CYW v. CCH

 FCMC 10082 of 2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10082 OF 2002

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REASONS FOR DECISION

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(Joinder Application)

INTRODUCTION

1. The Petitioner (“the Wife”) and the Respondent (“the Husband”) are in the midst of an ancillary relief trial, with the Wife having given evidence, and the trial has been adjourned part-heard, to be resumed on 17^th October 2005.

2. One of the major issues in the ancillary relief application is the extent of the Husband’s assets.  There had been lengthy discovery of the Husband’s means prior to the commencement of the trial.  In answer to one of the Wife’s questionnaires, in February this year, the Husband disclosed, for the first time, that he was an authorized signatory of two bank accounts held by a company T Ltd with the HSBC.  What the Husband said at that time was that T Ltd  was beneficially owned by his friend, a Mr. Lam, who is a PRC citizen who was working and living in Mainland China.  In answer to further questionnaires, the Husband said that he did not have any information as to the director or shareholder of T Ltd, and that although he was a signatory to two of its accounts, Mr Lam had never asked the Husband to help in effecting transactions in relation to T Ltd, and thus the Husband had no knowledge as to the transactions of  T Ltd.

3. During the adjournment, the Wife continued with her investigations of the Husband’s means, and found out the following :

(i) T Ltd  is in fact the registered owner of two properties, which  for convenience sake, I shall call “the Park Tower Property” and “the Island Resort Property”.  The Agreement for Sale and Purchase for the Park Tower Property was signed on 16^th January 2003, the Assignment was signed on 4^th March 2003, and the consideration was HK$6.8m.  There was a mortgage loan from Chartered Bank which was paid off on 27^th October 2004.  The Agreement for Sale and Purchase for the Island Resort Property was signed on 8^th September 2003, the Assignment was signed on 30^th October 2003, and the consideration was HK$2.998m.  There was a mortgage loan from HSBC which was paid off on 3rd January 2005.

(ii) the Agreement for Sale and Purchase, Assignment, and the Legal Charge for both properties were executed by a Ms Lam on behalf of T Ltd.  The Wife has alleged that Ms Lam , who used to work as a clerk in one of the parties’ companies, is the Husband’s mistress or girlfriend.

(iii) the Husband transferred a sum of HK$500,000 to T Ltd, on about 29^th September 2003, about 3 weeks after the Agreement for Sale and Purchase of the Island Resort Property was signed, but before the Assignment was signed.

(iv) the Husband had failed to disclose a bank account with the Standard Chartered Bank, which is the mortgagee bank of the ParkTower Property.

4. The above discovery led the Wife taking, inter alia, the following steps :

(i) issuing an application under s.17 of the Matrimonial Property and Proceedings Ordinance, to set aside the transfer of the sum of HK$500,000 (“s. 17 application”) from the Husband to T Ltd.

(ii) filing affirmations to allege that T Ltd is holding the two properties as nominees for the Husband.

(iii) issuing an application to join T Ltd as a party to the ancillary relief application (“joinder application”).

5. The Wife’s s. 17 application had been served on T Ltd, and I gave directions for the application to be heard together with the Wife’s ancillary relief application, and leave for T Ltd to file an affirmation in opposition.

6. The Wife will also be asking this Court to declare that T Ltd holds the two properties as nominees or in trust for the Husband in the ancillary relief trial and it is for this purpose that the Wife issued the joinder application which was before me.  T Ltd opposed the joinder application.  Initially, the Husband took a neutral position, but by the time the application was heard before me, he also opposed the application.

7. As the trial is due to re-commence in about 3 weeks’ time, after hearing the arguments, I made an order on the same day that T Ltd  be added as a party, with reasons to be handed down later.  Here are my reasons.

LEGAL PRINCIPLES

8. The Wife’s joinder application was made under O.15 R. 6 (b) of the Rules of the High Court, and there is no dispute regarding the legal principles.  This court may order T Ltd be joined if : -

(i) the presence of T Ltd before the court is necessary  to ensure that all matters in dispute may be effectually and completely determined and adjudicated upon, or

(ii) between T Ltd and  the Husband / the Wife , there exists an issue  arising out of the ancillary relief application which in the opinion of this court it would be just and convenient to determine as between T Ltd and the Husband / Wife.

