LEE MING MANG SHARON v. NG SIEW SENG RICHARD AND OTHERS

HCA 1536/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1536 OF 2006

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Dates of Hearing:    21-25, 28 July 2008, 29-31 October 2008, 17-18 November 2008

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J U D G M E N T

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Introduction

1.  This is going to be a judgment in two distinct parts.  Firstly, I need to consider whether the action should be struck out as an abuse of process which will not call for a detailed consideration of the merits.  If I decide that it should be struck out, I would still propose to deal with the merits of the action so that in the event of an appeal, the Court of Appeal would have a judgment from me which will include findings of fact on the evidence so that if I were to dismiss the action as an abuse of process and were held to have been in error to have done so, there would be no need to remit the matter back to me to give a judgment on the merits.  And also, of course, if I refuse to dismiss the action as an abuse of process I would in any event be required to give judgment on the merits in the usual way.

2.  The Plaintiff and the 1^st Defendant were husband and wife.  They were married on 9 January 1999 and separated in about April or May 2003.  The Plaintiff, who I will refer to by her given name Sharon, was born in December 1964 and so she was 34 at the date of the marriage.  The 1^st Defendant, who I will refer to by his first name Richard, was born in October 1957 and was therefore 41 years old at the date of the marriage.  Sharon is from Hong Kong and Richard is Malaysian.  The 2^nd Defendant is Richard’s brother.  I will refer to him by his name Michael.  He lives in England, has done so for many years, and is in practice as a veterinary surgeon.  The 3^rd Defendant (“SIL”) is a company formed by Sharon and Richard as a corporate vehicle to effect the purchase of one of the two properties with which I am concerned in this case.  It is at Viva Court, 290A, Prince Edward Road West, Kowloon (“Viva Court”).

3.  The claim by Sharon against all three Defendants is wide-ranging.  In respect of Viva Court, she seeks a series of declarations against all three Defendants and other orders giving effect to the declarations, which will have the consequence of restoring to her ownership of Viva Court which, on her case, was given to her by Richard as a gift on the occasion of their engagement.  As to the other property which is at 15H, Kam Shan Mansion, Tai Koo Shing, Quarry Bay (“TKS”), which was purchased in Richard’s name in March 2002 and which briefly became their matrimonial home, Sharon requires the court to give her a declaration that Richard holds TKS on trust for both of them in proportion to their respective contributions to the purchase price or in such shares as the court may determine and, thereafter, for a sale of the property and a distribution of the proceeds of sale in accordance with their shares as determined by the court.

4.  I propose to start by giving a brief account of Sharon’s and Richard’s relationship leading to the acquisition of Viva Court, their marriage, the renting out of Viva Court, the purchase of TKS, their separation and their divorce, in that order.  It will then also be necessary to provide a description of the divorce and ancillary relief proceedings which were withdrawn, in terms of a consent order, almost immediately after which Sharon started this action.  It is this withdrawal of the ancillary relief proceedings, in which Sharon sought orders broadly reflective of the orders which are now asked for in this action, which is the basis of the application to have the action struck out as abusive of the court’s process.

The Parties’ Relationship

5.  The parties met in about October 1989.  Sharon went to work at the Regal Meridian Hotel, where Richard was employed as its Director of Marketing and was her immediate superior.  They became close in about 1995 and by 1996 there was discussion about them getting married.  Sharon says that Richard told her that he would buy a property for her as an engagement present which would become their first matrimonial home.  He also told her that the purchase would be done through a company, but in such a way that she would be the ultimate beneficial owner.  This, she says, was put into effect in November 1996 when Richard arranged for the purchase of SIL an off the shelf company, of which he and Sharon became directors and were allotted one share each.  In February 1997, Sharon and Richard became engaged to be married and on 26 March 1997 SIL purchased Viva Court for $4,780,000.  So far as Sharon is concerned it was Richard who made the downpayment of $478,000 and the balance of the purchase price was taken by way of mortgage with the Bank of America on 19 April 1997 which is when the conveyance was completed transferring the ownership of Viva Court to SIL.  Eleven days beforehand, on 8 April, SIL increased its issued shares from 2 to 10,000, of which Sharon was allotted 9,499 shares and Michael 499.  In May 1997, Sharon and Richard moved into Viva Court.  They married, as I have already said, on 9 January 1999.

6.  Viva Court was re-mortgaged to HSBC on 17 March 2000, it offering better terms than the Bank of America.  Sharon says that at the start of the cohabitation Richard paid the mortgage instalments, with her having to help out from time to time because, by then, he had given up his job with the Regal Meridian and had gone into business on his own account running a restaurant in Quarry Bay called the Thai Café as well as Macau Destination a travel business.  By late 1998, the Asian financial crisis had taken hold very severely and Sharon says that Richard told her that he was not able to continue paying the mortgage instalments after which she took them over.  She has paid $925,165 in such instalments between 22 December 1998 and 1 March 2002.

7.  Richard’s version of events is diametrically opposed to Sharon’s.  They cohabited at rented accommodation in Argyle Street, close to where Sharon’s parents lived, from 1995 until 1997 when they moved to Viva Court.  At the end of 1996, his brother Michael, who was living in England, decided to buy a property in Hong Kong as an investment because the property market here was going up at the time.  Michael told Richard that he would like to take the purchase through a corporate vehicle established for that purpose.  He asked Richard to do what was necessary which he did by obtaining SIL off the shelf.  Richard says that Sharon knew precisely what was to happen, which was that all the initial funding was to come from Michael.  That is to say the deposit, the downpayment, stamp duty and solicitor’s fees.  All three of them agreed that SIL would acquire the property for Michael and that the shares in SIL, in Richard’s and Sharon’s names, would be held on trust by them for Michael as beneficial owner.

8.  Richard says that Michael paid about $1.3 million to secure the purchase with the balance being taken on mortgage.  He says that in order to make it clear that the share’s in SIL were held on trust for Michael, Sharon signed a declaration of trust on 12 April 1997, which was a week before the completion of the conveyance for Viva Court to SIL, to the effect that she held her shares as trustee for Michael.  She also signed a bought and sold note and an instrument of transfer with the date being left blank transferring her 9,500 shares to Michael.  These documents were ultimately executed on 11 July 2003 when they were dated, which had the effect of transferring her shareholding in SIL to Michael and in that way transferring her interest in Viva Court to him.  All of these documents have been put into evidence by Richard.  As to his 500 shares, Richard dealt with these on 1 May 1997 by transferring them to a company secretarial service (Profit Harbour Company Limited) which executed a declaration of trust on the same day in Michael’s favour.  On 14 September 2006, Profit Harbour Company Limited, on Michael’s instructions, transferred these shares back to Richard who now holds them as trustee for Michael, in confirmation of which on 16 January 2007 he executed a declaration of trust in Michael’s favour.  All of these documents have also been put into evidence by Michael.

