YUEN YIN v. YUEN MEI LENG KAREN AND OTHERS

HCA 1000/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1000 OF 2017

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D E C I S I O N

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1.  This is the defendants’ application to stay the present action (“High Court Action”) until after the determination of the divorce suit filed by Madam Kuan Lai Iong (“Madam Kuan”) in FCMC 5721 of 2017 (“Divorce Proceedings”).

BACKGROUND

2.  The plaintiff is in his eighties.  He married to Madam Kuan in 1982.  The 1^st and 2^nd defendants are their children.  The 3^rd defendant is the wife of the 2^nd defendant.

THE PRESENT ACTION

3.  The plaintiff commenced this action on 25 April 2017.  His major claim against the 1^st defendant and 2^nd defendant was that they have wrongfully taken the Arran Court Property and the Mantin Heights Property (“the Properties”) as well as a sum of HK$1,079,644.60 (“the Sum”) now holding by the 1^st defendant, without accounting to the plaintiff.  There are other related claims of unjust enrichment, conspiracy to injure, wrongful possession and trespass.

4.  It is not disputed that the Sum was transferred by the plaintiff to the 1^st defendant, and that the Arran Court Property (now registered in the name of the 1^st defendant) and the Mantin Heights Property (now registered in the name of the 2^nd defendant) were purchased by the funds solely owned by the plaintiff.

5.  The gist of the plaintiff’s case was that the Properties and the Sum are held by the 1^st and 2^nd defendants respectively on trust for the plaintiff.  The defendants however contended that they are gifts by the plaintiff.

6.  The 3^rd defendant, on the plaintiff’s case, has been involved in the purchase of the Properties and the handling of the plaintiff’s funds, and shall be liable for dishonest receipt, knowing assistance and conspiracy to injure the plaintiff. 

7.  Apart from declaratory relief, the plaintiff claims for orders to deliver up the Properties, accounts and inquiries, damages.

THE DIVORCE PROCEEDINGS

8.  On 9 May 2017, Madam Kuan presented a petition against the plaintiff for divorce on the ground of unreasonable behaviour.  One of the unreasonable behaviours relied on by Madam Kuan was the commencement of the High Court Action.  Madam Kuan pleaded that the plaintiff had given the Properties to the 1^st and 2^nd defendants as gifts.  The institution of the High Court Action to contend otherwise directly caused the breakdown of the marriage.

9.  On 9 June 2017, the 1^st and 2^nd defendants applied to intervene in the Divorce Proceedings.  They, together with Madam Kuan, sought a trial of preliminary issue on whether the plaintiff owns any beneficial interests in the Properties, to be heard separately and before the trial on ancillary relief. 

10.  Noting that the defendants have taken out the present application in the High Court Action for stay of the proceedings, the Deputy Judge in the Family court adjourned the application to intervene sine die with liberty to restore, and by a separate order, adjourned the hearing of the first appointment sine die with liberty to restore.

LEGAL PRINCIPLES ON STAY OF PROCEEDINGS

11.  It is part of the court’s case management power to consider whether an action should be stayed after the determination of matters in another action.  The court has an inherent jurisdiction to regulate its own procedures.  This jurisdiction was expressly preserved by section 16(3) of the High Court Ordinance, Cap.4.  These principles have been clearly recognized in cases including SWE Ltd v Chong Lai Fun, HCA 1064 of 2004, 28 October 2004 at pages 5 to 6; Re Chime Corporation Limited, HCMP 4146 of 2001, 11 March 2005 at paragraphs 11 to 14.

12.  There are express provisions in the Rules of High Court empowering the court to grant an order to stay any proceedings.

13.  Order 1B rule 1(2)(e) provides that the court may stay the whole or part of the proceedings either generally or until a specified date or event.

14.  Order 4 rule 9 which mainly deals with consolidation of causes or matters, empowers the court to stay any of the matters until after the determination of the other matter where there are:-

(1)  some common question of law or fact arises in both or all of them; or

(2)  the rights to relief claimed are in respect of or arise out the same transaction or series of transaction; or

(3)  for some other reason it is desirable to make an order under Order 4 rule 9.

15.  In the exercise of case management power, the court shall approach the matter with a view to the underlying objectives set out in Order 1A.  The court shall consider the “balance of convenience and fairness as between the parties”, and the discretion shall be exercised in a manner “to ensure that its procedures are used in a logical, fair and cost-effective manner” (SWE Ltd, supra; Re Chime Corporation Limited, supra; Luen Tat Watch Band Manufacturer Limited v Li Sin Man Seline, HCA 1428 of 2012, 25 July 2014).

GROUNDS OF STAY APPLICATION

16.  In support of their application, the defendants submitted that:

(1)  The questions of law and/or fact to be tried in both actions are the same or largely the same; the core issue in both actions is whether the Properties and the Sum are to be held on trust for the plaintiff or they are gifts to the defendants;

(2)  The dispute on the beneficial ownership of the Properties should be tried by one court only, and the Family court is the more appropriate forum;

(3)  The Family court has the jurisdiction and procedures to determine the issue in dispute;

(4)  There is no prejudice against the plaintiff if the disputed issue is tried in the Family court.

DECISION

17.  There is no dispute that the Family court has the jurisdiction and the procedures to deal with disputes on the ownership of properties.  (TL v ML [2006] 1 FLR 1263; Doreen Do Ye Tong v Wesley Wai Hei Wan [2011] 1 HKLRD 318; Leung Wing Yi Asther v Kwok Yu Wah (2015) 18 HKCFAR 605)

18.  In Leung Wing Yi Asther, supra at paragraph 29, the court of final appeal has remarked that:-

“in the context of matrimonial proceedings for ancillary relief, disputes between a spouse and a third party as to ownership of property should procedurally be approached as in standard claims for ownership of property: in other words, after a direction for trial for the dispute as a preliminary issue and the joinder of the claimant as intervener, by directions for the filing of pleadings on preliminary issue and for witness statements and discovery relevant to the issue.”

