SWM v. PYC

CACV 308/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 308 OF 2002

(ON APPEAL FROM F.C.M.C. NO. 8173 OF 2001)

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REASONS FOR DECISION

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Hon. Yuen JA:

1. This is an appeal from a decision of Geiser DJ (sitting in the Family Court) given on 17 May 2002 dismissing an application to transfer proceedings pending in the Family Court to the High Court. At the end of the hearing of the appeal, we dismissed the appeal and said that we would reduce the reasons for our decision into writing to be handed down. We do so now.

2. The Petitioner ("the Wife") had applied to the judge for (i) the transfer from the Family Court to the High Court of contested proceedings for divorce and ancillary relief, and (ii) an order that the application for ancillary relief be heard "in conjunction with" certain High Court Miscellaneous Proceedings.

Divorce proceedings

3. The Wife had filed a petition for divorce on 13 August 2001, on the ground of unreasonable behaviour. The ancillary relief which she seeks includes, amongst other things, settlement or transfer of 5 properties owned by a company ("the Company"), of which the Husband is a director and, as pleaded in the Amended Petition, "the majority shareholder".

4. The divorce has been contested by the Husband, who has denied and/or sought to explain the allegations of unreasonable behaviour, and who has denied that the marriage has broken down irretrievably.

5. The divorce petition has not been listed for hearing yet. If the petition is dismissed, there would of course be no question of settlement or transfer of properties (even if the Husband were the owner of any property).

High Court proceedings

6. The High Court proceedings are between the Company and the Wife regarding possession of a property in Shouson Hill ("the Shouson Hill property"). The registered owner of the property is the Company, but it has been used as the matrimonial home.

7. The Company is not a property-holding company only. It is a manufacturing and trading company which had been in business for some 16 years before the commencement of proceedings in 2001.

8. Before the commencement of proceedings, the Husband held 70.3% of the shares (with the Wife being the holder of 1 share), a French company by the name of Societe Wallisienne D'Investissement SA held 15.4%, and a company by the name of Fortune Victory Investments Ltd held 14.3%.

9. There is evidence from the Financial Controller of the Company that Fortune Victory is related to another French company by the name of Grand Arche Asie Pacifique. Societe Wallisienne D'Investissement SA and Grand Arche Asie Pacifique (collectively "the French companies") had acquired their shares in the Company (totalling nearly 30%) in 1996, some 5 years before the commencement of the proceedings herein, for a consideration of $20m. pursuant to an agreement made in 1994 which was drafted and witnessed by solicitors. Two French persons have been on the Board of Directors of the Company since 1995.

10. According to the Financial Controller's affirmation, the Company has been seeking to recover possession of the Shouson Hill property from the Husband and Wife for some time for financial reasons. The Husband has vacated the property but the Wife has not.

11. In July 2001, the Wife was removed as a director, and her 1 share was purportedly transferred to the Husband. On the face of it, therefore, since July 2001, the Wife has had no relationship with the Company which is the registered owner of the property she is occupying.

12. On 13 August 2001, the day the Petition was filed, a written notice of termination of her licence to occupy the Shouson Hill property was served upon her.

13. On 31 August 2001, the Company issued proceedings under Order 113 against the Wife for the delivery up of possession of the Shouson Hill property. The Wife opposed those proceedings claiming (i) that she has an equitable interest in the property and/or (ii) that the Company's corporate veil should be lifted so that the property could be transferred to her in the ancillary relief proceedings should she succeed in obtaining a divorce. This was notwithstanding the fact that the Wife had not alleged in any of her affirmations, in either the divorce proceedings or the possession proceedings, that the French companies held their shares on behalf of the Husband.

14. In January 2002, the Order 113 proceedings came before Deputy Judge Poon in the High Court. He held that the Wife had no equitable interest in the Shouson Hill property. However, he held "by a narrow margin" that since there was (at that time) no affidavit evidence from the Husband or the French companies themselves to confirm that the French companies' interests in the 30% shares were genuine, there was a substantial point to go to trial. The deputy judge ordered that pleadings should be filed.

15. Pleadings closed some 6 months ago. In the Defence and Counterclaim filed by the Wife on 10 May 2002, she has alleged that "in or about July 1990, the [Shouson Hill] property was purchased by the Defendant [i.e. the Wife] intending to be the matrimonial home of the Defendant and [the Husband]". This is an allegation that had not appeared in any of her affirmations before. The Counterclaim is for a declaration that she is the beneficial owner of the property and that the Company is holding it on trust for her.

