NLT v. LYKJ

FCMC 8680/2012

[2020] HKFC 75

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO 8680 OF 2012

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R U L I N G

(Joinder and transfer up)

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Introduction

1.  There are two applications currently before me which now require adjudication. Firstly, there is an application by the Petitioner wife dated the 31 January 2018, to join certain small corporate entities to the ancillary relief proceedings (i.e. the joinder summons). The joinder summons states as follows:

1.   leave be granted to join (i) ZT Limited as the 2nd Respondent, (ii) P Asset Management Limited as the 3^rd Respondent, and (iii) JG Limited as the 4^th Respondent; for the purposes of determining the preliminary issue of the beneficial owner of the following properties:

(a) Flat X, X^th Floor, Ellery Terrace, No.38 Good Shepherd Street, Kowloon, Hong Kong, registered in the name of the 1^st Respondent;

(b)  Portion X of X/F, Hung Hom Mansion, Nos. 46, 46A, 48, 50, 52, 54, 56 and 56A Wuhu Street Kowloon, Hong Kong, registered in the name of the 3rd Intended Respondent;

(c) X Floor, Hung Hom Mansion, Nos.46, 46A, 48, 50, 52, 54, 56 and 56A Wuhu Street, Kowloon, Hong Kong, registered in the name of the 3^rd Intended Respondent;

(d) Car Parking Space No. X on X Floor, Ellery Terrace, No.38 Good Shepherd Street, Kowloon, Hong Kong registered in the name of the Intended 3^rd Respondent; and

(e) Roof (No.XX Wuhu Street), X Mansion, Nos.XX, XXA, XX, XX, XX, XX, XX and XXA Wuhu Street, Kowloon, Hong Kong, registered in the name of Intended 4^th Respondent.

2.  In addition, the Respondent husband seeks to transfer the ancillary relief proceedings up to the High Court by virtue of his summons dated the 9 October 2019 (i.e. the transfer up summons). A third summons originally issued by the husband on the 13 November 2017, seeking to stay the matrimonial proceedings (i.e. the stay summons) pending the determination of three High Court actions, is now largely moot and I accept that this summons should now be dismissed. I shall refer to the issue of costs below.     

Background

3.  This case has a long and very protracted history, which I do not intend to go into here. However, it is of note that this hearing was delayed following what was essentially a case management decision by myself on the 17 May 2019 in which I granted the wife leave to be released from her implied undertaking in that she be permitted to use or disclose information, documents and/or materials from the matrimonial proceedings in three High Court actions, all of which were dated the 7 November 2017 and all of which involve the three entities that the wife now seeks to join to these proceedings. The husband sought leave to appeal my decision, which was dismissed on the 26 June 2019. The husband then took the matter up to the Court of Appeal itself. There was a hearing on the 16 August 2019 and a short judgment was subsequently handed down on the 22 January 2020. The husband’s application for leave to appeal was also dismissed by the Court of Appeal. It is of note that the Court of Appeal also provided the parties with some helpful guidance on the proper way to proceed and reiterated that in their view “it would be plainly wrong for these matters to be litigated in different courts”.          

4.  During this current hearing I was also informed that at the Order 14 hearings on the 7 January 2019 in the High Court, the wife had been given unconditional leave to defend all three High Court actions and that she had subsequently issued applications for all three actions to be stayed pending the conclusion of these proceedings. There was a further hearing scheduled in the High Court in January 2020 in that respect, but I do not know the outcome of that hearing.      

Joinder

The law

5.  Turning first to the joinder summons. An application for joinder is made pursuant to Order 15 rule 6. In particular, Order 15 rule 6 (1) states that:

Misjoinder and nonjoinder of parties (O.15,r.6)

6. - (1) No cause or matter shall be defeated by reason of the misjoinder or nonjoinder of any party; and the Court may in any cause or matter determine the issues or questions in dispute so far as they affect the rights and interests of the persons who are parties to the cause or matter.

6.  Order 15 rule 6 (2) (b) also adds that:

Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application ––

(a) …

(b) order any of the following persons to be added as a party, namely-

(i)   any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, or

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.

