ZXW v. PKP AND ANOTHER

FCMC 747/2018

[2023] HKFC 51

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 747 OF 2018

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JUDGMENT

( Third Party Ownership Claim and Ancillary Relief )

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1.  This is a trial on ancillary relief cum the determination of beneficial interest of some assets that are apparently marital.

2.  The husband is the petitioner and the wife is the 1^st respondent. The 2^nd respondent is the father of the husband.

3.  For the ease of reference, I shall refer to -

(1)  the petitioner as “the husband”;

(2)  the 1^st respondent as “the wife”;

(3)  the 2^nd respondent as “the father”;

(4)  the younger brother of the husband as “KC”; and

(5)  the petitioner’s mother/the 2^nd respondent’s wife as “the mother”.

The Divorce Proceeding

4.  The couple married young. When they were married in May 2013 in Hong Kong both of them were just 25 years old, with the husband being a few months older.

5.  The couple divorced young, too. They separated in September 2016; so at that time they were just 28 years old. In January 2018, the husband petitioned for divorce on the ground of desertion. The ground was later changed to one-year separation, which was uncontested. Decree nisi was granted on 20 November 2018.

6.  The couple gave birth to 2 children during their 3-year relationship. The elder is a daughter, born in June 2014, now 8 ½ years old. The younger is a son, born in April 2016, now nearly 7 years old. I shall refer to the children collectively as “the children”.

7.  On 25 January 2019, by consent, the joint custody of the children has been granted to the husband and the wife with their care and control be given to the wife and reasonable access to the husband.

8.  On 14 January 2020, I made an order that the husband is to pay the wife $9,400 and the children $51,700 (ie $25,850 each) per month as their interim maintenance, totalling $61,100, backdating from 1 February 2018 (“the MPS Judgment”).[1] The MPS Judgment was given after a full argument. I am told the husband has never complied with the order. As a matter of fact, 8 days after the MPS judgment the husband filed a Notice to Act in Person and at a later stage failed to engage in the proceeding.

The Parties’ Background

9.  I believe the following facts are not in dispute.

10.  The husband is a Mainlander and the wife is a local Hong Kong Chinese. They met and fell in love with each other when they were receiving tertiary education in Toronto, Canada.

11.  The father, aged 58, has been running a successful fur trading business for 20 odd years, with operation both in Hong Kong and the Mainland. His business is to act for clients in attending auctions in various parts of the world for the purchase of fur and have the fur to be shipped back and processed in his factory in Longgang, Shenzhen. In doing so, the father had to travel regularly to Toronto (at least 2 times each year) and to the Scandinavia.

12.  The father has a company “SL” as the vehicle for his business. SL is a company incorporated in March 2003 in Hong Kong. It is pleaded on the father’s Statement of Claim that he was/is the sole shareholder of this company.

13.  The father has 3 children: the husband, KC and a younger sister. The father sent all of them to Toronto for education. As the father (sometimes accompanied by the mother) had to visit Toronto for his business regularly, he also met his children regularly. Of course, he also met the wife who, according to the father, had already been in a relationship with the husband before their formal marriage.

14.  The father obtained his Hong Kong residency in 2011 by virtue of the Government’s Investment Entrant Scheme. The mother and KC, were also given Hong Kong residency as the father’s dependants. The husband and his younger sister’s applications were however refused. As such, at all material times, he had no right to reside in Hong Kong. This is the situation up to this date.

15.  In 2011, KC dropped out from school. He then started to assist the father in his business. In June 2012, the husband and the wife followed suit. They quitted their study without having completed their course. Upon their return, they also started to assist the father in his business. It would appear that all of them started by working in the father’s SL first. They then changed to work in another company which I shall call “JK”. Half of the issued shares of JK is subject to the proprietary claim by the father in the present proceeding.

16.  The father purchased a house in Palm Springs, Yuen Long as his home. It was purchased in the name of the mother. This house was also the home for the husband and the wife and their children. There was also another home in Longgang where the family stayed, together with the extended family, when they were in the Mainland.

The father’s ownership claim

17.  There is a dispute over the beneficial ownership of essentially 3 pieces of asset. The first is 5,000 issued share capital of JK. JK was a company incorporated in Hong Kong on 28 November 2012 with 10,000 issued share capital. The shares at issue is registered in the name of the husband. I shall refer to them as “the Shares”; the other 5,000 share are currently registered in the name of KC.

18.  The 2^nd piece of asset is a Hong Kong/Mainland car registration number (“the License”) that is being held by a Hong Kong unincorporated company which I shall refer to it as “CS”. The wife is at all times CS’s registered sole-proprietor and hence, the registered owner of the License. Apart from holding the car registration number, CS has no other business activity.

19.  The 3^rd piece of asset is a Land Rover (“the Car”) that carries the License.

20.  It is not in dispute that all the capital or purchase monies for the acquisition of the assets and all the working capital of JK were from the father. The father said notwithstanding these assets were registered in the name of the husband, the wife or KC, they were all beneficially belonged to him. The husband and the wife are merely trustees, holding the assets on his behalf.

21.  On the other hand, the wife contends that the assets were gifts from the father; they are all matrimonial assets available for division between her and the husband.

22.  Upon the father’s own application, he has been joined as the 2^nd respondent by an order dated 13 February 2019 for the determination of the beneficial ownership of the Shares, the License and the Car. I need to mention that the father’s application initially covered other assets, too. Parties soon agreed that these other assets do not form part of the matrimonial pot; as such, they are not relevant to the proceeding.