16. The Wife's allegation of beneficial ownership appears, at least on the face of it, to be inconsistent with the holding of Deputy Judge Poon that she has no equitable interest in the property.

17. Perhaps more importantly, for present purposes, there has been no assertion in the Defence and Counterclaim that the corporate veil of the Company should be pierced. Mr Robert Tang SC appearing for the Wife in this appeal accepts that there has been an omission but he says that there has been no abandonment of that position. He says the Defence may have to be revised in this regard.

Application before Judge Geiser

18. Be that as it may, that was the position before Judge Geiser in May 2002 when the Wife applied for the contested divorce and ancillary relief proceedings to be transferred to the High Court, and for the ancillary relief proceedings to be heard "in conjunction" with the High Court action.

19. Under Rule 32 of the Matrimonial Causes Rules, the court may by its own motion or by application of one of the parties transfer pending proceedings to the High Court "where, having regard to all the circumstances including the difficulty or importance of the cause or application or of any issue arising therein, the court thinks it desirable that the cause or application should be heard and determined in the Court of First Instance".

20. The application was opposed by the Husband on the grounds first, that there was no sufficient nexus between the High Court action and the divorce proceedings, and secondly, as the divorce would not be ready for hearing for some time (and the subsequent ancillary relief proceedings would be even later), the delay caused to the High Court action would be prejudicial to the Husband, presumably because of the Company's financial requirements for the use of the property.

21. The judge adopted the arguments put forward on behalf of the Husband and said that he also considered the application to be "premature". He said he did not see why there was a need to transfer the case "at this stage" and certainly there was "absolutely no reason for the divorce itself to be transferred to the High Court".

Principles on appeal from exercise of judge's discretion

22. The decision was an exercise of the judge's discretion. It is settled law that in the absence of (a) any misunderstanding of the law or the evidence, or (b) any wrong inferences of the existence or non-existence of facts, or (c) any change in circumstances, or (d) any aberration in the judge's decision, an appellate court should not interfere in the exercise of a judge's discretion.

No grounds for disturbing exercise of judge's discretion

23. It is clear from Judge Geiser's reasons that he considered the application for transfer to be premature because the divorce was a contested one that had not yet been heard. If the Wife fails to obtain a divorce, there would be no ancillary relief for the settlement or transfer of the property, and therefore no point of "nexus" between the Family Court proceedings and the High Court action.

24. That decision was certainly open to the judge and we can see no reason for disturbing it on any of the grounds set out in paragraph 22 above. Mr Tang SC submitted before us that by July-August 2003, the parties would have separated for 2 years and the Wife would be able to file a fresh petition for divorce based on that ground.

25. The Wife may or may not file a fresh petition then, and she may or may not be able to prove that the marriage has broken down irretrievably, but that is a matter for the future. As proceedings stood before the judge (and even as they stand now), the only nexus Mr Tang SC is alleging between the ancillary relief proceedings and the High Court action is that the Wife is seeking to lift the corporate veil. Yet, (i) as far as ancillary relief proceedings are concerned, there would be none at all unless the Wife first succeeds in obtaining a divorce despite the Husband's contest, and (ii) as far as the High Court action is concerned, she has made no claim to lift the corporate veil. All that she has asserted in the Defence and Counterclaim (notwithstanding Deputy Judge Poon's decision that she had no equitable interest) is that she is the beneficial owner of the property by way of a resulting trust.

26. Quite apart from that, it is difficult to see how the Family Court judge could have been asked to make an order for "consolidation" with the High Court action, as the Wife's solicitor puts it in his affirmation in support of the summons, when the Company (which was the plaintiff in the High Court action) was not before the court.

27. Finally, Mr Tang SC's submission was that the Wife might be prejudiced if the Company were to succeed in the High Court action and were to dispose of the property. It was said that if a divorce were to be granted and if an order were to be made in ancillary proceedings that the corporate veil should be lifted (presumably after a finding that the French companies were nominees or trustees for the Husband), the Wife would be prejudiced in that she would not be able to obtain a settlement or transfer of the property.

28. That may or may not be a ground for an application for a stay of execution in the High Court action if the Company succeeds, but at this stage, that would be far too speculative a state of affairs on which to base an application of the sort that was made to the judge.

Order

29. In the circumstances, we dismissed the appeal with costs.

Hon Kwan J:-

30. I agree.