UNDISPUTED FACTS

9. By the time of the hearing, further matters had been disclosed by Ms Lam, and the undisputed facts were as follows :

(i)	There were 2 payments to T Ltd by the Husband :
	(a)	a sum of HK$500,000 on 29th September 2003
	(b)	sum of HK$360,000 on 24th February 2003
(ii)	as mentioned above, the Husband was the signatory of two bank accounts of T Ltd with HSBC
(iii)	The Husband signed two guarantees, respectively for the mortgage loans for the purchase of the two properties

T Ltd’s CASE

10.  T Ltd is a company incorporated in British Virgin Islands on 18^th November 2002, and Ms Lam is the only registered shareholder with her address given as the Park Tower Property.  Ms Lam claimed that it was her brother Mr. Lam who asked her to set up the company and that T Ltd  was in fact at all material times beneficially owned by her brother Mr. Lam.  She said it was Mr. Lam who instructed T Ltd to purchase the two properties and that all the monies required for the acquisition belonged to Mr. Lam.  According to Ms Lam, her brother Mr Lam has been trading in antiques for many years, and that around 1995 to 2000, he had made profits of tens of millions from trading in antiques.  Ms Lam said that the Husband is a good friend of Mr. Lam’s.

2 Payments to T Ltd

HK$500,000

11. I now turn to consider the payments by the Husband to T Ltd.  The Husband’s and Ms Lam’s explanation about the payment of the sum of HK$500,000 to T Ltd was essentially the same, which was in late 2001, the Husband had borrowed RMB530,000 in cash from Mr. Lam to purchase a confiscated car sold under public auction in PRC, and the HK$500,000 was the repayment from the Husband to Mr Lam.  The Husband had produced a copy of the registration record of a car being registered in his name as evidence of his purchase.

12. In 2003 the Husband said as Mr. Lam would like to invest in a property in Hong Kong, Mr. Lam had asked the Husband to make repayment of the RMB530,000, which the Husband rounded it up to be HK$500,000 and which the Husband, at Mr Lam’s direction, paid to T Ltd’s bank account.  The $500,000 was thus a repayment of the RMB530,000 for the purchase of the car.  Neither the Husband, nor Ms Lam, had produced any evidence to show there was a payment of RMB530,000 from Mr Lam to the Husband in 2001 nor was there any evidence of how the car was paid for.

HK$360,000

13. In relation to the payment of the $360,000, in answer to one of the Wife’s questions in relation to the transactions in his Standard Chartered Bank account, the Husband said that he was asked by Mr Lam to deposit a cheque of HK$363,769.84 on 16^th January 2003 into the Husband’s account with Standard Chartered Bank, for Mr. Lam’s purpose of an intended antique transaction, and on 24^th February 2003, the Husband was asked by Mr Lam to withdraw the amount of HK$360,000 and to transfer the sum into the Chartered Bank account of T Ltd, again for the purpose of Mr Lam’s transaction of antiques.  A copy of the $363,769.84 cheque was not produced and even if it was produced, there was no evidence that it was for any transaction of antiques or that it came from Mr Lam.  Also, I cannot understand why these transactions had to be conducted through the Husband and not through Ms Lam, Mr Lam’s own sister, or T Ltd, allegedly Mr Lam’s own company.

Signatory to two of T Ltd’s Bank Accounts

14. To explain why the Husband is the signatory of 2 of T Ltd  bank accounts, the Husband’s and Ms Lam’s explanation seemed to be that Mr. Lam would come to Hong Kong from time to time to take care of his various property investments here, but there were times when Mr. Lam could not come personally, and that he had asked Ms Lam to be a signatory of T Ltd’s bank accounts, and further, as the Husband was an old customer with T Ltd, Mr. Lam had asked the Husband to be a 2^nd signatory of the two bank accounts with HSBC as well, to facilitate T Ltd ’s dealings with HSBC.  Again, I do not quite understand this explanation, namely how being a signatory would facilitate T Ltd’s dealings with HSBC.  There is also no information as to what dealings T Ltd is having with HSBC.

The Two Guarantees

15. Regarding the two guarantees, Ms Lam said that in order to obtain the mortgage from the Standard Chartered Bank for the purchase of the Park Tower Property, she and Mr. Lam understood that it was a requirement from the banks to have someone to act as a guarantor.  She said that Mr. Lam asked her to seek assistance from the Husband to act as a guarantor, to which the Husband agreed.

16. Similarly, at the time of the purchase of the Island Resort Property, HSBC required a guarantor, and Mr Lam again asked Ms Lam to ask the Husband to help, and the Husband agreed to act as a joint guarantor with Ms Lam.

CONCLUSION

17. Notwithstanding that the s. 17 application and the joinder application were served on T Ltd sometime in August 2005, Mr Lam, who is  the key character, being the sole beneficial owner of the company according to Ms Lam and the Husband, has not filed any affirmations.  There is also no documentary evidence that Mr Lam ever paid any funds directly for the purchase of the two properties.  Further I note that notwithstanding that Ms Lam had told this court that she would put Mr Lam’s address in her affirmations, she failed to do so, apart from producing a copy of Mr Lam’s membership card of the Guangdong Province Collectors’ Society showing a correspondence address in 2002 and an employee card (validity date from 1^st October 2003 to 30^th September 2008) showing that he was employed by an insurance company in PRC.