9.  Richard also says that shortly after Viva Court had been purchased he, Sharon and Michael agreed that he and Sharon would move into Viva Court as licensees of Michael on terms that they would pay him a “rent” equivalent to the mortgage instalments and that is why both he and Sharon came to pay the mortgage on the property.  In view of this evidence, he says that what Sharon has said about Viva Court being a gift to her by him on their engagement is simply not true.

10.  Continuing with the matter chronologically, in about March 2002 Sharon and Michael decided to buy TKS.  It had become clear that the mortgage instalments on Viva Court were too much for them and that the only way to deal with the situation was for Viva Court to be let and the rent used to discharge the monthly instalments to, by then, HSBC.

11.  It was agreed that TKS would be taken in Richard’s sole name and that he would pay the mortgage instalments on it and Sharon would be responsible for the household expenses and management fees on the flat.  She says that they also agreed that she would make a contribution to the downpayment on the purchase and that she would pay for the cost of decoration and refurbishment on the property.  TKS was purchased on 12 April 2002 for $2 million for which Sharon says $200,000 was the downpayment shared equally between them and the balance of the purchase price of $1.8 million was taken on mortgage from Pacific Finance (HK) Limited.  She says that Richard paid the mortgage of $8,000 a month and she dealt with the household expenses which came to $12,400 which included the maid’s salary of $3,800.  She also spent $60,000 out of her own money to decorate and improve the flat.

12.  In April 2003 her relationship with Richard was over and she moved out of TKS. 

13.  Richard’s account of the purchase of TKS is substantially different.  He says that at the start of 2002 he wanted to buy something at Tai Koo Shing as an investment because prices by then were at their lowest for sometime.  Sharon was against this idea because she considered that it was too risky.  He discussed his plan with Michael who supported him and said that he was prepared to lend him the downpayment.  In these circumstances, he decided to go ahead without Sharon’s involvement.  On 26 February 2002, Michael lent him $300,000 and he has produced the cheque and the deposit slip.  He accepts that on the previous day Sharon had lent him $100,000 as a temporary measure but he says that he repaid this on 4 March 2002.  The result was that only he paid the $200,000 downpayment using the $300,000 which his brother had lent him.  He says that he also paid for all the other expenses relating to the purchase which on his case amounted to over $185,000 which included the cost of decoration and refurbishment.  He says that during their cohabitation at TKS he also contributed to the household expenses as well as paying the mortgage.

Events Post Separation

14.  Having separated in April or May 2003, Sharon then initiated divorce proceedings by a petition alleging unreasonable behaviour filed on 29 July 2004 [FCMC 8117/2004].  The course of the divorce petition and of the ancillary relief application will need to be considered with some care on Richard’s plea that the action should be struck out as an abuse of process.  In understanding the way that the issues lie in this action, with particular reference to who is the beneficial owner of Viva Court, Sharon says in her witness statement in this action dated 23 May 2007 [B/61-72 @ §10/64] that she first discovered the existence of the declaration of trust of 12 April 1997 by which she purports to hold her shares in SIL as trustee for Michael in about September 2004 which was 18 months after she and Richard separated.  At B/65 she recounts in great detail, and all of this has been the subject of her oral evidence on which she was closely cross-examined, how Richard was in the habit of asking her to sign blank documents which he told her were related to mere formalities relating to SIL.  She says that she was tricked into signing the declarations of trust, bought and sold notes and instruments of transfer by which she transferred her 95% shareholding in SIL to Michael.  According to her, Richard would often present her with these types of document as she drove him to work when the car was stopped at red traffic lights on which occasions she was in no position to consider what it was that she was signing.  She says that when this was going on she and Richard were getting on well as husband and wife and that she loved him and trusted him.  He was an experienced businessman who knew about company documents and trusts and so forth and she trusted him implicitly.  It was by these underhand methods that she was tricked into signing away her interest in SIL and her ownership in Viva Court which Richard had told her he had given to her as an engagement gift.

15.  For his part, Richard denies all of this.  He says that she knew very well the basis upon which SIL had been used to purchase Viva Court on Michael’s behalf and the basis of their occupation of the flat which I have already related, and of course this is now the basis of her claim in the action to have restored to her ownership the shares in SIL and through this her ownership of Viva Court.

16.  Having summarised the evidence and how the issues lie in respect of SIL/Viva Court and TKS, I now turn to examine the course of the divorce proceedings which form the basis of the plea of abuse of process.

The Divorce Proceedings

17.  These are the foundation of the plea of abuse of process.  Miss Lorinda Lau, who appears for Richard, submits that it is an abuse of process by Sharon to bring this action for the relief that she now seeks in circumstances where she had, quite appropriately, asked for identical relief and potentially more than that, given the breadth of the Family Court’s jurisdiction in ancillary relief proceedings following divorce, which she then pursued vigorously until her then solicitors approached Richard’s solicitors with a proposal that they agree to mutually withdraw their applications, Richard by then having applied for an order of nominal maintenance to protect his future position, on the basis that Richard would pay $45,000 as a contribution towards Sharon’s costs in the ancillary relief proceedings.  This was agreed and an order by consent was made by Deputy District Judge C K Chan on 1 August 2006 [B/286-287] based on a consent summons signed by their respective solicitors on 17 July 2006 [B/281-282].  The material terms of the order were these:

“BY CONSENT it is ordered that:-

1.      All claims for ancillary relief by each party hereto against the other be withdrawn.

2.      The Notice of an Application for Ancillary Relief dated the 23^rd November 2004 and registered in the Land Registry by Memorial No. UB9398932 in the asset specified in the SCHEDULE hereto be withdrawn and the registration thereof be vacated;

3.      The Respondent shall pay the Petitioner costs of and incidental to the application for ancillary relief in an agreed sum of HK$45,000.00 and each party shall waive all the previous costs orders whether made in his or her favour in the divorce proceedings hereof prior to the date of the Consent Order to be made herein.

Dated the 1^st day of August 2006.

SCHEDULE

All Those 28 equal undivided 55,224th parts or shares of and in Sub-Section 3 of Section J of Quarry Bay Marine Lot No.2 and the Extension Thereto and Section N of Quarry Bay Marine Lot No.2 and the Extension Thereto (Flat H on 15^th Floor, Kam Shan Mansion, Kao Shan Terrace, No.5 Tai Fung Avenue, Taikoo Shing, Hong Kong).”

