TWC v. LSC

FCMC 11594 /2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 11594 OF 2012

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DECISION
(Leave to Appeal)

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1. By a Ruling handed down on 14 March 2014, I refused the applications for joinder by the respondent and the intended intervening parties.  They now apply, by separate summonses, for leave to appeal against the Ruling of 14 March 2014 (“the said Ruling”).

2. For convenience, I continue to adopt the same abbreviations and nomenclatures as in the said Ruling.  Thus, the petitioner husband is referred to as “H”, the respondent wife as “W”, the daughter, ie the 1^st intended intervening party, as “Hung” and the son, the 2^nd intended intervening party, as “Yiu”.

Applicable Legal Principles

3. The parties have no dispute over the applicable legal principles.

4. The relevant test governing applications for leave to appeal from the District Court is provided in 63A(2) of the District Court Ordinance (Cap 336) (“the DCO”):

“Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that –

(a) The appeal has a reasonable prospect of success; or

(b)  There is some other reason in the interests of justice why the appeal should be heard.” [emphasis added]

5. The Court of Appeal discussed the application of s 63A(2) of the DCO in Sunny Tadjudin v Bank of America, National Association, HCMP No 691 of 2012, unreported, 29 June 2012 at paragraphs 8 – 10:

“8. Under section 63A(2) of the District Court Ordinance, Cap 336, leave to appeal to the Court of Appeal shall not be granted unless the Court of Appeal is satisfied that the appeal has a reasonable prospect of success, or that there is some other reason in the interests of justice why the appeal should be heard. Counsel relies on both limbs in section 63A(2) in seeking leave to appeal.

9. Reasonable prospect of success involves the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable” (SMSE v KL [2009] 4 HKLRD 125 para 17). Furthermore, it is pertinent to bear in mind that even if there is a reasonable prospect of success on appeal, the court still retains a discretion whether to grant leave to appeal, although the fact that there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion (Ho Yuen Ki Winnie & Ors v Ho Hung Sun Stanley & Anr. HCA 391/2006, 25 May 2009, A Cheung J para 3; and HCMP 1009/2009, 24 August 2009, para 22). [emphasis added]”

6. As I have already set out the parties’ case and their facts in the said Ruling, I do not propose to repeat them here. Reference to the relevant parts of the said Ruling will be made as and when necessary.

7. In brief, W and the children’s case is that H has promised the children on several occasions verbally that all interests in T&N L and other assets of the family would be passed to them when he passes away.  For this reason, the children have an interest in T&N L and the landed properties acquired by the funds of T&N L.  In addition, Yiu also claims that he is the beneficial owner of whole of the Property, despite the fact that it was purchased in the joint names of Yiu and W.  In dismissing their applications, I held that the children’s alleged claims are not capable of being enforced, whether in law or in equity. 

The Intended Intervening Parties’ Grounds of Appeal

8. I would deal with the grounds advanced by Mr Clough on behalf of the intended intervening parties first. 

Ground no 1

9. Mr Clough’s Ground no 1 is as follows:

The learned Deputy Judge erred in law in that he failed to identify the correct test as to whether or not a party should be added as an intervening party namely that a person, not a party to an action, is entitled to intervene and to be joined as a party if he has some interest that is directly related or connected with the subject-matter of the action.

10. Mr Clough submitted that every family is unique.  The family in the present case has its own arrangement as to how the family members run the family business.  The children have been working for the business for nothing or low salaries in order to build up their interest in the company; hence, they are entitled to be joined.

11. With respect, this is not what the children said in their affirmations.  As I have referred to their affirmations in the said Ruling, the children did not say that because of their work and contribution they have acquired an undefined interest in the company or the family assets now.  On the contrary, both of them said they relied on H’s promises that all the interests in T&N L and other assets of the family would be passed to them upon his death.  What they have is at most a moral claim:  see paragraph 38 of the said Ruling.

12. In my view, this ground must fail.

Grounds no 2(i) and 2(ii)

13. In his Ground no 2, Mr Clough set out the 4 matters that he said I failed to pay any or any sufficient regard to.  As far as I can see, Grounds no 2(i) and 2(ii) can be dealt with together.