18. Ms Lam denied that she was the mistress or girlfriend of the Husband.  She referred him as her boss in a letter dated 11^th August 2005 she sent to the court.  There was, however, no explanation from her or the Husband as to why the Husband’s address on the guarantee provided for the mortgage loan for the purchase of the Park Tower Property was given as the Park Tower Property, the same address as Ms Lam.

19. The question is a simple one : who provided the funds to T  Ltd for the purchase of the 2 properties ?

20. I would also add, at this stage, that the two payments of HK$500,000 and HK$360,000 by the Husband to T Ltd fall within the presumption of s. 17 in that these payments were presumed to have been made by the Husband with the intention of defeating the Wife’s application for ancillary relief, and the burden is on the Husband and / or Ms Lam to prove that these payments were not made with such an intention.

21. Counsel for T Ltd, Ms Wong, submitted that Ms Lam had explained the purpose of the two payments from the Husband.  With respect, these were mere assertions on Ms Lam’s part, with no supporting evidence and also it is not at all clear whether these were the only payments from the Husband, as Ms Lam was vague in her affirmation, saying that “although some of the monies were given by the Respondent to T Ltd, they all in fact were repayment of loans that my brother advanced to the Respondent in the past ……”.  In fact there was also a transfer of HK$4m on 23^rd November 2002 to the Husband’s account, which was transferred out on 25^th November 2002 to an unknown person, allegedly again pursuant to Mr. Lam’s request.  At this stage, we do not know whether this transfer had anything to do with the purchase of the two properties, although the Husband said not.

22. The Husband’s evidence in relation to T Ltd was clearly inconsistent and contradictory, since earlier in February, he said he knew nothing about the company’s transactions, and now it turned out that he had signed two guarantees for the purchase of the properties.  No doubt, Ms Lam’s and the Husband’s evidence will be tested in the forthcoming trial.

23. The Wife said that neither Ms Lam or Mr Lam would have the funds to purchase the two properties and the funds came from the Husband, and that T Ltd holds the two properties as nominees or in trust for the Husband.  T Ltd says the properties are held for Mr. Lam.

24. In the ancillary relief trial, I will need to decide whether the two properties or T Ltd form part of the Husband’s assets and this would obviously affect T Ltd.

25. At the commencement of the hearing, all counsel have agreed that if I were to allow the joinder application, to save costs for T Ltd, T Ltd needs only to appear during the Husband’s evidence and after the Husband’s case has closed.

26. Having considered all the above circumstances, I am of the view the T Ltd ought to be joined as a party to ensure all matters may be effectually and completely determined and adjudicated upon, and also it would just and convenient to determine as to whom the two properties beneficially belong.

COSTS

27. I agree with counsel for the Wife, Ms Wee, that the joinder application was a “stand alone” application and I had dealt with costs at the hearing.  I set out hereafter again my orders.

28. There were three hearings : -

(i)  26^th August 2005

This was the first return date of the joinder application, Ms Lam appeared for T Ltd during this hearing.  She did not apply for leave to represent T Ltd although no objection was taken by Ms Wee or counsel for the Husband, Mrs Remedios, as to her presence.  As Ms Lam had no legal representative and did not appear to fully understand the procedures, I made no order as to costs for this hearing.

(ii)  20^th September 2005

On this occasion, although T Ltd was legally represented and Ms Wong appeared as its counsel, she was instructed only a week before the hearing and she sought leave to file a further affirmation on behalf of T Ltd to provide further information.  So far as the Husband is concerned, Mrs Remedios submitted that it was up to T Ltd to produce documents and therefore the Husband was only turning up because he was the respondent and there was no expression prior to 27^th September 2005 that the Husband was opposing the joinder application.

(iii)  27^th September 2005

This was the actual hearing for the arguments.  Although the Husband appeared to take a neutral position previously, on this occasion he adopted the same position as T Ltd to oppose the joinder application.

29.Having heard the three counsel, I made no order as to costs for the hearing on 26^th August 2005 and 20^th September 2005 as those were hearings when directions were given for T Ltd to provide further documents.  So far as 27^th September 2005 is concerned, there is a general rule that costs should normally follow the event and I see no reasons to depart from this.  Both T Ltd and the Husband opposed the application and as the Wife had succeeded, I ordered that T Ltd and the Husband do pay the Wife’s costs equally, to be taxed if not agreed, on party and party basis, with certificate for counsel.