18.  It can be seen from the Order that Sharon’s solicitors had registered a caution against the title of TKS which was to be removed.  Richard’s evidence, which I accept, is that he thought this was the end of the matter in terms of litigation between himself and Sharon.  She was in the happy position of being in excellent and well paid employment with monthly earnings of $88,383 [her Form E – B/153] as General Manager of Siber Hegner Limited and he was now back with the Regal Meridian Hotel earning $60,000 a month living in rented accommodation having let out TKS to pay for the mortgage.  He also had other debts of $830,237 [his Form E – B/176] and maintenance obligations to his previous wife and his daughter Natalie.

19.  Having obtained the consent summons on 17 July 2006 Sharon, now having instructed other solicitors, issued her writ in this action three days later on 20 July 2006 [B/1-7].  I think it is helpful to see how far the matrimonial litigation had gone before the consensual withdrawal of those proceedings.  Richard has put into evidence the relevant pleadings and orders.  Sharon’s divorce petition of 29 July 2004 included what might be termed the usual prayer for ancillary relief asking for periodical payments, secured periodical payments, a lump sum and a transfer to her of Richard’s interest in TKS [B/132].  The petition was not defended.  A decree nisi was pronounced on 17 November 2004 and made absolute on 28 January 2005 [B/279].

20.  The ancillary relief application began in earnest with the filing of Sharon’s Form E on 13 September 2004 [B/139-161].  At page B/159 under Part 6 “Orders Sought” Sharon repeated the prayer to her divorce petition but added a claim that:

“(3) … the Respondent do transfer and assign all his shares and/or beneficial interest of and in Sino Intelligent Limited to me; …”

In response to paragraph 6.2, which asks the party completing the form to identify the property that he or she is seeking a transfer, settlement or sale of Sharon has answered that question by identifying TKS and Viva Court as well as a $100,000 wedding ring [B/159].  At paragraph 2.4, she laid claim to her shares in SIL — 95%, which she alleged were held by Michael as her trustee [B/145].  At paragraph 5.2, Sharon dealt with her claim regarding SIL and Viva Court in these terms [B/157]:

“5.2   Conduct by either party will only be taken into account in exceptional circumstances.  If you feel it should be taken into account in your case, identify the nature of such conduct.

Then the Respondent and I married, we lived at 1^st Floor, Viva Court, No.290A Prince Edward Road West, Kowloon, Hong Kong.  This property was and in owned by our company, SINO INTELLIGENT LIMITED.  Originally, I owned 95% of the said Company’s shares.  To my surprise, my said shares were transferred to Ng Siew Loong, the brother of the Respondent on 11^th July 2003 according to a recent search.  I do not have recollection of executing any document to effect such transfer and I have not received any consideration for such transfer.  All books, accounts and documents of the said company are in the possession of the Respondent.  I suspect that the Respondent has wrongfully disposed of my shareholdings and attempted to eliminate my interest in the said property.”

She was there advancing precisely the same claim that she is now putting forward in this action.

21.  For present purposes, I do not need to make further reference to Sharon’s Form E save to say that it was an obviously conscientiously completed document which laid claim to both properties in this action and the shareholding in SIL.

22.  Richard’s Form E is dated 26 October 2004 [B/164-168]. Although his Form E is six weeks after Sharon’s I presume that these were exchanged following the terms of the Practice Direction so that at the time that Richard prepared his Form he had not seen Sharon’s Form E.  He set out his income position which showed that his outgoings exceeded his income and that he had debts in excess of $800,000.  He indicated that in respect of the purchase of TKS, the downpayment of $200,000 had come from Michael as had the other expenses relating to the property in the sum of $185,193.90, which I presume related to refurbishment costs and solicitor’s fees.  At paragraph 5.5, he set out his financial position as being a precarious one [B/183]:

“1.     I have not yet received my Income Tax for 2003/2004.  It will be sent together with my Income Tax for 2004/2005.  The calculated estimated amount is HK$178,089.00

2.      My daughter Ng Un Tung Natalie will be going to school in United Kingdom in 2005.  The estimated cost for her Form 3 schooling in a Public School including board & Lodging and vacation cost is estimated to be HK$250,000.00 per year.

3.      There is a strong risk of Job redundancy.  As the business environment for the Hotel industry improved, the need to have a highly paid experienced Hotel Executive to maintain and improve profitability is no longer necessary.  A younger less experienced Hotel Executive at half my salary can be hired for House Keeping the Hotel.

4.      My only Insurance Policy is provided by my present employer.  I have no personal Insurance policy at the moment.  With my age and should I lose my present job in the near future, my present financial status would not be able to provide me with any financial help for any medical services.

5.      My previous personal Insurance Policy No.28-8003426-7 (Policy year 28 August 1987), Insurance Policy No.28-9464106 (Policy year 18 November 2000), both had been cancelled by Manulife as I have no cash or means to pay the required premium.  I tried to renew Insurance policy in July 2004 by applying for a new policy with Manulife.  However, due to failure in medical check up, I was unable to do so.

6.      My medical report indicated that I have kidney stones and two urology shock wave treatments are required to clear all the kidney stones.  One treatment was made in August 2004 and another was scheduled in October 2004.  However, as my company’s insurance policy cannot cover two treatment within one year, the other treatment has been postponed until early next year 2005.”

Notably, at this stage there was nothing from him about the shareholdings in SIL or the purchase and occupation of Viva Court.

23.  From there the parties moved to the First Appointment and Sharon’s solicitors, as required by the Practice Direction, prepared a Bundle for it dated 4 November 2004 [B/189-199].  At B/190, she set out the orders that she required, mirroring the relief claimed in the writ in this action.  This was followed by a detailed request for further information from Richard based on what he had said in his Form E.  It amounts to a demand for comprehensive disclosure [B/191-195].  It is followed by a statement of the apparent issues between the parties and a chronology [B/196-197].

24.  Richard’s solicitors also did what the Practice Direction required and prepared a First Appointment Bundle of their own dated 10 November 2004 [B/201-212].  They also filed a questionnaire directed at Sharon’s Form E which called for comprehensive answers and disclosure.  At B/217-244, dated 20 December 2004, is Richard’s answer to Sharon’s request further information and documents.  In terms of time, this must have taken a number of hours to compile by client and solicitor with the attendant legal expense that would need to be incurred in the preparation of such a document.  For her part Sharon filed an affirmation on 18 December 2004 responding to Richard’s questionnaire [B/246-254].  On 25 January 2005, the matter came back to Deputy District Judge C K Chan who adjourned the case for a further pre-trial review, gave leave for further questionnaires to be administered and responded to and recorded agreed values for TKS, Viva Court and two modestly-valued properties owned by Richard in Malaysia.