The husband’ absence

23.  The husband was legally represented up to 22 January 2020. The last substantive hearing that he was so represented was in the wife’s application for maintenance pending suit on 27 September 2019. He filed a Notice to Act in Person on 22 January 2020. Since then, apart from filing a Defence on 3 August 2020 and a witness statement dated 9 December 2019, both of which are apparently professionally drafted, the husband has not been engaging in the proceedings. From 13 November 2020 to 18 July 2022, the court received a total of 5 notifications/representations from the husband which showed that he was fully aware of the progress. There was however no compliance of any case management directions including the filing of his List of Documents and a section 7 narrative affirmation by the husband. The case was set down for trial as early as in November 2021. I was aware that the husband was not a resident of Hong Kong and in all likelihood he was in the Mainland but at the relevant time there was in place by the Government a “Come2hk-Travel Scheme for non-Hong Kong Residents Coming from Guangdong Province or Macao to Hong Kong without being subject to quarantine” that could have allowed the husband to attend trial in Hong Kong. Even if he was not able to take the benefit of the Scheme, the husband should have sufficient time to make himself available for quarantine or could have sought to have the trial to be held by way of Remote Hearing. The court heard nothing from the husband on what efforts he had made in order to be able to engage in the proceeding.

The father’s Case

The Shares

24.  The father’s Statement of Claim is settled in Chinese by his counsel. I set out below the relevant parts of its English translation prepared by the Judiciary’s court interpreters:

13. (The husband) originally studied abroad in Canada, however, in around 2012, he came back before he completed his studies and so it is hard for him to get a job.

14. When (the husband) came back to Hong Kong, he already had the plan to get married with (the wife).

15. In order to assist (the husband) in starting up his business and becoming self-sustaining, and at the same time let (KC) learn the fur business step by step, (the father) planned to set up and aided with own capital a company which would act as a distributor for fur auction on behalf of (SL)’s clients, and assign (the husband) and (KC) to work and practise in that company and earn salaries (“the Plan of Aiding the Sons”) (扶助兒子計劃 ).

16. In order to implement the Plan of Aiding the Sons, in 2012, after discussion, the three parties involved in the proceedings and (KC) agreed with the following proposal, or reached the following consensus (“the 4-Parties Agreement”) (四方協定 ):

16.1. (the father) facilitated and provided capital to finance the setting up and running of a company which acted as a distributor for fur auction on behalf of (SL)’s clients, and assigned (the husband) and (KC) to work and practise in that company and earn salaries;

16.2. (the father) is the only beneficial owner of the company set up out of such purpose and he has the right to request the members of such company to make and complete share transfer from time to time;

16.3. the company set up out of such purpose must comply with the request of (the father) to provide subsidies or bear liabilities for the persons or individuals designated by (the father);

16.4. in order to demonstrate the fact that the company set up out of such purpose will be jointly operated by (the husband) and (the wife) as a couple, the share capital of the company should be held by (the husband) and (the wife) as trustees equally on behalf of (the father)’s equity;

16.5. as (the husband) did not have right of abode in Hong Kong nor a Hong Kong identity card, he could not stay long in Hong Kong. Therefore, (KC), who already got right of abode in Hong Kong and a Hong Kong identity card, stood in to hold as a trustee half of the share capital of the company set up out of such purpose on behalf of (the father)’s equity;

16.6. (the father) would facilitate (SL) to entrust the agency work such as liaising with clients, purchasing, re-transportation, arrangement, etc. which originally could be completed by (SL) itself without hiring others, to the company set up out of such purpose so that the latter could benefit from this;

16.7. (the father) would facilitate (SL) to assist the company set up out of such purpose in obtaining credits or bear parts of the liabilities incurred from setting up such company;

16.8. for the business of (SL) and the company set up out of such purpose, (the father) would provide or facilitate (SL) to provide capital for buying various equipment or property required, and the beneficial ownership of that belonged to (the father).

(emphasis added)

25.  Hence, the father’s case is:

(1)  he devised the “Plan of Aiding of the Sons”;

(2)  for the implementation of the Plan, JK was established; and

(3)  there was an agreement or a consensus arrived at amongst the husband, the wife, the father and KC in 2012 on matters pleaded in paragraph 16.1 to paragraph 16.8.

26.  The father termed the agreement or the consensus as “the 4-Parties Agreement”. He pleaded it was in reliance upon the 4-Parties Agreement that he incorporated JK and provided it with capital at his own costs and expenses and hence acted to his detriment. [2]

The License and the Car

27.  The father also relies upon the 4-Parties Agreement to establish his beneficial interest in the License and the Car.

28.  The father pleaded that the License and the Car were necessary for the business of SL and JK (“提供必須之器具或財產”). It was used for travelling clients and members of staff of SL back and forth between Hong Kong and the Mainland.[3] He spent altogether $2,168,000. [4]

29.  As to why the License and the Car were in the name of the wife, the father pleaded that at that time it was the understanding of all the parties that the registered driver of the License must be a Hong Kong resident issued with a Mainland “Home Visit Permit” (回鄉證). Since the wife was a holder of both the Home Visit Permit and a Hong Kong driver’s license and the husband was not, all the parties agreed that the wife was to hold the License and the Car on trust for the father. [5]

30.  Apart from reliance upon the 4-Parties Agreement, it is the father’s alternative case, as pleaded in paragraph 32 of his Statement of Claim, that it can be inferred or confirmed from the conducts of the 3 parties in the proceeding and those of KC from the relevant times as from 2012 that the husband, the wife and KC are trustees for the father (“基於以上作訴事宜，從訴訟三方及(KC)自2012年起於所有關鍵時刻之行徑可以推斷或認定…”).

31.  The father, however, failed to plead what are the conducts that he relies upon so that the trusteeship in his favour can be inferred or confirmed. I consider this is a fundamental defect. I shall come to this point in the latter part of this judgment.

32.  The father further relies upon resulting trust.[6]

33.  Mr Chan, who appeared for the father, accepted that, prima facie, beneficial ownership goes hand in hand with legal ownership. If a claimant seeks to divorce the beneficial ownership from legal ownership and to claim the beneficial ownership in the property which he purchased and transferred to the name of another, he must bear the legal burden of proving his equitable right which is inconsistent with the undisputed legal title: Lee Tso Fong v Kwok Wai Sun, [2008]4 HKLRD 270, at [23] & [24].

34.  Mr Chan submitted that for the reason that the acquisition of the License and the Car were for the business of JK, and the acquisition of JK was founded on the 4-Parties Agreement, if the court finds in favour of the father that there was a common intention constructive trust as regards the ownership of the Shares, such finding shall also extend to the License and the Car.