19.  The correct approach of this court is to balance all the circumstances and determine whether it is more appropriate for the dispute on beneficial ownership to be heard in the High Court Action or the Divorce Proceedings, in order to ensure that the court’s procedures are used in a logical, fair and cost-effective manner.

20.  The parties are in agreement that a common issue of dispute in both actions is whether the Properties and the Sum are gifts by the plaintiff to the defendants (as contended by the defendants) or that the defendants were only holding the same on trust for the plaintiff (as contended by the plaintiff).

21.  On a careful reading of the Statement of Claim in the High Court Action and the Petition in the Divorce Proceedings, the question of beneficial ownership is not the only issue. Furthermore, the approaches of the two courts in hearing the issue of beneficial ownership would most likely be different because the questions before the two courts are different.

22.  The question before the Family court is whether the marriage shall be dissolved on ground of unreasonable behaviour.  The plaintiff’s commencement of the High Court Action and his contention that the Properties are held by the 1^st and 2^nd defendants on trust for him are not the only matters complained by Madam Kuan in the Divorce Proceedings. She also relied on other conduct including the plaintiff’s moving out to live with his daughter from his first marriage (“First Daughter”), and the arguments between the plaintiff and Madam Kuan relating to the First Daughter. If the Family court is satisfied that the other behaviours complained by Madam Kuan support the Petition for divorce, it may not be necessary for the Family court to determine the issue of beneficial ownership.

23.  Insofar as ancillary relief and the determination of family asset are concerned, Madam Kuan’s current position is that the Properties and the Sum do not form part of the family assets as these assets are beneficially owned by the 1^st and 2^nd defendants respectively. Accordingly, on Madam Kuan’s case, these assets should not feature in the determination of ancillary relief.

24.  On the other hand, the beneficial ownership of the Properties and the Sum are the central issue of the plaintiff’s claim in the High Court Action. In the present action, this court is asked to rule on whether the plaintiff’s claims (including the claim on beneficial ownership) are established, and if so, whether the plaintiff is entitled to the relief claimed against each of the defendants.  In determining these issues, the court will be required to consider the pleaded issues on breach of fiduciary duties, the role and involvement of the 3^rd defendant and so on.  These issues or some of them may not be required to be decided by the Family court in order to determine the main suit or the intervener proceedings (if any).

25.  It is noted that the 3^rd defendant is not involved in the Divorce Proceedings, whether as an intervener or a proposed witness.

26.  It is therefore very likely that, if the dispute of beneficial ownership of the Properties is to be first heard by the Family court, this court will still have to hear evidence in relation to the purchase of the Properties in order to resolve issues that are not required to be canvassed in the Family court.  The chances of hearing the relevant evidence on the same issue again in the Family court after the determination by this court is however much lower.

27.  The determination of the preliminary issues (if any) in the Divorce Proceedings will not finally dispose of the High Court Action. Some of the pleaded issues (e.g. breach of fiduciary duties, conspiracy) and relief sought (e.g. order for delivery up of the Properties, mense profit) in the High Court Action will, most likely, not be dealt with in the hearing of preliminary issues by the Family court.

28.  Counsel for the defendants suggested that the defendants are prepared to offer undertakings to deliver up the Properties and pay mense profits to the plaintiff if the Family court determines in favour of the plaintiff on the beneficial ownership of the Properties.  I do not consider this cures the problem satisfactorily.  The terms of the undertaking will potentially be a separate area of dispute.  It may also create another set of proceedings if it comes to the need for enforcement.

29.  I do not agree with the defendant’s submission that much time and costs would be saved if the issue of beneficial ownership is to be heard by the Family court. The procedures to be adopted by the Family court in the preliminary issue would be very similar, if not identical, to the procedures in the High Court in terms of pleadings, discovery and witness statements.  Further, the parties will have to file another set of pleadings (in addition to the Petition) if the preliminary issue of beneficial ownership is heard in the Family court.  There will only be one set of pleadings if the matter is to be dealt with in the High Court Action.

30.  The defendants further submitted that once the issue of beneficial ownership of the Properties is determined, the other issues will go away.  I do not find any basis that support the above conclusion. 

31.  The plaintiff submitted that this action should not be stayed as he commenced the High Court Action first and he should not be deprived of his right to prosecute in this action.  This is a matter of case management, not a question of deprivation of rights to prosecute the action. (Re Chime Corporation Limited, supra at paragraphs 12-14) I do not consider the fact that he commenced this action first, without more, is a sufficient ground for refusing stay.

32.  It is not desirable that the same issue in dispute arising out of the same transaction or series of transactions is to be tried in two separate proceedings.  This alone does not justify a stay of the present proceedings.

33.  The Family court has not yet ruled on whether or not preliminary issues are to be heard.  Counsel for the plaintiff has indicated that if the present action is not stayed, the plaintiff will oppose the trial of preliminary issues in the Divorce Proceedings, and will proceed with the present action with reasonable diligence.  I invite parties and their legal representatives to approach these procedural issues in the two proceedings with good sense.

34.  Having balanced all the factors, I do not consider it is appropriate to stay the present action after the determination of the divorce suit in the Divorce Proceedings.

ORDER

35.  I therefore dismiss the defendants’ application to stay the present action.  I order that the defendants shall file the Defence within 28 days after the date this decision is handed down, and a costs order nisi that the defendants shall pay costs of this application to the plaintiff on a party and party basis, to be taxed if not agreed.  The above costs order nisi will become absolute if there is no application to vary the same within 14 days.