25.  On 8 February 2005 [B/262-272] Richard filed a request for further and better particulars of Sharon’s Form E and of her affirmation of 18 December 2004.  This second round of requests was even more detailed than the first questionnaire, on which date Richard also formally applied for nominal maintenance for himself to preserve his future right to seek a variation to a more substantial order if he required maintenance from Sharon.  There was then a hiatus of nearly 18 months, Sharon did not respond to Richard’s further request and did not file another of her own, until the consent order of 17 July 2006 [B/281-282] to which I have already referred.

26.  I have taken the trouble to go through the various steps taken in the matrimonial litigation in order to explain that the parties had gone a considerable way down the road to setting the matter down, either for a FDR hearing when the judge would have attempted to assist the parties to settle or, failing a settlement at that stage, to setting it down for a substantive hearing of the application.  I do not have evidence of this, but it must be the case that both parties would have spent a not inconsiderable amount in legal costs which in Richard’s case included a payment of $45,000 as a contribution to Sharon’s costs.

27.  Richard says, and I accept, that he thought it was all over.  He had received no indication whatsoever that Sharon intended issuing this writ for, in effect, identical relief within two or three days of the settlement of the matrimonial proceedings.  He had agreed to the Consent Order foregoing his right to, on a very basic level, nominal maintenance for himself, but he also gave up the right to have his financial dispute with Sharon, in all its aspects, income and capital, resolved in the natural forum for spouses following their divorce, which is the Family Court exercising its wide-ranging jurisdiction to do what is right between ex-spouses taking into account the various factors appearing in section 7, Matrimonial Proceedings and Property Ordinance.

28.  Miss Lau submits that Sharon cannot be allowed to bring one set of proceedings in, of all the Hong Kong Courts’ jurisdictions available to her, the most appropriate to do justice between them on all the matters which she now seeks a favourable adjudication on in this action and then, having pursued those proceedings for two years, has invited a joint withdrawal of those proceedings with a $45,000 costs contribution from Richard only to issue this action three days later without any intimation to him that this was her purpose in withdrawing her application in the Family Court.  It is submitted that this is sharp practice and where she has had one go, she should not be allowed to pursue Richard in this action.  This is abusive, in the legal sense, and I should not entertain it.

29.  The facts and matters relied on by Richard in support of this part of the case have been pleaded in paragraph 23 of the amended defence and counterclaim [A/43-45] and at paragraph 23(m) a conclusion is sought to be drawn that:

“In the circumstances, the Plaintiff is estopped and precluded from maintaining her claims in relation to the Viva Court property and the Tai Koo Shing property in this action against the 1^st Defendant.”

The Argument on Abuse of Process

30.  Before I attend to the arguments of Miss Lam, who appears for Sharon, and those of Miss Lau it is helpful to take the law first.  This type of situation was extensively discussed in the House of Lords in Johnson v Gore Wood & Co. [2002] 2 AC 1 particularly in the speeches of Lord Bingham of Cornhill and of Lord Millett. 

31.  The facts in that case differ considerably from what I have before me nevertheless, I need to summarise them briefly to provide context to what Lord Bingham and Lord Millett said in their speeches on estoppel and abuse of process.

32.  I take much of this from the headnote to the report of the case.  J, a businessman, conducted his affairs through a number of companies, including W Limited, in which he held all but two of the issued shares.  On behalf of W Limited he instructed GW a firm of solicitors, who from time to time also acted on his behalf personally and of others of his companies, to act for W Limited in connection with a proposed purchase of land, which it planned to develop.  It had an option to purchase the land, and GW were instructed to serve a notice exercising the option.  This they did but there then followed an action in the Chancery Division which concerned the validity of the notice, which resulted in an order for specific performance being made against the vendor.  By the time that the conveyance was completed W Limited had suffered considerable loss because of the cost of the Chancery action, due to, amongst other matters, its inability to recover costs and damages from the vendor and the collapse of the property market.  It therefore started an action for professional negligence against GW in connection with the exercise of the option to purchase.  Before the action came to trial, solicitors representing W Limited notified GW’s solicitors that J also had a personal claim against them arising out of the same matters which he would pursue in due course.  Subsequently, J’s solicitor and GW’s solicitor discussed J’s personal claim and J’s solicitor explained that it had been thought better to wait for W Limited’s claim to be concluded before dealing with J’s personal claim.  There was a discussion of overall settlement of both claims.  W Limited’s claim was eventually settled during the trial on payment to W Limited of a substantial proportion of the sum claimed by it.  In April 1993, J issued his writ against GW who in December 1997 applied to strike it out as an abuse of process of the court.  The judge declined to strike it out.  The Court of Appeal set aside the judge’s order on his decision not to strike it out for abuse of process but not on the other grounds which are not relevant for these purposes.  On appeal to the House of Lords, the appeal by J was allowed.  The House of Lords held that there was a public interest in the finality of litigation and in a defendant not being vexed twice in the same matter; but that whether an action was an abuse of process as offending against the public interest should be judged broadly on the merits taking account of all the public and private interests involved and all the facts of the case, the crucial question being whether the Plaintiff was, in all the circumstances, misusing or abusing the process of the court.  It held in that case that the Plaintiff’s action was not abusive.

33.  Lord Bingham reviewed the authorities and the basis upon which succeeding actions had been sought to be struck out as an abuse of process including res judicata in its classic narrow sense and also in its extended reach as explained by Sir James Wigram VC in Henderson v Henderson [3 Hare 100, 114-115] in the following way:

“In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.  The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

This rule has been applied in many subsequent cases including by the Privy Council on appeal from the Hong Kong Court of Appeal in Yat Tung Investment Co. Ltd v Dao Heng Bank Limited [1975] AC 581 at 589-590, per Lord Kilbrandon who gave the Opinion of the Board in which he distinguished res judicata in its narrow sense with that identified by Sir James Wigram VC in Henderson v Henderson supra.:

“The second question depends on the application of a doctrine of estoppel, namely res judicata.  Their Lordships agree with the view expressed by McMullin J that the true doctrine in its narrower sense cannot be discerned in the present series of actions, since there has not been, in the decision in no 969, any formal repudiation of the please raised by the appellant in no 534.  Nor was Choi Kee, a party to no 534, a party to no 969.  But there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings.”

