CLC v. SKW

CACV 256/2015

[2018] HKCA 143

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 256 OF 2015

(ON APPEAL FROM FCMC NO 12118 OF 2010)

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REASONS FOR JUDGMENT

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Hon Kwan JA (giving the reasons for judgment of the court):

1.  This is an appeal against the judgment of HH Judge Melloy on 8 July 2015 (“the Judgment”) dismissing an application under section 17(1)(b) of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“the MPPO”) made by the wife who had petitioned for divorce. For ease of reference, the couple will be referred to as husband and wife notwithstanding a decree nisi for divorce has been made. The appeal is brought by the wife with leave granted by the judge in a ruling on 28 October 2015 (“the Leave Ruling”).

2.  At the conclusion of the hearing, we have dismissed the wife’s appeal with costs and these are the reasons for our judgment.

3.  The relevant summons of the wife dated 17 September 2014 sought an order in these terms:

“(1) SZE KWOK WAN (施國雲) do have leave to join in this suit as 2^nd Intervener limited to the issue relating to the alleged subsidy/gift of HK$400,000 given by the Respondent [i.e. the husband] to her (“the said gift”);

(2)   To set aside the disposition of the HK$400,000 by way of subsidy/gift given by the Respondent to SZE KWOK WAN (施國雲);

(3)   the Intended 2^nd Intervener do return the said HK$400,000 being the family assets in this Suit to the Petitioner; and

(4)   The costs of this application be to the Petitioner.”

4.  An order was made joining Madam Sze Kwok Wan (“sister Wan”) as the 2^nd Intervener in relation to the aforesaid summons.  The husband and sister Wan were not legally represented before the judge.  On appeal by the wife, the husband remains unrepresented and sister Wan is represented by Ms Bonnie Cheng.

Background

5.  For the purpose of this appeal, the relevant background matters may be stated as follows.  They are non-controversial matters taken from the Judgment and/or the affirmations filed by the parties.

6.  Sister Wan is the 2^nd elder sister of the husband.  They have an eldest sister known as Sze Kwok Mei.

7.  The husband and the wife registered their marriage in 2002.  They have three children aged between 11 and 7 at the time of the hearing in 2015.  On 16 September 2010, the wife petitioned for divorce on the ground of behaviour.  An order was made on 17 February 2012 for maintenance pending suit, which has never been complied with, the husband alleging he had gambled away HK$10 million in Macau and he no longer has the means to pay the wife maintenance for her or their three children.  The judge found this “a very difficult case that has included countless allegations made by each party one against the other, many of which were later found to be untrue or exaggerated.”[1]

8.  Sister Wan was married to Sze Liang Tui (“Tui”). They were divorced in 2003.  They have a son Ming Ying and a daughter Yan Yan. Sister Wan and her family lived in a public housing unit as from December 1997 and since November 2002, she became a recipient of Comprehensive Social Security Allowance.  In January 2006, Tui was imprisoned in Mainland China for dangerous drugs related offences and was put to death by execution in February 2010.

9.  Ming Ying went to Australia to study in 2004 after he graduated from secondary school.  He was supported by his father Tui initially, before the latter was detained in the Mainland.

10.  According to the affirmations of the wife, since 2000, sister Wan’s family has been in financial difficulties.  Sister Wan did household chores for the wife for a period and was paid by the husband to help her support her family. In view of sister Wan’s financial condition, the wife paid her transportation costs, medical fee, and clothing expenses for her and her family.  In December 2006, the wife received a request from Ming Ying to pay his school fee and this was paid by the husband.  Also, at the request of sister Wan and Yan Yan, the wife acted as the guarantor of Yan Yan in respect of her grant or loan repayment to the Government when Yan Yan studied for an associate degree in Hong Kong.  The wife has deposed that the husband “has all along supported Tui’s family, including his children’s education fee, salary to Sister Wan and he also supported his other sister Sze Kwok Mei.”[2]

11.  The sum of $400,000 was paid by two cheques dated 6 and 10 October 2008 drawn on the husband’s account in favour of Sze Kwok Mei who then remitted the money to Ming Ying in Australia for his education expenses.  According to the wife, the payment was made to Sze Kwok Mei as she had the time to arrange for the currency exchange and remittance to her nephew[3].

12.  There is therefore no dispute that the HK$400,000 was paid by the husband for the education expenses of Ming Ying.  What is in issue is whether the sum was paid as a gift or a loan which has to be repaid and, importantly, whether the disposition was made with the intention of defeating the wife’s claim for financial provision.

The conflicting evidence

13.  This matter of the HK$400,000 was first raised in the wife’s affirmation filed on 26 November 2010[4] in which she asserted that the husband has an asset being “loan to [his] elder sister at least HK$400,000.”