The wife’s case

35.  While the wife accepts the father paid for the assets, she denies there being any 4-Parties Agreement or consensus as alleged. She never heard of the Plan of Aiding the Sons. The wife said the assets were gifts from the father; such gifts were intricately linked with her marriage with the husband.

The Shares

36.  I summarize what she pleaded in paragraph 9 of her Defence and Counterclaim as follows.

37.  The wife met the husband in Toronto in about 2009 and they formed a relationship.

38.  The husband proposed to her in April 2012. She accepted it but requested to get married after graduation from university. The husband told the wife that the father requested the two of them to get married earlier without waiting until graduation from university if they had such plan anyway. As the husband’s family was doing their family business, there was no such need for them to get any graduate certificate. The husband also told the Wife that the father promised to put up funds (“打本” ) to set up a company for the husband and the wife to do their business and let them take care of the business and make their living.

39.  In around end of May 2012, the father visited Toronto. The father told the wife personally that they did not need to continue their studies, and that he would put up funds to set up a company in Hong Kong for the them to do their business.

40.  The husband and the wife therefore terminated their studies and returned to Hong Kong in around end of June 2012. At that time, the husband already planned to get married with the wife.

41.  In order to make good on the promise, the father put up funds to set up JK and gave it to the husband and wife as gift. [7]

The License and the Car

42.  The wife says in around mid-2012 when the husband and the wife were still in Toronto, the husband informed her that the father requested them to obtain a G-class driver’s license (the “G-licence”) in Ontario, Canada before leaving. The father promised to buy a car for the use of the couple after marriage.

43.  In around end of May 2012, when the father personally made the promise that he would “put up funds” to establish a company, he also promised to gift her a China-Hong Kong vehicle in order to facilitate the couple’s travels to and from the Mainland after marriage.

44.  Subsequently, the License, CS and the Car were acquired by the father. It is not in dispute that the acquisitions were made after the couple had returned to Hong Kong but before their marriage.

45.  It is accepted by all that a G-license issued by Ontario would entitle its holder to obtain a full driver’s license in Hong Kong without further test.

46.  The wife denies the Car was used for the purposes as alleged by the father. She says it was solely used for carrying the wife, the husband and the children to and from the Mainland. [8]

47.  For the above reasons, the wife says the legal and beneficial ownership of the assets at issue are aligned. She counter-claims for the return of the Car and the title documents relating to the License. She has not counter-claimed for the 5,000 shares currently registered in KC’s name.

The husband’s case

48.  The husband filed his Defence on 3 August 2020. Though on record he was acting in person, the pleading was undoubtedly professionally drafted. Essentially, he admits to the father’s claim and has no objection to the reliefs prayed for by the father. To me, from what I observed during the MPS proceeding, it does not come as a surprise that the father and the husband are on the same page. [9]

The Applicable Legal Principles

49.  In Bhura v Bhura (No 2) [2014] EWHC 727, [2015] 1 FLR 153, Mostyn J provided some useful guidance on the approach to be taken by the court when dealing with dispute over ownership in a domestic setting:

8. The applicable legal principles concerning a property dispute such as this are tolerably clear and have most recently been re-stated by the Supreme Court in Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776. In summary I think they are as follows:-

i) If there is an express declaration of beneficial interests then that is, almost invariably, the end of the matter. Such an express declaration can only be displaced if it has been procured by fraudulent conduct. In this case it is said by the wife that the signed TR1 for Mayfield Avenue is a sham. A sham is of course a species of fraud. It involves the parties entering into a dishonest compact, i.e. a conspiracy, to express the true state of affairs falsely in the written agreement. I will analyse the law relating to sham transactions a little later.

ii) If there is no express agreement about the beneficial interests then there is likely to be (at least) a tacit understanding. This is hardly surprising as one would expect that when people enter into what may very well be the most important economic transaction in their lives – buying a home – they would have a pretty clear understanding of who owned what share of it. In determining whether there was such a tacit understanding, and if so what it was, the court will look at all the evidence holistically and will examine the whole course of the parties’ conduct in relation to the property.

iii) In the rare case where the evidence does not reveal a tacit understanding about ownership the court can reach for the presumptions. An obvious presumption is that beneficial ownership is the same as legal title (see Jones v Kernott at paras 17 and 51(1)).

iv) Another is the presumption of the resulting trust. In Pettitt v Pettitt [1970] AC 777 at 824 Lord Diplock doubted that it was of much relevance in the modern era. In his view it would be “an abuse of the legal technique for ascertaining or imputing intention to apply to transactions between the post-war generation of married couples ‘presumptions’ which are based upon inferences of fact which an earlier generation of judges drew as to the most likely intentions of earlier generations of spouses belonging to the propertied classes of a different social era.” Some commentators believe that the doctrine has a medieval origin. The principal problem with it is that that is allows the “solid tug of money” (as Woodhouse J evocatively put it (echoing George Eliot) in Hofman v Hofman [1965] NZLR 795 at 800) “to submerge any faint suggestion that other [non-financial] contributions play a valuable part in the acquisition of family assets”.

v) A further presumption is the presumption of advancement but this can be regarded as being on its death-bed given that it is abolished by s199 Equality Act 2010, which is awaiting implementation.

vi) But presumptions are only presumptions. In a memorable dictum Lamm J in Mackowick v Kansas City St. J. & C.B. Ry., 196 Mo. 550, 571, 94 S.W. 256, 262 (1906) stated that “presumptions may be looked on as the bats of the law, flitting in the twilight, but disappearing in the sunshine of actual facts”.

vii) “Actual facts” are those which suggest that a result steered by a presumption is unfair. Although there are different degrees of emphasis and nuance all of the Justices in Jones v Kernott accepted that where a tacit agreement could not be found by a process of inference the court could impute to the parties a fair agreement which they never in fact made but which they should “be taken” as having made (see paras 45, 60, 72, 85(2)). Of course, as Woodhouse J pointed out, this involves a “fictional attribution of intention”, but the process has a long pedigree. One only needs to remind oneself of Lord Denning MR’s statement in Appleton v Appleton [1965] 1 WLR 25 at 28 to see how the wheel has turned full circle. There he said “A judge can only do what is fair and reasonable in the circumstances. Sometimes this test has been put in the cases: What term is to be implied? What would the parties have stipulated had they thought about it? That is one way of putting it. But, as they never did think about it at all, I prefer to take the simple test: What is reasonable and fair in the circumstances as they have developed, seeing that they are circumstances which no one contemplated before?” I cannot see any difference between that statement and that of Lord Wilson in para 87 where he rhetorically asked “where equity is driven to impute the common intention, how can it do so other than by search for the result which the court itself considers fair?” (emphasis added)