2(i)	The parties’ daughter, identified in the judgment as (Hung) on its incorporation, was the legal and beneficial owner of (T&N L) and that when her shareholding was transferred to the petitioner she claimed a continuing beneficial interest in the company.
(ii)	The transfer of the said shareholding was without consideration and that there is no presumption of advancement from a daughter to a father and the presumption is that the recipient holds the property on resulting trust for transferor.

14. Mr Clough raised a new point in the leave application. He submitted that there is no actual evidence of consideration having been paid for the transfer of the shares by Hung to H.  On the reading of Hung’s Affirmation, in particular paragraph 9 of the Affirmation (which I set out in paragraph 19 of the said Ruling), the natural meaning of her affirmation must be that there was no consideration.  In the circumstances, H was and is holding the shares by way of resulting trust for her or at least it is arguable that H is a trustee by way of resulting trust.  This should be sufficient as a ground for Hung to be joined as a party.

15. To start with, it is common ground that the bought and sold notes and the instruments of transfer of the shares have not been disclosed in the present proceedings.  Thus, whether or not there was any consideration and if yes, the amount, at least on the face of it, could not be ascertained.

16. W’s Affirmation dated 30 July 2013 in support of her application of joinder also mentioned the transfer of the shares.  It is fair to say that the Affirmation did not say whether the transfer was for any consideration.  However, W, in the same Affirmation, went on to say that since the incorporation of T&N L, Hung has been working in the company until today.  She would handle the daily financial, shipping and operational matters of the company:  see paragraph 6 of the Affirmation.

17. In paragraph 8 of the Affirmation, W also said that Hung and Yiu only received low salary from T&N L throughout the years.  For example, Hung only received around $8,000 per month in the initial years.  Her present salary is only $11,000 per month.

18. Then in paragraph 9, she said that H “has promised on several occasions verbally to (Hung) and (Yiu) that all interests in (T&N L) and other assets of the family would be passed to them when he passes away”.  She then concluded that, “By the reasons of matters aforesaid, (Hung) and (Yiu) do have interest in (T&N L) and the landed properties acquired by the funds of (T&N L) …”.

19. As for Hung, her Affirmation dated 3December 2013 was silent as to whether she had contributed to the acquisition of the 50% shareholdings when T&N L was incorporated in 1997.  She said “… The understanding and agreement at that time was that I owned 50% of the interest in the business of (T&N L) while my parents owned the remaining 50%, which was held in the name of my mother”. 

20. In paragraph 11 of the Affirmation, she said she started to receive salary at $5,000 per month in September 1997.  In 2000 her salary was increased to $8,000 and the highest salary she received was only $11,000 per month (with double pay).  She said she had no other benefit save the basic salary.

21. In the same paragraph, she also mentioned that in the past she did not want to work in the family business.  On 2 occasions in early or mid 1990s, she left and worked as a factory worker and packaging worker.  On each occasion, H requested her to return and promised her that “the family business and assets would go to (Yiu and her) at the end of the day”.  Relying on these promises, she returned and continued to work in the family business.  She also said that in the subsequent years, on various occasions, H repeated the same promises.

22. As for H, his case is that Hung held the shares as trustee for him ever since the incorporation of T&N L. 

23. As I said in paragraph 42 of the said Ruling, Hung did not set out or explain why despite the transfer of the shares in 2003 she continued to be the beneficial owner of the 50% shareholdings in T&N L.  It is true that there was no mention of whether there was any consideration in Hung’s Affirmation, but one would have thought that if there was no consideration and the transfer was merely in “name”, there is no reason why she did not explicitly state this in her Affirmation.  Further, if she remained to be the beneficial owner of half of the interest in T&N L, she owes an explanation as to why she has been “given” a basic salary as if she were an employee and why she has to rely on H’s promises to her.

24. That said, the ultimate question is whether Hung has a reasonable prospect of success to claim that H holds his shareholding by way of resulting trust in her favour, such prospect must not be fanciful but needs not be probable.  To me, despite the misgivings one may have arising from W and Hung’ s Affirmations regarding the shares, I agree with Mr Clough that there is at least an arguable case on the part of Hung that H is holding the shares by way of resulting trust for her. 

25. For the above reasons, I grant leave to appeal on Grounds no 2(i) and (ii). 

Ground no 2(iii)

26. Mr Clough’s Ground no. 2(iii) is as follow:

The parties’ son, identified in the judgment as (Yiu), is the registered joint owner of (the Property) and claimed to be the beneficial owner of (the Property).