14.  In response, the husband made an affirmation on 30 December 2010 which was filed on 3 January 2011 stating as follows[5]:

“LOANS?

(1) HK$400,000

In October 2008, I transferred HK$400,000 into Sze Kwok Mei’s bank account, who then remitted the money to Sze Ming Ying’s account in Australia. It is not a loan and requires no repayment. I always treat it as my subsidy for Ming Ying’s education in Australia. [Sister] Wan did give me some money from time to time saying they represented repayments to me. I keep no record of such “repayments”.”

15.  The wife countered this with an assertion in her 3^rd affirmation filed on 1 March 2011[6]:

“In October 2008, the [husband] transferred a sum of HK$400,000 into Sze Kwok Mei’s bank account. I clearly know that this is a loan to his second elder sister [i.e. sister Wan] to finance her son’s education in Australia and this is not a gift/subsidy for Sze Kwok Mei. He was not generous enough to give out a sum of HK$400,000 to his elder sister.”

16.  In the wife’s 13^th affirmation filed on 18 August 2014, what was alleged in her 1^st affirmation as a loan of HK$400,000 provided by the husband was asserted as a loan by “my family”.[7]  This was expanded and altered in her 14^th affirmation filed a month later on 17 September 2014, in which she described family gatherings with sister Wan during which sister Wan mentioned she wanted to borrow HK$400,000 to support Ming Ying’s study in Australia and the wife said she had an education fund reserved for her own children who would not use it for the time being as they were too young and she agreed to lend the fund to sister Wan so long as the money was used for Ming Ying’s study and sister Wan had to repay the loan after Ming Ying had graduated as the fund was reserved for the education of the wife’s children[8].

17.  Sister Wan filed an affirmation on 4 November 2014 declaring that she had never borrowed from the wife.  She went on to state that “all the sums borrowed [lent] to me by [the husband] were private dealings between me and [the husband] and none of [the wife’s] business.  As to the HK$400,000 lent to me by [the husband] in October 2008, due to the lapse of time, according to the law, [the husband] had already forfeited his right to claim for repayment of the loan.”[9]

18.  Mr Enzo Chow, who appeared for the wife here and below, cross-examined the husband and sister Wan.  The husband disagreed that the HK$400,000 was a loan, he maintained it was a subsidy for Ming Ying and as for sister Wan giving him some money from time to time, these were “matters between siblings because of [their] feelings towards each other.”[10]  Sister Wan asserted all the money for Ming Ying’s study abroad was paid by his father, that there was no need for the wife to subsidise, and denied that the wife’s family had lent her money from time to time to support her family and Ming Ying’s study in Australia[11].

The judge’s findings

19.  The judge dealt with the summons in question in §§33 to 35 of the Judgment.  The first two paragraphs summarised the parties’ assertions which have been set out in greater detail above.  The judge then made these findings in one concise paragraph in §35:

“With respect it seems to me that even if the husband’s forgiveness of the alleged loan amounts to a disposition under s 17 of the MPPO (which is questionable), the fact remains that this disposition is unlikely to have been done with the intention of defeating the wife’s claim for ancillary relief. The loan was a soft loan between family members. It was made in October 2008, two years before the divorce petition was issued and 6 years before the wife issued a formal application under s 17 of the MPPO. Thus the rebuttable presumption shifts and it is for the wife to show that this loan was forgiven in order to defeat her claim for ancillary relief. It seems to me that she has not been able to do this. Consequently this summons will also be dismissed.”

20.  In the Leave Ruling, the judge said whilst it is clear she did not make a “definitive finding with respect to whether or not the HK$400,000 in dispute was a loan or a gift”, and accepting that the term “disposition”[12] should be viewed widely, she is not obliged to find on the facts whether the gift or loan amounted to a disposition and given she dealt with the matter in the alternative, no difficulty would be caused by this in any event[13].

21.  As for her use of the words “soft loan”, the judge remarked that the fact remains “this was a loan/gift between family members” and “was not a transaction that was done on a commercial basis.”[14]

22.  The judge gave leave to appeal as she can see “some force” to Mr Chow’s argument that the husband’s disposition should be viewed as being from the date he forgave the loan and not from the date when he forwarded the funds to his nephew and his submission that the husband admitted to this in his affirmation of 30 December 2010 and did so in order to defeat the wife’s claim for ancillary relief[15].

This appeal

23.  Mr Chow made these arguments on appeal:

(1)   There is no basis for the judge to find that the loan was a “soft loan” between family members.  Even if it is characterised as a “soft loan”, the husband was entitled to demand repayment and sister Wan had a legal obligation to repay.