A more modern explanation of and for the rule in Henderson is to be found in the decision of the English Court of Appeal in Barrow v Bankside Agency Ltd [1996] 1 WLR 257 at 260:

“The rule in Henderson v Henderson 3 Hare 100 is very well known.  It requires the parties, when a matter becomes the subject of litigation between them in a court of competent jurisdiction, to bring their whole case before the court so that all aspects of it may be finally decided (subject, of course, to any appeal) once and for all.  In the absence of special circumstances, the parties cannot return to the court to advance arguments, claims or defences which they could have put forward for decision on the first occasion but failed to raise.  The rule is not based on the doctrine of res judicata in a narrow sense, nor even on any strict doctrine of issue or cause of action estoppel.  It is a rule of public policy based on the desirability, in the general interest as well as that of the parties themselves, that litigation should not drag on for ever and that a defendant should not be oppressed by successive suits when one would do.  That is the abuse at which the rule is directed.”

Lord Bingham in Johnson v Gore Wood supra explained Henderson in these terms at 31A-F:

“But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them.  The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter.  This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole.  The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.  I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party.  It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive.  That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.  As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.  Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim.  While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances.  Properly applied, and whatever the legitimacy to its descent, the rule has in my view a valuable part to play in protecting the interests of justice.”

34.  In a case such as the present one where the original action was settled by mutual withdrawal, the speech of Lord Millett is, if I may say so, of great assistance.  At page 58, Lord Millett having set out what Sir James Wigram VC had said in Henderson at p.114-115 supra said that the Vice-Chancellor had been careful to limit this to cases which had proceed to judgment and not to an out of court settlement.  At p.59, Lord Millett was of the view that the Henderson principle did also extend to cases that had been settled.  At 59B-60A, he made these important observations:

“In one respect, however, the principle goes further than the strict doctrine of res judicata or the formulation adopted by Sir James Wigram V-C, for I agree that it is capable of applying even where the first action concluded in a settlement.  Here it is necessary to protect the integrity of the settlement and to prevent the defendant from being misled into believing that he was achieving a complete settlement of the matter in dispute when an unsuspected part remained outstanding.

However this may be, the difference to which I have drawn attention is of critical importance.  It is one thing to refuse to allow a party to relitigate a question which has already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which has not previously been adjudicated upon.  This latter (though not he former) is prima facie a denial of the citizen’s right of access to the court conferred by the common law and guaranteed by article 6 of the Convention for the Protection of Human Rights and Fundamental Freedom (1953).  While, therefore, the doctrine of res judicata in all its branches may properly be regarded as a rule of substantive law, applicable in all save exceptional circumstances, the doctrine now under consideration can be no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression.  In Brisbane City Council v Attorney General for Queensland [1979] AC 411, 425 Lord Wilberforce, giving the advice of the Judicial Committee of the Privy Council, explained that the true basis of the rule in Henderson v Henderson 3 Here 100 is abuse of process and observed that it ‘ought only to be applied when the facts are such as to amount to an abuse: otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation’.  There is, therefore, only one question to be considered in the present case: whether it was oppressive or otherwise an abuse of the process of the court for Mr Johnson to bring his own proceedings against the firm when he could have brought them as part of or at the same time as the company’s action.  This question must be determined as at the time when Mr Johnson brought the present proceedings and in the light of everything that had then happened.  There is, of course, no doubt that Mr Johnson could have brought his action as part of or at the same time as the company’s action.  But it does not at all follow that he should have done so or that his failure to do so renders the present action oppressive to the firm or an abuse of the process of the court.  As May LJ observed in Manson v Vooght [1999] BPIR 376, 387, it may in a particular case be sensible to advance claims separately.  Insofar as the so-called rule in Henderson v Henderson suggests that there is a presumption against the bringing of successive actions, I consider that it is a distortion of the position.  The burden should always rest upon the defendant to establish that it is oppressive or an abuse of process for him to be subjected to the second action.”

35.  This statement of the principle, as it has now evolved, is important where it is submitted on behalf of Sharoninter alia that if I strike out this action, it would deny her the opportunity to have these issues against Richard litigated before a court in circumstances where the first case had been mutually withdrawn by agreement.

36.  Another feature of this matter which is at the forefront of Miss Lam’s submissions on Sharon’s behalf is that in the Family Court proceedings, Michael and SIL were not parties as they now are.  On this aspect Lord Millett said this at 60B-D:

“The rule in Henderson v Henderson 3 Here 100 cannot sensibly be extended to the case where the defendants are different.  There is then no question of double vexation.  It may be reasonable and sensible for a plaintiff to proceed against A first, if that is a relatively simple claim, in order to use the proceeds to finance a more complex claim against B.  On the other hand, it would I think normally be regarded as oppressive or an abuse of process for a plaintiff to purse his claims against a single defendant separately in order to use the proceeds of the first action to finance the second, at least where the issues largely overlap so as to form, in Sir James Wigram V-C’s words, at p.115, ‘the same subject of litigation’.

Particular care, however, needs to be taken where the plaintiff in the second action is not the same as the plaintiff in the first, but his privy.  Such situations are many and various, and it would be unwise to lay down any general rule.  The principle is, no doubt, capable in theory of applying to a privy; but it is likely in practice to be easier for him to rebut the charge that his proceedings are oppressive or constitute an abuse of process than it would be for the original plaintiff to do so.”

I will therefore need to decide whether, in these circumstances, Michael and SIL can be said to be Richard’s privies.

37.  This, in my judgment, will only admit of one answer which is that in these circumstances both SIL and Michael are Richard’s privies.  They are parties related to him in the relief that is sought against him.  What Miss Lam has strongly urged on me is that in the Family Court action neither were parties to that matter, so that, even if I were to strike out this action against Richard as abusive it should be allowed to proceed against Michael and SIL.

38.  There is no doubt that in the Family Court proceedings both Michael and SIL would have been necessary parties, which at the adjourned pre-trial review which Deputy District Judge C K Chan had provided for in his order of 25 January 2005 someone would have had to tell the judge that notice of the proceedings would need to be given to both of those parties for each to consider whether to make an application to intervene in the ancillary relief application.  Indeed, the judge of his own volition could have so directed.  There is no question that they would have had a sufficient interest in the matter for the court to allow them to intervene and take part in that application. 