50.  Thus, the first step is to look at whether or not there was any express declaration of beneficial interests.

51.  If there was no express agreement about the beneficial interests, the next step is to see if there was any common intention or agreement, at least, in the words of Mostyn J, some “tacit understanding” of who owned what share of it. In determining whether there was such a tacit understanding, and if so what it was, the court will look at all the evidence holistically and will examine the whole course of the parties’ conduct in relation to the property.

52.  In the rare case where the evidence does not reveal a tacit understanding about ownership the court then, as a third step, can reach for the presumptions. The presumption that beneficial ownership is the same as legal title is one of the presumptions only. The other presumptions include the presumption of resulting trust and the presumption of advancement.

Why the Shares and the Car were registered in the way they were?

53.  The following chronology of events are relevant.

54.  On 28 November 2012, JK was incorporated. The founding members were KC and the wife, each holding 5,000 shares (“the Allotment”). Both KC and the wife were the company’s first directors.

55.  On 6 February 2015, KC resigned as director of JK, leaving the wife as the sole director.

56.  Shortly thereafter on 5 March 2015, KC transferred his 5,000 shares to the wife; hence, the entire 10,000 shares were in the wife’s sole name (“the 1^st Transfer”)

57.  The husband and the wife separated in September 2016.

58.  On 23 December 2016, the wife resigned as director of JK. At the same time, the husband and KC became its directors.

59.  On 26 May 2017, the wife transferred 5,000 shares to the husband and KC each (“the 2^nd Transfer”). The Shares at issue are the 5,000 shares currently being registered in the husband’s name.

The Allotment on 28 November 2012

60.  The father pleaded the original intention was to have the shareholdings of JK to be held by the husband and the wife equally as trustees on his behalf because in future JK was to be jointly operated by the husband and the wife.[10] However, since the husband had no right to reside in Hong Kong or in possession of a Hong Kong Identity card, hence, not being able to stay in Hong Kong for long, the other half of the shareholding was being held by KC, as trustee, who at the time was already a Hong Kong resident. [11] Therefore, KC and the wife each held 5,000 shares; and in both cases, the father was the beneficial owner of the entire shareholding.

61.  I must confess I do not understand how the fact the husband was not a Hong Kong resident could be a reason. The father admitted he could have held the entire shareholding by himself but he gave the excuse that it was not convenient for him to do so; he was always out of Hong Kong. Contrary to what the father said, as set out above, after the husband and the wife had separated from each other in September 2016, the wife made the 2^nd Transfer. When being asked why the father had given such a direction as apparently the husband’s status had not changed and he remained to be not being able to stay in Hong Kong for long, the father was evasive by not giving a direct answer. He simply referred to another incident in which he asked his employee one Ms Chan, who was a witness at trial, to hold his shares in SL for him. He even mentioned he could simply find an employee randomly (求其) to hold assets for him. It is hard to believe that the father, being a seasoned entrepreneur, would randomly find an employee to entrust him/her with his assets.

62.  The father then gave another explanation that JK was required to have 2 shareholders. This explanation flies in the face of the fact that the wife was the sole shareholder after the 1^st Transfer, which, according to the father’s case, must have been done under his direction.

63.  The resignation of KC as director of JK on 6 February 2015 must have been done upon the father’s instruction, too. Yet, there was not any explanation why he did that.

64.  Further, the father testified that JK was established for his sons. He referred to the name of the company, the letter “J” being the initial of the husband’s name and “K” being the initial of KC’s name; hence, the 5,000 shares that were supposed to be held in the name of the husband were held under the wife’s name for the reason that the husband was not a Hong Kong resident and the other 5,000 shares were held in KC’s name. One can hardly have any difficulty in seeing that this version is strikingly different from what has been pleaded in his Statement of Claim that JK was to be operated by the husband and the wife.

65.  The wife said she felt “strange” (奇怪) when she saw the documents as arranged by the father bearing her and KC’s name as shareholders. This arrangement did not accord with the father’s promise. She did raise this with the husband who merely replied that “it does not matter, because (we are) one family” (“有咩所謂，都係一家人”). She further felt it would be embarrassing (不好意思) if she was to enquire with the father.

66.  The wife’s response was, in my assessment, understandable. Back then, she was not even married to the husband. As someone who was young, inexperienced, new to the family and without any ‘bargaining’ power, she could just look up to the father for the arrangement which, in the wife’s case, was to honour his promises.

The 1^st Transfer – KC’s transfer of 5,000 shares to the wife on 5 March 2015

67.  There was no explanation from the father in his pleadings or affirmations on why such a transfer was made. Under cross-examination, the father confirmed the transfer was done under his direction, yet he admitted he was not sure of the reason.

68.  The wife said she had no objection to the transfer because it was consistent with the promise of the father. I agree.

The 2^nd Transfer – the wife transferred 5,000 shares to the husband and 5,000 shares to KC on 26 May 2017

69.  The father was not able to explain why he had directed the Shares to be transferred to the husband. There are documentary evidence adduced by the father that, in respect of other assets, he arranged formal documents to be signed for his protection when someone holding assets for him or for the husband. The father was evasive when being asked why he had not arranged the same in respect of the Shares. It was only after much reluctance that he gave the answer that the wife, being his daughter-in-law, was treated as a family member. Yet, he admitted that the husband’s divorce would affect his assets if there were no documents evidencing the “holding” arrangement. He gave the explanation that back then he had not thought of the possibility of a divorce between the husband and the wife.

