon Section 21L of the Supreme Court Ordinance Chapter 4:

15. That approach may be swiftly disposed of. We are not aware of any occasion where a Mareva has been directly imposed upon a person not defendant to the litigation. To do so would be a novel extension of the jurisdiction and we see no justification for taking that step in this instance.

16. As to the discovery, we are at a loss to understand how the orders could "protect the wife's claim". It seems to us, with respect, that a great deal of the confusion apparent throughout these proceedings stems from the attempt of those advising the wife to prosecute them as though they were a tracing claim. Such an approach was faintly supported before us by an argument that the fraudulent conspiracy between the husband and the 2nd Respondent had impressed the monies with a trust in favour of the wife. In our opinion that cannot be. The wife has no claim to the monies as such, not even if the disposition to the daughters be set aside. In our view these parts of the order were misconceived.

17. It then becomes unnecessary to consider whether the final order of the judge, restricting the liberty of the 2nd Defendant to leave Hong Kong until she or her company had complied with one or other of the conditions, was validly made under Section 21L, as applied, for example, in Bayer v. Winter [1986] 1 W.L.R. 497 or Re Oriental Credit Ltd. [1988] Ch. 204 or whether the powers of the court are now circumscribed by the comprehensive terms of Section 21B.

18. For these reasons we allow the appeal and Set aside the order made below so far as it relates to the 2nd Respondent, save as to paragraph 1 thereof; subject to argument by counsel we would award the 2nd Respondent her costs in this court and below.