7.  Mr Eric Leung for the wife also took me to the commentary from the White Book at 15/6/1 which elaborates upon these themes as follows:

This rule prevents an action being defeated by the misjoinder or nonjoinder of parties, and it provides for any necessary amendment in respect of the parties to an action being made at any stage of the proceedings … This rule should be construed so as to bring all parties to disputes relating to one subject-matter before the court at the same time so that the disputes may be determined without the delay, inconvenience and expenses of separate actions and trials … A liberal application should be given to O.15, r.6, particularly in the aftermath of the Civil Justice Reform, so as to ensure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of legal proceedings with respect to any of those matters is avoided…

Furthermore, on whether a new party should be joined, the test is whether there is a bona fide claim and a proper question to be tried as between the plaintiff and the intended defendant that is necessary or just and convenient for resolution between them as well as between the plaintiff and the defendant in the present proceedings…

8.  In addition, it is accepted by both sides that the correct approach to matters of this nature was originally set out by Mostyn J in Fisher Meredith v JH and PH (Financial Remedy: Appeal: Wasted Costs) [2010] 2 FLR 536. This approach has also been recently approved by our own Court of Appeal in LLC v LMWA [2019] 2 HKLRD 529, where Lam J said that generally speaking it was not necessary to join a third party unless there was a request for a particular order to be made against him or her. In that judgment Lam J stated inter alia as follows:

[25] Further, even in cases where a spouse seeks a proprietary order in respect of the disputed property, the third party must be involved only if he or she has a competing claim to that property. In this respect, there is a difference between cases where the third party is the legal owner or one of the legal owners of the disputed property and cases where a spouse claims that the third party has a beneficial interest in a property legally held under the name of that spouse. In the former case, the third party should be joined as a party since the legal title of the disputed property would have to be transferred or subject to encumbrance if the ownership issue is resolved by the making of a proprietary order. In the latter case, the third party should be notified of the claim and if he or she decides to contest the ownership issue, he or she should apply to be joined as party to the proceedings. If the third party does not apply to be joined, he or she shall be bound by the judgment: see Order 15 Rule 13A (4) of the Rules of the High Court, applicable by virtue of Rule 3 of the Matrimonial Causes Rules.

9.  The difficulty in this case is that the situation is not at all clear cut and it seems to me that the High Court actions have only served to muddy the waters further. 

10.  In essence, it is the wife’s case, that all of the properties in dispute are matrimonial properties and that as such they should prima facie be included in the matrimonial pot for distribution. She believes that the present High Court actions are in effect little more than a sham designed to remove these properties from that matrimonial pot and to put them beyond her reach by “pretending” that they belonged to the husband’s recently deceased’s mother. To that end she notes that shares in ZT Limited were originally legally held by the husband’s mother who had dementia before she passed away in 2017 and that these shares are now in probate. It is the wife’s case that the husband is the true beneficial owner of those shares and that the ZT Limited was originally placed in the husband’s mother’s name for tax reasons. She further notes that all of the High Court actions are undefended and that had she not stepped, in orders would have been made in terms. As things stand the legal ownership of the properties in dispute are as follows:  

SCHEDULE

Description of property	Registered owner(s) in the Land Registry	Shareholders in the record of the Companies Registry
1)  Flat X, Xth Floor, Ellery Terrace, No. 38 Good Shepherd Street, Ho Man Tin, Kowloon, Hong Kong.	LYKJ (the Respondent)	Not applicable.
2)  Flat X, X Floor, Block X, Rhythm Garden, 242 Choi Hung Road, Kowloon	LYKJ (the Respondent) and his mother Madam LMT	Not applicable.
3)  Flat No. X (No. 52 Wuhu Street), Xth Floor, Hung Hom Mansion, Kowloon	LYKJ (the Respondent)	Not applicable.
4)  Roof (No. XX Wuhu Street), Xth Floor, Hung Hom Mansion, Kowloon	JG Limited (‘JGL’)	The Respondent is the sole shareholder of JGL.
5)  Portion X, X Floor, Hung Hom Mansion, Kowloon.	P Asset Limited (‘PAL’)	The Respondent is the sole shareholder of PAL.
6)  X Floor, Hung Hom Mansion, Kowloon.	P Asset Limited	The Respondent is the sole shareholder of PAL.
7)  Car Parking Space No. X on X Floor, Ellery Terrace, No. 38 Shepherd Street, Ho Mun Tin, Kowloon, Hong Kong	P Asset Limited	The Respondent is the sole shareholder of PAL.

11.  It is the husband’s case that his mother was indeed the legal and beneficial owner of all of the properties in issue, that these were held by his mother using different legal vehicles and that he did not defend the High Court actions because he knew that he “did not own any beneficial interest in the Properties”.  He added at paragraph 12 9iv) of his 18^th affidavit dated the 27 June 2018 that

Infact, P, JG and I agreed to hold the respective Properties registered in our names on trust wholly for the benefit of ZT, which is a company owned by Ms L (his mother) at that time.     

12.  One of the difficulties here is that the husband’s case has changed over time. Originally he said that he fully owned all of the properties in dispute 100%. He then changed his position and said that he owned 50% and his mother also held a 50% share in the properties. Latterly he has changed his position again and he now says that the properties are 100% owned by ZT Limited, which in turn was wholly owned by his recently deceased mother.   