70.  I accept it might well have been the case that a divorce was unimaginable at the time of the Allotment and the 1^st Transfer, but it could not be so said in respect of the 2^nd Transfer. It is to be recalled that at the time of the 2^nd Transfer the husband and the wife had already separated from each other; their marriage had crumbled; the wife even tendered her resignation with JK on 26 July 2016 after a severe quarrel with the husband. In this regard, the wife said the father paid her a total of $200,000 in September and November, 2016, hoping that she would return to the husband. This part of evidence was not challenged by the father. I am sure that while there were hopes of reconciliation, the divorce of their marriage was certainly not a remote possibility in the mind of the father.

71.  The wife said in about December 2016 the husband requested her to transfer her shares in JK to him. The husband ensured she would be paid $40,000 per month plus credit card spending. She still cherished some hopes of saving the relationship and so foolishly conceded. The transfer documents were in fact signed by the wife in December 2016 but not on 26 May 2017 as shown on the documents. Indeed, the husband at the same time requested for the transfer of the License and the Car because he did not have any vehicle in the Mainland. She initially conceded to this request too but when she saw the transfer was to be made to the mother she refused to sign.

72.  It is true that the wife participated in the business of JK since its establishment but one should not lose sight of the fact that she was only able to do so because of her relationship with the husband. When that relationship ended, her career with JK and her source of finance ended, too. On that view, it is not difficult to understand why the wife “returned” her shares in return for some financial security.

The Plan of Aiding the Sons

73.  On a literal reading of the Statement of Claim, it seems quite clear that, as was rightly pointed out by Ms Chong, the father had different goals for his sons. His goal as regards the husband, being the eldest son, was to help him kick-start his career and to achieve self-sustainability. As for KC, his goal was to help him to learn the fur trade step by step (“逐步學習”). At cross-examination, the father disagreed he had different goals. His intention was merely to give them a job and for them to gain some experience. The father gave the excuse that he did not fully understand his Statement of Claim which was written in traditional Chinese rather than in Simplified Chinese.

74.  The father testified that the Plan of Aiding the Sons only crystallised after the husband had returned to Hong Kong for good. Under cross-examination, the father even said KC was the main player of JK because he was the one attending auctions with clients. When being pointed out that this did not sit well with what he said in the Statement of Claim that in future JK was to be jointly operated by the husband and the wife, the father accepted there was a discrepancy.

JK’s business

75.  The father claimed JK’s business was not anything new. The business of JK, which was to purchase furs by way of auctions for clients, was previously conducted by SL. That part of the business was carved out from SL. The father described SL and JK are indivisible, JK was somewhat like a branch or a department of SL; both belonged to him. It is pleaded in paragraph 11 of the Statement of Claim that the father was/is the sole beneficial owner of SL but, surprisingly, in evidence the father said there were also 2 other shareholders, each held 10% of the shareholdings. In other words, the father owned 80%. He tried to save the situation by saying that he was the only one in charge and responsible for everything. The other 2 shareholders were to share profits only but not losses. There is no explanation on why there was such a discrepancy.

76.  On the evidence before me, I accept that the profits of JK were not shared by the shareholders. JK was treated as a department or a branch of SL; there were inter-flows of cash between the two companies and receipts that should have gone to JK were paid by customers directly to SL, to the extent that the same were not recorded on JK’s books, such that the audited accounts did not really reflected the reality. The father on various occasions simply had JK’s monies remitted for the use of his other companies.

77.  In my view, JK bears all the hallmarks of a typical Chinese family business. All major policies or strategies of JK were made by the father. Given that the husband, the wife and KC were young, inexperienced and new to the business, it is entirely understandable.

The father’s relationship with the wife

78.  The wife’s case, simply put, is that the father was fully aware of her relationship with the husband and the husband’s proposal when they were in Toronto. The wife met the father frequently because the father (and on some occasions the mother, too) had to stay in Toronto two to three times every year for business.

79.  The father was incoherent in his evidence about his relationship with the wife. He was guarded and avoided giving direct or affirmative answers. The overall impression is that he tried to impress the court that his relationship with the wife was rather distant before the couple’s return for good on 22 June 2012. He said while he knew the wife was the husband’s girlfriend, he was not aware of how deep the relationship was. He admitted he disapproved of their relationship for the reason that the wife was from a single-parent family. He denied having advised the wife not to continue her study and made the promises as claimed by her. In this regard, he said he only knew of the husband’s proposal to the wife upon their return to Hong Kong. He did not expect the husband would have brought the wife with him for good.

80.  Ms Chan’s evidence did not support the father’s assertions. Ms Chan said when the father first mentioned about starting a new company (ie JK), the husband was still attending school in Toronto but KC had already returned. She vaguely recalled at that time the father had already mentioned the wife would be joining too but there were not much details.

81.  The undisputed fact is that before their return to Hong Kong on 22 June 2012, the husband and the wife met the father and KC in Denmark in early June when the latter attended auctions with clients there. The wife’s case is they did so at the request of the father so that they might learn the trade. The father denied the trip was at his request nor the trip was for the purpose as claimed. Be that as it may, it is hard to believe that the father was not aware of the couple’s imminent return when he met them in Denmark and that he only knew of the decisions to get married when they returned. I also disbelieve the father that he only knew of the wife’s termination of her study upon her return to Hong Kong.

The wife’s involvement in JK

82.  The wife said she worked hard for JK. She was responsible for secretarial and accounting work. She mentioned, for examples, she had to ensure the correctness of all orders, liaise with auction houses and translate orders from English into Chinese.

83.  On the other hand, the father said the wife’s title was nominal (虛銜), the actual work of her position was largely performed by employees of SL.

84.  Ms Chan and KC did not support the father’s contentions.

85.  Ms Chan said she was not there to supervise the wife’s work. Whilst Ms Chan was not clear about the full extent of the wife’s duties, she was able to say the wife thoroughly performed her work in full in the first year, but afterwards when she was pregnant and had to take care of the children, the wife worked less.

86.  KC’s oral testimony was the father assigned work to 3 of them; hence, the implication must be that the wife did work in JK. KC believed part of the wife’s work was to translate orders from English into Chinese.