27. The Property was purchased in the joint names of W and Yiu in 1997.  Yiu said it was W who paid all the purchase monies and she intended to purchase the Property as a gift to him.  At that time since he was still in Canada, W gave her name as one of the registered owners so that she could deal with the Property for him.

28. Mr Clough, together with Mr Chan who appeared for W, raised a new point.  They submitted that since H in his petition is seeking the transfer of whole of the Property (ie including Yiu’s share), so Yiu’s interest is affected and he should be allowed to join in.  Mr Chan also drew my attention to W’s Form E where she claimed she owns 50% beneficial interest in the Property.  W’s case is therefore contrary to that of Yiu.  When I pointed out that W was absolutely silent in her affirmation regarding Yiu’s claim on the Property, Mr Chan’s response was that either Yiu must have told lie or he must have misunderstood the arrangement. 

29. On that, Mr Tang, counsel for H, immediately confirmed that H has no intention to claim for Yiu’s half share in the Property; what is sought after is merely the other half share in the name of W. 

30. With this new point one might have thought that there is now apparently a dispute between W and Yiu as to whether or not W is and was holding her share in the Property as trustee for Yiu.  However, in my view, this does not take Yiu any further.  As I pointed out in paragraph 44 of the said Ruling, Hung was a volunteer.  All the purchase monies were paid by W.  His assertion that W was and is holding her share in the Property upon trust for him is faulty as it was not evidenced in writing nor was the declaration of trust manifested and proved in writing signed by W as required by section 5(1) of the Conveyancing and Property Ordinance, Cap 219.  As I observed in the said Ruling, his assertion is a mere say so.  It is not for the court to speculate what Yiu’s case is.  There is no suggestion whether in the affirmation or by way of submission that Yiu has a claim on the whole of the Property by way of resulting, implied or constructive trust. 

31. For the above reasons, Yiu’s claim in relation to the Property is fanciful and this ground must fail.

Ground no 2(iv)

32. Ground no 2(iv) is as follows:

Part of the financial arrangement within the family enterprises was that (Hung) and (Yiu) worked for either no remuneration or for “pocket money” or very low pay since they had an interest in the accruing family assets.  Their value to the family business was being rewarded by recognition of the fact that they had a beneficial interest in the assets rather than by paying them a proper salary or other income for their work.

33. In my view, this ground is substantially the same as Ground no. 1.  I do not propose to repeat my reasons here.

Ground no 3

34. Ground no 3 is as follows:

The learned Deputy Judge erred in law in rejecting the concession made by the Petitioner, the respondent to the application for the intended Intervening Parties to be joined namely that (Hung) and (Yiu) may rely on the doctrine of proprietary estoppel on the basis that “estoppels can only be a shield and not a sword” when this dicta from the judgment of Lord Denning in Combe v Combe was restricted to the doctrine of promissory estoppel or the High Trees Principle.

35. In the hearing, Mr Clough did not really insist on this ground.  I accept that as a matter of law proprietary estoppel is capable of operating positively so as to confer a right of action.  That said, it is clear that I did not take into account the doctrine of proprietary estoppel in reaching my decision.  The facts as alleged by the intended intervening parties also do not make out a case of proprietary estoppel.

Ground no 4

36. Ground no 4:

The learned Deputy Judge erred procedurally by relying on authorities that were not cited during the course of submissions.  In the premises, he did not have the benefit of submissions as to why it was relevant that the interest of (Hung) and (Yiu) in the family assets come within the doctrines of resulting, implied and constructive trusts.  In the premises, this was procedurally unfair to the Intended Intervening Parties.

37. Mr Clough did not deal with this ground in the hearing nor was this ground dealt with in his skeleton submissions.  I presume he must be referring to Lord Diplock’s judgment in Gissing v Gissing [1971] AC 866 that I made reference to in paragraph 47 of the said Ruling.  To me, the ultimate issue boiled down to whether the intended intervening parties were prejudiced by not being given sufficient opportunities to be heard.  If the court was deprived of the benefit of their submissions as said in the Ground, for instance the case cited or the legal principles referred to is incorrect, the hearing for leave to appeal would be the proper venue to deal with the issue but nothing further was heard.  Thus, I fail to see how the intended intervening parties were prejudiced. 