13.  Thus, there are significant issues here with respect to fact and credibility and it follows that the more likely route is that the matter will need to proceed to a preliminary issues trial so that the trial judge is able to hear from both sides in the witness box.

Decision

14.  In conclusion then, although this application falls more into the second category of cases identified initially in Fisher Meredith, nevertheless given the 3 High Court actions I agree that it is prudent to join the three intended Respondent’s to these proceedings, so that all interested parties may be given an opportunity to participate in the family litigation process. I also agree that the matter should be dealt with by one court and as will be seen I agree that this should be the Family Court. Consequently, I shall make an order in terms of paragraph 1 the wife’s summons dated the 31 January 2018. I further direct that ZT Limited, P Asset Management Limited and JG Limited be informed of this decision within the next 7 days. The next hearing in relation to this matter was originally set down for the 25 March, however given the reinstitution of the GAP and the shortness of time in any event, I shall adjourn this aspect of the case to a later date for further directions. All parties shall be invited to attend that second hearing.      

15.  Mr Tse for the husband says that he understands that the third parties may choose not to participate in the matrimonial litigation. With respect however, that is really a matter for them. However, it follows that if they choose not to participate they will be bound by the outcome regardless.

16.  For the avoidance of doubt I do not accept that this decision will be unfair to the husband. In particular, I do not accept that progress is so advanced in the High Court actions that it would be more convenient and cost effective for matters to proceed in the High Court. To that end it is of note that the pleadings are not yet closed.     

Transfer of the Proceedings to the High Court

The law  

17.  The application to transfer up is made pursuant to Rule 32 and Rule 80 of the Matrimonial Causes Rules, Cap 179A, together with Practice Direction 15.14. I have also been referred to a number of cases as set out in the Practice Direction including the judgment of His Honour Judge Saunders in H v H, FCMC 7173/2000 dated the 1 February 2002 (unreported).

18.  It is accepted that in accordance with those authorities that the Family Court has an unfettered discretion to order a transfer up of any application to the High Court and that such an unfettered discretion also extends to deciding when such an order should be made.

“The fundamental principle is whether in light of the overall circumstances including the nature of the issues of fact or law involved, the proceedings or part of them are more desirable to be dealt with in the Court of First Instance” (§2)

It is also accepted that:

    … an application for transfer should be made as soon as practicable after it becomes apparent that a transfer is required.   

19.  In H v H His Honour Judge Saunders also stated as follows:

… there must be cogent reasons why a case should be removed from the ambit of a group of specialist judges.  It is right that R 80 requires the court to take into account the financial limits for the time being relating to the jurisdiction of the District Court in other matters, but that is only one consideration.  Very large sums of money alone will rarely be sufficient to justify transfer.  There must be some special complexity in the case which will demand that it be given the attention of a Judge of the Court of First instance.

With respect I agree.

20.  Further Mr. Leung also took me to the following paragraphs in that same judgment, which are also pertinent to this case:

The High Court and the District Court have a concurrent jurisdiction in divorce and in ancillary relief. Parties are however required to commence their proceedings in the District Court. There are now 6 judges sitting on a permanent basis in the District Court who are solely engaged in matrimonial work. There is a separate Family Court Registry, and although the "Family Court" does not have any substantive legislative basis it exists as a de facto separate branch of the District Court. The effect of this has been to build a pool of judges who are very experienced in this particular field. The judges deal with a wide range of ancillary relief cases, regularly involving many millions of dollars and with international implications.

There is no equivalent "Family Division" in the Court of First Instance of the High Court. Ancillary relief cases rarely go to the High Court and when they do there is no assurance that the judge who tries the case will have any special expertise in the field. In most cases however, fortunately, trials are able to be allocated to a judge who has been promoted to the High Court from the District Court and who has gained experience in the Family Court.

Again, save for the fact that there are now 10 Family Court Judges and not 6, I agree with this analysis of the situation.

21.  In another earlier case, namely B v B, unrep (FCMC 3105 of 1999), Deputy Judge Jenkins also made the following points:

I believe that the following matters referred to by HH Judge Hartmann (as he was then) in Jack v. Jack and another (DJ No 3782 of 1995) are relevant considerations and should properly be taken into account in deciding whether to order a transfer, They are:

“where there is a matter of public interest; where there are novel or difficult points of law to be resolved; where delay will work a clear injustice and/or where there is unduly complicated or conflicting evidence the resolution of which is likely to be so protracted that it will unduly prejudice the Family Court lists and this work against the interests of other litigants”.