87.  It is also to be recalled that before JK was established, the father arranged the wife to work in SL and for this purpose, an employment contract was signed between the wife and SL. Much emphasis was placed by Mr Chan on the fact that the wife was arranged to have signed this contract. I fail to see how this could be helpful to the father’s case. The wife agreed prior to the establishment of JK, she was arranged to learn in SL. If the wife was just intended to be given a nominal title, one wonders why the father would have made the efforts to train the wife to be able to “on the field”.

88.  I accept the wife participated in giving credits to clients including making decision on whether and, if yes, how much to give when the husband and KC were attending auctions overseas. She said normally the same interest rate previously charged by SL would be adopted.

89.  During the period when she was the sole shareholder of JK, she was arranged by the father to have signed a Deposit Deed dated 27 July 2016 pledging JK’s bank deposits as security for the liabilities of SL and JK. It is significant to note that according to the Deposit Deed, she would be personally liable for the liabilities. Yet, there was not any indemnity given by the father in favour of the wife.

90.  The wife claimed during the relationship she was able to withdraw money from JK from time to time for family’s use.[12] The father’s responses were surprisingly ambivalent. At one point, he disagreed. He said Ms Chan kept an eye on this matter. At another point, he conceded he was not clear about this, he did not know if the wife was able to do so and admitted the ledgers were prepared by the wife. The father’s responses should be seen in light of his pleading that JK and SL were under his control and that the wife’s title was nominal.[13] If everything was under his control as alleged, there was no reason why he gave such ambivalent answers.

91.  Ms Chan did not know if the wife was able to withdraw money from JK or the family expenses of the husband and wife were paid out from JK. The books and accounts were not kept by her. She further testified it was the wife who handled the accounts and handed them over to auditors.

92.  KC did not know if the wife had withdrawn money from JK.

93.  Considering the level of living standard enjoyed by the wife (which I shall refer to below), and given the state of evidence of the father and Ms Chan, I come to a conclusion that the wife’s claim that some living expenses were paid out from JK is more believable.

The License and the Car

94.  CS (the holder of the License) and the Car were acquired by the father in around July/August 2012. The father pleaded the License and the Car were tools or assets required for the business of SL and JK (“提供必須之器具或財產”). It was used for travelling clients and members of staff of SL back and forth between Hong Kong and the Mainland.[14]

95.  It is not difficult to see why the father said these assets were “business tools” of SL and JK only. If they were not, they would not fall within the scope of the so called 4-Parties Agreement. It has to be remembered that the wife case is these assets were gifts to her, the Car was for her private/family use or, at the very least, mainly for this purpose. I believe this is why Mr Chan had to take the stance that the resolution of the issue of ownership of these assets follows that of the Shares.

96.  As to why the License and the Car were in the name of the wife, the father said it was the understanding of all the parties that the registered driver of the License must be a Hong Kong resident issued with a Mainland “Home Visit Permit” (回鄉證). The wife fulfilled the requirement while the husband did not. Nevertheless, all the parties agreed that the wife was to hold the License and the Car on trust for the father. [15]

97.  The wife denied there was such an understanding.

98.  The father agreed that there was no requirement that the owner and the driver of the Car must be the same person; in particular, the owner must be a holder of both a Hong Kong identity card and a Home Visit Permit. As a matter of fact, the father admitted that SL purchased another car in 2011 with a Mainland license plate and the named driver was his employee. He conceded there was no need for the wife to have been registered as the owner of the Car but he gave the explanation that it was for convenience purpose.

99.  He then further added that the original intention was to have the Car purchased in the husband’s name. But since the purchase was to be by way of a hire-purchase and the husband did not have a job or income proof in Hong Kong, he decided to have it purchased in the wife’s name.

100.  The wife’s case that the Car was a gift has been expressly pleaded in her Defence and Counter-claim. If the putting of the Car under the wife’s name was merely for convenience because the husband and the wife were going to be one family; and further that if it was because the husband did not qualify for hire-purchase, these matters, which clearly do not fall within the matters agreed under the 4-Parties Agreement as alleged by the father, have to be pleaded. Nor these matters mentioned in any of his affirmations/witness statements. Apart from these, in my view, there is still the question of why the father did not have the Car put under KC’s name who was equally qualified or under any other’s name who, according to the father, he could have “randomly” chosen.

The Use of the Car

101.  The father said since the husband and KC had joined the business, he saw the need of having another car, hence, the Car was purchased. The Car was for transporting the employees and clients of SL only. However, under cross-examination, at one point, the father conceded that the wife and the children had to use the Car for travelling to their home in the Mainland and thus, contrary to what has been pleaded, the Car had been used for private and family purpose.

102.  KC also conceded that he was incorrect when he said in his affirmation that the Car was solely for SL’s business.

103.  Ms Chan confirmed that she only travelled on the Car just once or twice every year. This is contrary what she said in her witness statement that she had travelled on the Car “many times” for work. She did not know who the main user was. It is also Ms Chan’s evidence that it was KC who drove the Car across the border, which could not have been correct as he was never a named driver. I do not find Ms Chan’s evidence in this respect reliable.

104.  The wife said when the Car was in the Mainland, it was used by the husband. Her evidence is that the husband spent roughly half of the time there. As she was the named driver she had to drive the Car across the border for the husband. She accepted that a few months after the purchase of the Car (ie in around December 2012), the father purchased a 7-seater vehicle (without a Mainland license plate) for her use within Hong Kong. She mainly used the 7 seater when the husband had taken the Car to the Mainland. Yet, she disagreed with the father’s suggestion that the 7-seater but not the Car was the gift to her. In about 2015, since the wife had to take care of the children and was not available to drive the husband to the Mainland, the husband was added as a second driver.