(2)   The loan in 2008 is not a disposition for the purpose of section 17 of the MPPO, as it created a chose in action which is enforceable by the husband.  Rather, the disposition that would be caught by section 17(1)(b) would be the husband’s forgiveness of the loan when he waived the legal right to recover it.  The term “disposition” in section 17(4) should have a wide instead of a restricted meaning.  The forgiveness of the loan was not made for valuable consideration and the disposition is caught by section 17(2).

(3)   The timing when this disposition took place should be the date on which the husband manifested his intention not to enforce the legal right to recover the loan, and this was stated in his affirmation filed on 3 January 2011.  At that time, the right to recover the loan had not become time-barred.

(4)   Although there is no direct evidence the husband made this disposition with the intention to defeat the wife’s claim for ancillary relief, such an intention may be inferred.  There is no need for this requisite intention to be the sole or dominant intention of the husband so long as it is played a substantial part in his intentions as a whole (Kemmis v Kemmis [1988] 1 WLR 1307 at 1331A to B).

(5)   In determining whether the husband did have the requisite intention, the court may have regard to the natural consequence of this disposition, citing Kemmis v Kemmis at 1326D to H.  The effect of the husband’s forgiving the loan is that the matrimonial pool would have HK$400,000 less, with the effect that the matrimonial assets available for division would be less than what they should have been.  The reduction of the amount of any financial provision which might be granted would bring this within the meaning of defeating an applicant’s claim for financial provision in section 17(4).  Hence, the judge was wrong in holding that even if the forgiveness of the loan amounts to a disposition, the required intention that this was done in order to defeat the wife’s claim for ancillary relief was not established.

24.  Mr Chow accepted that the rebuttable presumption in section 17(3) does not apply even if the reviewable disposition should be the forgiveness of the loan, as the timing of this disposition was more than three years before the date of the application in September 2014.  So the burden is on the wife to establish that the disposition was made with the intention of defeating her claim for financial provision.

25.  We do not agree with Mr Chow’s submissions.

26.  We have set out in some detail the relevant background.  It is common ground that sister Wan’s family circumstances were such that she was unable to support her son’s education expenses in 2008.  Given her straitened circumstances, the close family relationship, and that the husband had been supporting her family for some time (on the wife’s own evidence), it stands to reason that it must be the common understanding of the husband and sister Wan that she would have no legal obligation to repay the HK$400,000.  The fact that sister Wan had made some “repayments”, which the husband did not refuse, made the judge characterise this as a “soft loan”.  There is ample evidence for the judge to make this finding and no basis for this court to interfere.

27.  As rightly submitted by Ms Cheng, as there is no legal obligation on the part of sister Wan to repay, forgiveness of the amount made available for the nephew’s education expenses simply does not arise.  There is nothing in the evidence to suggest there was any change of intention on the part of the husband, and the focus here is on his subjective intention (Kemmis v Kemmis at 1315H, 1326E).  To the contrary, he had deposed that he “always” treated the sum as his subsidy for his nephew’s education in Australia.  He was not cross-examined that he had acted in a manner that should be regarded as having forgiven the loan or waived his intention not to recover it.  The only suggestion made to him by Mr Chow was that the amount was a repayable loan.

28.  It is wholly contrived to claim that as the husband manifested an intention not to recover the amount in his affirmation, this should be regarded as a disposition.  For one thing, there was no change of intention from 2008.  Further, the statement in his affirmation was made in response to the wife’s allegation that he has an asset being his loan to his sister.

29.  The judge could not be faulted in finding that the wife has not been able to establish that even if the forgiveness of the loan amounts to a disposition (which the judge finds questionable), this was done with the intention of defeating her claim for financial provision.  The amount was paid to the nephew in October 2008, two years before the divorce petition and six years before the application to set aside under section 17.  The judge found it was a “soft loan” between family members.  There was no evidence of any change of intention on the part of the husband that this should not be repayable.  As for Mr Chow’s reliance on the natural consequence of the disposition, for such an inference of intention to be drawn, it was stated in Kemmis v Kemmis at 1326G to H that the natural consequence of the disposition would not generally be enough by itself to support an inference of the requisite intention.

30.  There is no basis to interfere with the judge’s findings of fact.  We have therefore dismissed the appeal.  We made no order as to the costs of the leave application which have been reserved, as the husband and sister Wan were not legally represented.  For the costs of the appeal, we made no order as between the wife and the husband (who indicated to us he would not seek costs) and ordered the wife to pay the costs of sister Wan, and that sister Wan’s own costs be taxed in accordance with the Legal Aid Regulations.