39.  As to whether a party in the subsequent action can apply to have it struck out against him as an abuse of process, where that party was not party to the original action, the answer to this aspect has been supplied by Lewison J in Barrett v Universal Island Records Ltd & Ors [2006] EWHC 1009 [at page 34 of the report which I have been supplied with].  At paragraph 193, Lewison J said this:

“[193] The principle underlying abuse of process is, however, capable of applying so as to bar a claim by a person who was not a party to the previous litigation relied on.  Ms Jones referred in particular to Morris v Wentworth-Stanley [1999] QB 1004, 1017, [1999] 2 WLR 470, [1999] 1 FLR 83 in which Potter LJ said that the principle was open to be applied where a plaintiff fails to join a defendant who should have been joined in earlier proceedings, and cited with approval the following statement by Mummery LJ in MCC Proceeds Ltd v Lehman Brothers International (Europe) [1998] 4 All ER 675, 696, [1998] 2 BCLC 659:

There was no valid reason for Macmillan not joining LB as a Defendant to the first action, so that all claims in relation to the title to the Berlitz shares could be decided in the same action and bind all interested parties … it is an abuse of the process of the court to bring [the action] against LB.: the substantial issue raised in it (ie the title to the Berlitz shares) has already been decided, on both law and fact, in the first action in circumstances which preclude the parties in this action from attempting to litigate that issue again.”

At paragraph 195, he referred to the speech of Lord Shaw of Dunfermline in Hoystead v Commissioner of Taxation [1926] AC 155, 165 who said that:

“In the opinion of their Lordships it is settled, first, that the admission of a fact fundamental to the decision arrived at cannot be withdrawn and a fresh litigation started, with a view of obtaining another judgment upon a different assumption of fact; secondly, the same principle applies not only to an erroneous admission of a fundamental fact, but to an erroneous assumption as to the legal quality of that fact.  Parties are not permitted to bring fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances.  If this were permitted litigation would have no end, except where legal ingenuity is exhausted.”

This raises a different aspect of the matter to which I will return presently, but I refer to it now because it serves to demonstrate the importance which the law attaches to the disposal of litigation in one go whenever possible by the inclusion of all the relevant issues and arguments against all the proper parties.  For the sake of completeness, I should also refer to the English Court of Appeal decision in MCC Proceeds Inc. v Lehman Brothers International (Europe) [1998] 4 All ER 675, to which Lewison J supra had made reference in the passage that I have just referred to in Barrett v Universal Island Records Ltd & Ors. Mummery LJ in dealing with the objection, if I can so term it, that the parties and issues in the case before him differed said this:

“It is pointed out on behalf of MCC Proceeds that the parties and the issues in the first action and in this action are different.  The claim in the first action was by Macmillan against SL (and others, but not LB) in respect of the ownership of shares covered by certificate No B1-425.  The claim by MCC Proceeds in this action is against LB in respect of the conversion of share certificates Nos 234, 243, 245, 246 and 347.

This is an oversimplification of the legal position.  The essential factual basis of the claims is the same in both cases.  An examination of the extent of overlap between the first action and this action brings this case within the Henderson v Henderson principle.  First, the issues in the two actions.”

Discussion

40.  Whilst Miss Lam, in a series of very powerful submissions, has pointed to the inapplicability of the principle which I have set out in the previous paragraphs, to the way that this dispute has developed, first in the Family Court and now in this form in this action, it seems to me that it is precisely to this sort of litigation that these principles are addressed.  There is no question whatsoever that the issues raised by Sharon in her ancillary relief application include precisely the same issues that are raised in this action.  Although Michael and SIL were not made parties to the ancillary relief application both were clearly sufficiently interested in the subject matter of the application to have been allowed to intervene but, more importantly, both should have been served with her application by Sharon.  The Family Court would not have been able to proceed without giving Michael and SIL a chance to state their cases.  In such circumstances, there is nothing in the point that the parties are different in this case.

41.  What I find especially distasteful is the fact that Sharon (through her then solicitors) kept from Richard her carefully planned, it could not have been otherwise, decision to issue the writ in this action within days of the settlement of the matrimonial application in circumstances, and this provides the sting in the rail, where Richard was persuaded to contribute $45,000 towards Sharon’s costs in the consent summons.  I have no doubt that had he been fully informed of what she intended to do he would have declined to consent to a mutual withdrawal where, for the previous two years, they had been contesting the matrimonial suit at not inconsiderable legal expense for both of them, and for present purposes, I can concentrate on the fact that Richard would have had to spend considerable legal fees.  I say this based on the pleadings, questionnaires and answers and the Form’s E which I have seen and read.  All of this has been wasted expenditure for Richard who has now had to spend yet more considerable fees in defending this action.

42.  I am bound to say that Sharon’s behaviour is to be markedly contrasted to that of Mr Johnson in Johnson v Gore Wood ibid. where at all times GW’s solicitors had been kept fully informed of Mr Johnson’s intention to bring a personal action after his company’s action against GW had been concluded and discussions had therefore been possible, albeit unsuccessful, as to a global settlement of the company’s and Mr Johnson’s claims.

43.  There is no question in my mind that to strike out this action would not cause Sharon an injustice in the sense of depriving her of her right to have her claims litigated.  She had brought the correct proceedings, as between husband and wife, in the Family Court which would have been able to have before it all four parties in this action and done justice to each of them given the extent of its powers and jurisdiction.  The Family Court was undoubtedly the appropriate court for this dispute where both of these real property disputes (Viva Court and TKS) arose out of the matrimonial relationship.  Notwithstanding that she had gone to the right court in the first instance, Sharon has been advised, late in the litigation, to withdraw and start all over again in this court.  To have done so in the distasteful circumstances of not coming clean about her intentions when drawing Richard into a settlement and getting him to contribute to her costs is in my view abusive of the court process.  If ever there was a case meriting an order striking out an action it is this one and that is the course that I propose to take.

44.  In passing, what I wish to observe is that it is unfortunate that I had not been asked to determine this as a separate preliminary issue, as the court is usually invited to do with such applications.  In the event, I have had to also deal with the trial on its merits which has resulted in 11 court days being used.

45.  Whilst I appreciate that Sharon is now left without a remedy against Richard, she may now need to consider her position as against those who advised her into the course that she took which has resulted in my striking out her second action.

Result

46.  This being my view of the matter, where I have found what has been done to be abusive of the court process, this action will now be struck out with costs to the Defendants.  The order for costs will be an order nisi.

The Action on Its Merits

47.  This part of the judgment is now entirely academic but, as I indicated at the start of my judgment, I should in the event of an appeal indicate how I would have decided this matter had I not struck out the action.  Given that the content has now become academic, I propose to deal with the merits more briefly than would otherwise have been the case.