In my view none of these factors are present in this case and further none of the specific matter matters in r.80(5) apply either.

As in that case, I agree that none of these factors apply here.

22.  Interestingly in a more recent case heard by my brother judge, HH Judge Kent Yee, in the Civil jurisdiction, namely Wan Sui Ha Alice v Ng Wing Yan [2019] 3 HKLRD 429, he also held that a property dispute should more properly be dealt with in the Family Court and that “… The Statement of Claim filed by Madam W in DCCJ can be issued in FCMC for the purpose of the trial of the preliminary issue and that the costs of preparing the document will not be wasted”.

Again I agree that this may be an option here.

Decision  

23.  I should say at the outset that in this instance I have decided not to transfer this matter up to the High Court as requested by the Respondent. I do so because I am largely unpersuaded by the arguments advanced by Mr. Tse both in writing and orally.In his written submission these are set out as follows:

Grounds of transfer up to the High Court

11. There is dispute as to the beneficial ownership of five properties that involved high estimated net asset value of HK$50.155 Million [Annex 1, being the Schedule agreed by the parties which was submitted to the Court of Appeal], not an insubstantial amount.

12. There is nexus between the present proceedings and the three High Court Actions involving the determination of ZT Limited’s claims regarding the subject five (5) properties of substantial amount made it more desirable for the present proceedings to be transferred to the High Court as it allows all matters to be heard in High Court which is in more advance stage for the determination of the preliminary issues.

13. In considering whether the present proceedings should be dealt with in the High Court or Family Court, the Husband did take into the account the higher cost scale of the High Court and consider the Family Court may be a more appropriate forum than the High Court if legal fee is the only consideration. However, there are other factors surrounding the present case that outweigh the consideration of the legal fee only [2/563/§4].

14. One of the factors is no fair result to the Husband will be achieved if the hearing of the suit is conducted in the family court before Her Honour Judge Melloy as ; she has held prejudicial views against the Husband which can be illustrated by the comments made by Her Honour Judge Melloy in the hearing on 8th June 2018 [2/563/§5].

15. Other factor to be considered including there is high likelihood that the losing party will appeal the decision to the High Court with total costs involved (in both family court and the appeal in the High Court exceeding cost for the High Court only).

24.  In summary assets of HK$50.155 million do not place this case in the very big money category and as HH Judge Saunders has pointed out in paragraph 19 above, that is rarely a sufficient reason on its own to justify a transfer up in any event. Secondly I do not accept, also as indicated above, that the High Court actions are at a more advanced stage for determination of the preliminary issue. Thirdly it is also true that it would be costlier to proceed in the High Court in comparison with the Family Court, but I do not accept that other factors outweigh this consideration. I further do not accept the allegation that I am prejudiced against the husband, but in any event if he holds that view then it is open to him to apply for me to recuse myself. Lastly the issue of an appeal is neither here nor there. If either party believes that they have grounds, then it is a matter for them whether or not to seek leave to appeal. It goes without saying that significant cost consequences may flow as a result of such a decision.

25.  In such circumstances the husband’s transfer up summons dated the 9 October 2019 shall also be dismissed.    

Costs

26.  I can see no reason why costs should not follow the event in the normal way. Consequently, there shall be an order nisi to be made absolute in 28 days’ time, that the Respondent husband shall pay the Petitioner wife the costs of and arising out of all three summonses referred to above on a party and party basis to be taxed if not agreed.  There shall be certificate for counsel.   

Further directions

27.  There is a hearing scheduled for the 25 March and it seems that the parties may be ready to proceed with that hearing notwithstanding the GAP. To that end I have received a letter from the solicitors for the wife today urging me to proceed with the hearing on the premise that it is urgent and essential. Whilst I agree that the wife’s application is urgent it also seems to me that it should be possible to deal with this matter by way of a paper disposal. Consequently, I shall make the following order nisi to be made absolute in 7 day’s time i.e. on the 30 March 2020:   

Order nisi

1)    The Petitioner’s summons dated the 19 December 2019 shall be determined on paper;

2)    Both parties shall file and serve short written submissions in relation to the same within the next 7 days (i.e. on or before the 30 March);

3)    If either party objects to this course of action, then they shall write to the court setting out the basis of their objection within the next 3 days. It should also be noted that if objections are raised and are then found to be without merit that the court may take this account when exercising its discretion on costs.

4)    Please note that any objections and the submissions referred to in paragraph 2 above, may be filed at court by using the no reply e-mail address (fcj02@judiciary.hk).

5)    The further callover hearing in relation to this matter referred to in paragraph 14 above, shall be provided to the parties in the paper disposal Ruling.