W’s Grounds of Appeal

38. I now turn to W’s Grounds of Appeal

Ground (a)

39. Ground (a) is as follows,

The Learned Judge has erred in considering and concluding that the Respondent sided with the Intended Intervening Parties and ruling that there is no relevancy of the claim of the Intended Intervening Parties to the present proceedings

40. I fail to see how this could be a ground. During the hearing for leave, Mr Chan conceded that W does not know the nature and extent of the children’s interest in the family assets.  He even conceded that W now takes a neutral stance on the application.  Therefore, he seemed to agree with what I said in paragraph 38 of the said Ruling that if the children say they have a claim or an interest in the family assets, such claim or interest must be capable of being framed in legal terms.

41. As Mr Tang pointed out, W took the initiative to take out the joinder application to which the children also agreed.  There is no basis to argue that I erred by concluding that W sided with the children.  In any event, it is irrelevant as to whether or not W actually sides with the children for the simple reason that according to my conclusion the children at most have a moral claim against H only. 

Ground (b)

42. Ground (b) is as follow,

The Learned Judge has failed to consider or adequately consider that (Hung) was the owner of 50% of the entire shareholdings in (T&N L) since its incorporation until August 2003

43. This ground is essentially the same as Ground no 2(ii) of the intended intervening parties.  I would not repeat the arguments and the decision here.

Ground (c)

44. Ground (c) is as follows:

The Learned Judge has failed to consider or adequately consider that (Yiu), one the Intended Intervening Parties was / is one of the registered owners of the Property

45. Again, this ground is essentially the same as Ground no 2(iii) of the intended intervening parties.

Ground (d)

46. Ground (d) is as follows:

The Learned Judge has failed to consider or adequately consider that the funds for the purchase of (the Million Fortune Property), now registered under the sole name of the Petitioner, were wholly come from the Mortgage against the Property taken out in 2011

47. This ground is relation to paragraph 49 of the said Ruling which I set out below,

49.   Further, Mr Chan submitted that the Property was originally free from mortgage but in 2011 a mortgage was taken out as security for a loan for the purchase of another property in the sole name of H.  This is not in any evidence before me.  Mr Chan is not entitled to give evidence from the bar.  In any event, this is disputed by Mr Tang.  Be that as it may, my view is that this fact would not assist Yiu as it is incumbent upon him to explain, if he was and is the sole beneficial owner, why he would have allowed this to happen but his affirmation is absolutely silent on this.

48. The ‘another property’ mentioned in the said paragraph 49 is the Million Fortune Property referred to in the said Ground.

49. Mr Chan submitted that there were in fact evidence and the same had been disclosed in W’s Answer dated 5 February 2013. He argued that it is H’s duty to explain why he now claims all the interest in the Million Fortune Property when large portion of the purchase price was paid by mortgage of the Property which is owned by Yiu and W.

50. Mr Tang correctly pointed out that nothing was mentioned about the mortgage in any of the affirmations of W and the intended intervening parties for the purpose of the joinder application.  Of course, the Million Fortune Property was also not mentioned. The Answer dated 5 February 2013 was not before me nor was it referred to during the application hearing.  

51. I must confess I have some difficulty in understanding Mr Chan’s argument and for this reason, also in understanding W’s position.  As said, Mr Chan admitted that W does not know the nature and extent of the children’s interest in the family assets.  While W may wish to assert to have an interest in the Million Fortune Property, is Mr Chan saying that Yiu also have an interest in Million Fortune Property?  However, Mr Chan is not acting for Yiu and Mr Clough did not put forward this assertion.  In any event, this is not what W and Yiu said in their affirmations.  For Yiu, he has two ‘claims’ only.  The first is what I called the ‘moral claim’ on the business and family assets and the other is the whole of the Property.  It is not for the court to speculate what their cases are.  It is incumbent upon them to let the court know what causes of action they have or at least the nature of their interest claimed but their affirmations simply do not say so.  Thus, this ground also fails.

Orders

52. For the reasons aforesaid, I give leave to appeal on Grounds no 2(i) and (ii) of the intended intervening parties’ summons and on Ground (b) of the respondent’s summons. 

Costs

53. The 2^nd intended intervening party fails in his application.  He should be liable to the petitioner and the respondent for the costs of his application, to be taxed if not agreed, with counsel certificate.  As for other costs, I consider that the proper costs order is costs in the cause of the appeal; and I so order by way of an order nisi.