An Assessment of the Parties

48.  I take Sharon first, she being the Plaintiff who carries the persuasive burden of proof.  The outcome must turn largely on the view that I form of the parties credibility based not only on what they have said and how they have said it but also on an appraisal of the important documents that are in evidence taking into account the inherent probabilities having regard to the allegations that are made by each party.

49.  Sharon has greatly impressed me as someone of considerable accomplishment and intelligence.  She has a university degree from Canada.  She is an attractive woman of considerable poise and sophistication.  The fact that for many years now, she has held a senior and very responsible position in an international company speaks volumes for this view of her.  In fact I am completely persuaded that as between her and Richard she is by far the more intelligent and capable.  I am quite certain that coming off the back of a failed first marriage Richard considered her quite a catch.  He saw Sharon as a bright, attractive younger woman with a good earning capacity.  I don’t say that in any mercenary way but I am satisfied that he must have been extremely gratified by the prospect that he was to marry such a person.  This assessment must therefore sound in her favour on her prime case that he promised to buy Viva Court for her as an engagement present.  That prospect would no doubt have helped dispel any doubt that she might have had about marrying an older man with all the baggage of a previous failed marriage and a child that needed supporting financially.  The notion that she was to own what was to become the matrimonial home must have provided added comfort against the risk that their marriage might fail.

50.  Richard, whilst the less capable of the two, was and is, no doubt, also an able person with much experience, particularly in the hotel, food and beverage and tourism industry.  The fact that he has been able to command high-ranking positions in the hotel industry confirms this view of him. 

51.  Michael as a veterinary surgeon, who as practised as such in England for many years, is also a person of considerable standing.  But what has struck me about him is that, for someone who says that Viva Court was purchased by SIL for him using his money and that he has always been the beneficial owner of SIL’s shares through Sharon and Richard, he has shown very little grasp of the detail.

Discussion of the Evidence

52.  A very important feature of the case concerns the issue of who provided the downpayment for the purchase of Viva Court.  Miss Lam rightly accepts that the 10% deposit of $478,000 and the further 20% downpayment of $956,000 as well as stamp duty and other charges such as conveyancing costs came from Richard’s bank account.  This of course is consistent with Sharon’s case that he was buying the property for her as a present on their engagement.  The remainder was taken on mortgage.  Richard says that this was Michael’s money.

53.  An examination of the evidence shows that it is far less compelling than one might expect on a matter of such importance for both brothers.  This was a very substantial transaction and whilst one makes allowances for the fact that the brothers trusted each other and that Richard and Sharon were very happy together at the time, the fact remains that there is no contemporaneous evidence to support the Defendants’ case.  The only evidence that did arrive came on 10 July 2007, over 10 years after the event, some two weeks before the start of the trial when Richard filed his supplemental statement [B/310(7)] exhibiting a HSBC bank advice dated 27 March 1997 purporting to show a payment of $800,000 from Michael to himself.  The explanation for the delay in filing the documents was that Michael had only managed to travel back to Malaysia in early July 2007 to look for the evidence.  Michael’s evidence in chief is that he “positively remembered” paying for the initial deposits and that “the bulk I remember was from a cheque from my Malaysian account and that was for $800,000”.  He went on to say that the transfer was stated on the HSBC bank advice to be a “repayment of a loan” to Richard so as not to fall foul of Malaysian Government restrictions prohibiting the transfer out of large sums of money.  Under cross-examination, Michael gave evidence that the money had been brought over in cash by Richard from Malaysia in “bits and pieces” and said that the final amount of $800,000 was remitted on 27 March 1997 after the initial deposit had been paid on 26 March 1997 on the signing of the Sale and Purchase Agreement.  What Michael could not fully explain was that $800,000 had been transferred from Richard’s account to his account, except to say that Michael had owed him a lot of money.  This evidence was given by Michael on 24 July 2008.  The trial had to be adjourned to October and on 29 October 2008 Richard was able to produce, for the first time, HSBC bank statements showing that $300,000 had been deposited into his bank account on 6 January 1997 and a further sum of $946,489.15 came on 6 March 1997.  He settled, in terms of his evidence, for these sums as being the amounts transferred by Michael to pay for the purchase price of Viva Court.  This is what he told me.

54.  Miss Lam submits that the two brothers’ evidence on the means by which Viva Court was purchased is suspicious when one considers that there was nothing to prevent the purchase being taken by Michael directly either in his own name or through a company.  The fact that he was resident overseas may have presented a problem only in respect of obtaining a mortgage but this would not have been insurmountable where the mortgagee bank would have had the security of the property to look to and Richard, in good employment, as was Sharon, could have stood as guarantors.

55.  What actually emerged was a confused structure with SIL firstly issuing two shares, then 10,000 of which Sharon had 9,500 and Richard only 500.

56.  Michael’s evidence was that he had left it all to Richard to arrange.  His prime concern was that, given Richard’s previous “messy” divorce, he did not wish to become involved in any potential claims should things have gone wrong for Richard again.  Richard’s account of it is that this corporate structure was for “convenience” [see his witness statement, para.4B/93].  When it came to his oral evidence, he said that he had rather left it all to his accountants, Samuel Chan & Company who structured it in this way because it was difficult for Michael, as a non-resident, to obtain a Hong Kong mortgage.  Miss Lam says that this version is a new one, not predicted by the pleadings or the witness statements.

57.  Miss Lam has sought to test this account, the inability of Michael to obtain a Hong Kong mortgage, by looking at the structure of the purchase.  She has helpfully provided a chronology, of the various steps in the process with references, which I gratefully reproduce here:

“23.12.96     P & D1 each allotted 1 share in SIL [C1/632-633]

27.01.97             P & D1 visited D2 in UK [Exhibit D2/p.15]

08.04.97       SIL increased its issued shares from 2 to 10,000 — P allotted 9,499 & D1 allotted remaining 499 new shares:  Return of Allotment [C2/673-4]; P’s Application for 9,499 shares [C2/675]; D1’s Application for 499 shares [C2/676]; P’s Share Cert No.4 [C2/678]; D1’s Share Cert No.3 [C2/679]

12.04.97       P’s Declaration of Trust in respect of 7,000 shares [B/112]

01.05.97       D1 transferred 500 SIL shares to Profit Harbour: Instrument of Transfer [C1/647=650]; Bought & Sold Note [C1/646=651]

                     Profit Harbour’s Declaration of Trust [C1/644]

30.12.97       D1 resigned as director of SIL [C2/681].  Betty Wong appointed as director of SIL [C2/682]; Betty Wong’s Consent to Act as Director [C2/683]

01.01.98       Minutes of SIL Board Meeting at which it was resolved that D1 be appointed as director and Betty Wong to resign as director [C2/685].  Notification of Resignation of Director (filed 15.12.99) [C2/690]; Notification of Changes of Director [C2/691]

April 03        P & D1 separated: D1’s Financial Statement §1.5 [B/166]

11.07.03          Date of Purported Instrument of Transfer [C2/698] & Purported Bought & Sold Note [C2/699]”

58.  Faced with this structure, it is right to say that Richard was quite unable to say why it was done in this way.  All he could say is that Samuel Chan & Co. did it like this.  He could of course have called Samuel Chan to tell the court why he had done it like this and what instruction he had received including as to the beneficial interest of Michael who had provided the deposit and the downpayment.