Discussion

105.  For the reason that the factory and their home in the Mainland were both located in Longgang, the use of the Car, as eventually conceded by the father, covered both private and business purposes. This concession glaringly does not sit well with what are expressly pleaded in the Statement of Claim. [16]

106.  The father was the one who ultimately paid for the License and the Car. On evidence, I accept that:

(i)  KC once paid certain fees out of JK’s account for the Car,

(ii)  at the time of placing the initial deposit of $100,000 for the purchase on 19 July 2012 it was initially made in name of the husband but was subsequently changed to that of the wife,

(iii)  SL’s address was used as the correspondence address in relation to the License and the Car,

(iv)  the port of exit from Hong Kong was at Sha Tau Kok (which was closer to SL’s factory in Longgang) and not at Lok Ma Chau (which was closer to their family home at Palm Springs, Yuen Long),

(v)  the insurance covering the use of the Car in the Mainland was purchased in the husband’s name;

(vi)  the maintenance matters might have been handled by the husband; and

(vii)  it was the husband who used the Car mainly.

107.  However, in my judgment, all the above matters have to be seen in the context that these were arrangements made within an extended family and these matters are not at odds with the wife’s assertion that the Car and the License were gifts to her.

108.  I accept the wife’s evidence that she (and not the husband) was taken to choose the Car. The Car, which was bigger in size, was convenient for travelling between the Mainland and Hong Kong; and she chose it because of its colour.

109.  It was put by Mr Chan to the wife that the father’s original intention was to give the Car to the husband. This suggestion, however, was entirely inconsistent with the father’s pleaded case that the Car belonged to him.

110.  I accept the wife’s version that in about April 2016 because she had to give birth to the son and at about the same time the Car required maintenance/checking for the renewal of the License, she handed all the relevant license documents to the husband for processing.

111.  At the same time, I am aware that there is a discrepancy in the wife’s documents on to whom the Car was gifted. She once said in her Answer in the ancillary relief proceeding that the Car was a wedding gift for her and the husband and she later clarified in her witness statement it was a gift to her. I am also aware that the wife also conceded that it took about 2 years for getting a G-Class driver’s license in Ontario.

112.  Be that as it may, on the totality of the evidence and for the reasons aforesaid, I reject the father’s pleaded case regarding why the Car was put under the wife’s name and the use of it.

Was there a 4-Parties Agreement?

113.  I have heard and observed with care the father and the wife in court. I am sure neither of them have spoken the entire truth.

114.  The father did not impress me as a credible witness at all. He recited from his scripts and attributed the discrepancies in his evidence to the fact that the Statement of Claim and his affirmations were written in traditional Chinese which he could not fully understand or he did not pay full attention to what were written. He was evasive to sensitive questions and at times was argumentative, confusing and talked through his hat, for instance, he said he could randomly choose an employee to hold property for him; he even refused to answer a couple of questions.

115.  As for the wife, she tried to exaggerate the extent of control she had on JK; and I am not entirely with her regarding the circumstances under which the 2^nd Transfer was made as depicted by her.

116.  The father’s primary case is there was an express 4-Parties Agreement. The father has not pleaded the time, the date and the place when the discussions took place nor are the relevant particulars provided in his affirmations.

117.  The father was examined on the particulars relating to the discussions leading to the agreement/consensus. He was only able to provide some vague particulars. He testified that the agreement/consensus was obtained after several discussions. He recalled the very first time the husband informed him of his intention of quitting school was in February or March 2012. At that time, KC, who had already quitted about a year earlier, was with the father in the business trip in Toronto. He confirmed that KC, the wife and the younger sister were also there when the discussion took place but he was not sure of the venue. When repeatedly asked about the contents of the discussions, his response was simply that the husband could return and learn the trade together with KC. He further said there was another similar discussion in May when he was in Toronto again but no helpful particulars were provided. In this regard, it has to be recalled that according to the father’s evidence, he was not aware of the intended marriage and the wife’s premature termination of her study before the couple’s return in June 2021. Hence, on his own evidence, the wife was not a party yet.

118.  The other occasion happened in July or August 2012 that the father described as important. Yet, he was not able to recall the place; he said it could be in Hong Kong or it could be in Longgang of Shenzhen where his factory and home were; and there could be more than one discussion. He was not sure who were present there. It was possible that the mother and the wife’s mother were there too when the discussions took place. Be that as it may, when being repeatedly asked by this court about the contents of the discussions, all the father could say was that these were “casual chats” (閒談). Essentially he referred to the situation where upon the return of KC, the husband and the wife there were 3 more persons and because SL had 2 other shareholders, he decided to carve out part of SL’s business to a new company. He was to give them a job, with a salary of $20,000 per month, and that was his plan. I set out below the relevant part of the father’s evidence,

問： 好喇。咁就當其時，喀，你點向佢哋表示你嘅意願呀？

答： 我意願就話因為細仔已經做緊㗎喇，做緊，嗰時就乾脆--大仔又返嚟喇，人多喇，我琴日我都作咗證，細仔一個人都冇問題，就住公司，因為大仔又返咗嚟喇，潘佳碧又返咗嚟喇，因為我原來嗰間公司仲有兩個股東唔賬面嘅，就蝕咗就我嘅，賺咗--目的就佢嘅貨就要畀我加工，賺咗錢就有分，蝕咗錢我負責，我唔想把呢啲所有嘅捆埋一齊，就乾脆話嗰個拍皮嘅踢出嚟，畀你哋--你嗰度，就唔好黐咗嗰個(SL)，就咁樣計劃，係咁樣㗎喇，就計劃就係咁樣㗎喇。

問： 好喇，就講晒喇，係咪呀？

答： 唔。

問： 仲有冇，仲有冇你係--咁你係當其時有講嘅說話，你仲有冇補充？

答： 佢就講過好多，而家就即係我一下子我唔知講乜嘢吖嘛，即係你話補充乜嘢，就話大概就商--嗰時我就--我開始諗喇，整個新公司嚟，就佢就單獨出去，唔好黐住我(SL)，又把呢啲原來我啲--同佢哋幾個人嘅，就我拍皮嘅一定去另外嘅，就唔想話佢哋一齊嘅，因為佢嗰個叫做broker吖嘛，其中一項嘛，就踢咗出嚟，攞嚟咁樣放喺嗰度，大家唔好黐埋嗰度，又話點樣做，「又打份工，你每個月發工資兩萬鈫喇」，佢哋詳細細節就係咁樣囉，就係咁樣。

119.  The husband took out an application on 30 October 2018 seeking a determination of the beneficial ownership of the License and the Car. He said these assets were in fact belonged to the father. It is significant to note that there was no mention by the husband that the Shares of JK being held under his name were also the father’s property. In response, the father filed his affirmation on 4 January 2019 in support of this application. In that affirmation, the father made the claim that JK, the License and the Car, together with some landed properties under the husband’s name, belonged to him. He made some mentions that JK was established to help the husband building up his career but it is significant to note that the father made no mention whatsoever about the Plan of Aiding the Sons and the 4-Parties Agreement.