59.  If Richard and Michael are telling the truth, the whole matter had been structured in a very sloppy and had hazard manner.  It would have been very simple to have prepared a trust document at the outset with the appropriate recitals at the beginning setting out the factual background and the reasons for the establishment of the trust.  What the court has been presented with is a structure of ownership with piecemeal changes added on.

60.  Nevertheless, what does appear to favour Richard is that Sharon purportedly signed a declaration of trust on 12 April 1997 which was a week before the completion of the purchase of Viva Court, by which she held her shares in SIL as Michael’s trustee and also a bought and sold note and an instrument of transfer with a blank date transferring her 9,500 shares to Michael.  These latter documents were finally executed on 11 July 2003 after the parties had separated.  The cumulative effect of these documents is to transfer the shares in SIL and therefore the ownership of Viva Court to Michael.

61.  Whilst the structure of the purchase of Viva Court has little to recommend it, Richard at least has documents of some sort signed by Sharon to confirm in some form or other his and Michael’s case.  This has required Sharon to explain her signatures on the documents.  She has explained them by saying that some of the documents were put to her to sign at home in a rushed way so as to prevent her considering their contents or their consequences.  Some were signed in traffic, as she drove, albeit at red traffic lights.

62.  I have to judge the truth of this against the background of my assessment of her as a highly intelligent, astute and articulate person.  She says that she trusted Richard and signed when he told her that this was all routine company paperwork.  For my part, I do not consider that this lady, having regard to her character, would have signed anything as important as this in such a perfunctory manner.  I cannot accept this version of events by her.  I have come to this conclusion notwithstanding the contents of the email that she sent Michael [Exhibit P.1 and P.2] dated 27 March 2005 which was during the progress of the divorce proceedings, in the course of which she says that she had been so stupid to trust Richard in believing everything that he told her and that she did not recall signing any papers returning her shares in SIL back to Michael and to Richard.  Whilst this email tends to support her present case, the weight that it carries is greatly lessened by the fact that it comes well after the events referred to and during the course of what had by then become hostile divorce proceedings.

63.  Notwithstanding that she says that she had been stupid to believe Richard at the time, I am not prepared to accept that someone of Sharon’s calibre would have signed in the circumstances that she has described.

64.  Ultimately and this is cause of regret, the evidence has come out in such a way as to leave me in a considerable state of doubt as to the veracity of both parties’ versions.  Richard’s and Michael’s structure for the purchase of Viva Court is less than convincing and Sharon’s account as to the way in which her signatures on the vital documents, the declarations of trust and the transfer documents of her shares to Michael, were obtained I am unable to accept.

65.  Had I been put to it to decide the issues on Viva Court, I would have had to decide the matter on the burden of proof alone.  Unsatisfactory as such a way of disposing of a case may be, this would have been the only way that I could have proceeded on the evidence before me.  I am unable to arrive at any firm findings of fact on these rival accounts.  I am unconvinced by Richard and Michael as I am by Sharon’s version of how she signed these crucially important documents.

66.  Whilst Miss Lam has quite properly referred me to the case of Re Superyield Holdings Ltd [2000] 2 HKC 90 where Mr Recorder Kotewell SC observed that:

“Prima facie, if no other evidence was available, it would be a very strong thing to hold that the beneficial ownership did not go with the legal title.  So, at the first step, it would have been for the second respondent to displace that prima facie position.”

the fact remains that it is Sharon who must carry the persuasive burden overall to establish that her version of events is true and that consequently that the two brothers have not been truthful.  The choice is a stark one.  She has not been able to discharge her burden on a balance of probabilities and in such circumstances I would have refused her the orders that she asks for on Viva Court.

TKS

67.  Here the matter is much more straightforward.  The title lies with Richard.  I am satisfied on this occasion that the downpayment came as a loan from Michael.  There is no doubt that Sharon had been making very substantial financial contributions to the marriage going back to the start of the relationship, but I do not believe that the way that her case has been presented, by means of an action in this form, can alter the fact that the legal title reposes with Richard.  I do not believe that it can properly be said that he holds the legal title on behalf of both of them.  I would have dismissed Sharon’s action on the basis that it has been put forward.

Comment

68.  This case has brought into focus the desirability of financial disputes between husband and wife being heard in the Family Court which is provided with the powers and jurisdiction to arrive at the most just disposition of such cases.

69.  In this matter, Sharon has undoubtedly made very considerable direct financial contributions to the marriage.  Very significantly she paid over $900,000 in mortgage instalments on Viva Court, thereby securing a roof over the parties head.  She made payments to help out Richard in respect of his failing business at the Thai Café and in addition made payments for domestic expenses at TKS including the maid’s salary.  All of this could and would have been properly reflected by the judge in the Family Court irrespective of whether it was Michael or she who was the beneficial owner of Viva Court and the fact that TKS was in Richard’s sole name would not have had the impact that it has had on my finding in this action.  The broad jurisdiction and powers of the Family Court to make transfer of property orders, order lump sums, make settlements and order periodical payments (most unlikely given Sharon’s relatively high earnings in this case) would have provided the fair outcome.

70.  Whilst none of these remarks can have any effect on the decision that I have arrived at in striking out this action, I have felt compelled to make them because it seems to me that had Sharon persisted in her ancillary relief application, properly constituted and with the addition of SIL and Michael as Intervenors and/or added Respondents, she would have obtained just recompense for her considerable financial input into this short-lived marriage.

Conclusion

71.  The action having been struck out as an abuse of process, the Defendants must have these costs of the action which will be taxed on a party and party basis if these cannot be agreed.  This will be an order nisi.

72.  Finally, I wish to thank both Miss Lam and Miss Lau for the helpful and very thorough way in which they have each conducted their cases which has been of great assistance to me.