120.  Further, when he referred to the operation of JK, he said at paragraph 10 that “according to my knowledge”, the wife was in control of the books and accounts of JK (“以我所知，答辯人作為呈請人妻子控制JK的會計與目，…”). At paragraph 11, he said that “according to my understanding”, the wife also worked in JK and also took $20,000 per month (“據本人理解，答辯人在JK 亦有工作，並同樣支取每月20,000港元”. He did not provide the source of his knowledge or understanding. In my view, these statements clearly do not sit well with his pleading that everything was arranged, or to be more exact, dictated by him. Specifically, he said in his subsequent Statement of Claim, his supporting witness statement and his oral evidence that he had “allowed” (容許 ) the wife to have the sole control of JK’s accounts and books; he also “arranged” (安排) the wife to have withdrawn $20,000 per month as her salary from JK and to have the husband’s $20,000 salary credited directly into the wife’s bank account. If what he pleaded were true, there is simply no way he did not know exactly what the arrangements were in the earlier affirmation.

KC’s evidence

121.  As far as his affirmation is concerned, KC was on the same page as his father. He said he was employed as JK’s business manager. Essentially, KC said everything belonged to the father. He testified that after the husband and the wife had returned to Hong Kong, the father just made the arrangement for the 3 of them to learn and they just followed. There were no discussions about the shareholdings of JK, all were directed by the father. However, he was not able to explain why he repeated the father’s version and said in his affirmation that in future JK was to be operated by the husband and the wife jointly and, on that basis, why initially he was to hold 5,000 shares of JK upon its establishment. When being referred to an earlier part of his affirmation where he said there were discussions leading to the agreement/consensus, KC changed to say there were a lot of discussions. Strikingly, after the lunch break on the day he gave evidence, he further said the father told them that the shareholdings were to be divided into 2: the husband and the wife were to hold 50% and he was to hold the other 50%. Since the husband was not a Hong Kong resident, his 50% was to be held by the wife. This was noticeably the same as what the father had said earlier in the witness box but this evidently did not sit well with what he said in his affirmation that JK was to be operated jointly by the husband and the wife. There was no satisfactory explanation from him.

122.  Ms Chan had no personal knowledge of the so called 4-Parties Agreement or any agreement or consensus between the parties regarding the actual arrangement.

123.  I am aware that the wife’s evidences are not without shortcomings. She was cross-examined in minute details on the wording used in the documents she filed. It was pointed out by Mr Chan that the wife did not state her beneficial shareholding in JK in her Form E of 7 May 2018. Instead, the wife merely stated that she was once a director. There were minor discrepancies between her Form Es of 7 May 2018 and 2 November 2020 in which she did not use the word “gift”.

124.  Although the parties’ relationship was familial, the financial venture on which the parties had embarked was not associated with a mutual commitment to each other for the future as in the case of husband and wife: see Marr v Collie (PC) [2018] AC 631, at [48]. The present case does not concern a family home that was bought in the joint names of former cohabitating couple as in Stack v Dowden (HL(E)) [2007] 2 AC 432 and Jones v Kernott (SC(E)) [2012] 1 AC 776. This is also not a case where some investment assets were bought in the joint names of former cohabitating couple as in the case of Marr v Collie. The present case is one where “business” assets (including the License and the Car which the father alleges were for the business of SL and JK) were acquired by the father but the same were being put in the names of his son and daughter-in-law.

125.  Ultimately, the burden is on the father to prove his equitable right over the assets which is inconsistent with the legal title. The father’s case is simply this. His sons and the wife were inexperienced, without academic qualification and penniless. He was the mastermind of everything and indeed he was the patriarch of the family. He arranged everything and provided all the necessary capital, support and business connections in building up their careers. Everything was done under his thumb and so on that basis everything belonged to him.

126.  In my assessment, while the pleading and the affirmations were professionally crafted, the father’s evidence, whether it was affirmation evidence or oral evidence, could hardly support his claim that there was an express agreement/consensus covering the comprehensive matters set out in his pleadings. On the above analysis, I have no doubt that the so called 4-Parties Agreement is a sheer fabrication. His claim for the Shares based on the 4-Parties Agreement must be rejected. As the father also relies upon the 4-Parties Agreement to establish his beneficial interest in the License and the Car, his claim on these assets must fail too.

Common Intention of the Parties

127.  Paragraph 32 of the Statement of Claim pleads that the agreement or common intention can be inferred or confirmed from the conducts of the parties. However, as pointed out at [31] above, the kind of conducts that the father intends to rely upon have not been set out or particularized. If he intends to rely upon the particulars that have already been pleaded in other parts of the pleading, the same have to be identified. It is incumbent upon the father to particularise the conducts he intends to rely upon in support of his claim such that a common intention or a tacit understanding can be found. I do not think it is incumbent upon the court to speculate and pick and choose the conducts for the father in order to complete his claim. Order 18, rule 12(1), RHC provides that every pleading must contain the necessary particulars of any claim, defence or other matter pleaded. Para 18/12/1 of the Hong Kong Civil Procedure (2023) states,

Effect of rule—The requirement to give particulars reflects the overriding principle that the litigation between the parties, and particularly the trial, should be conducted fairly, openly, without suprises and, as far as possible, so as to minimise costs. In Aktieselskabet Dansk Skibsfinansiering v. Wheelock Marden & Co. Ltd [1994] 2 H.K.C. 264 Bokhary J.A. said at 269E-270E that the functions of properly particularised pleadings are as follows:

(1) to inform the other side of the nature of the case that they have to meet as distinguished from the mode in which that case is to be proved;

(2) to prevent the other side from being taken by surprise at the trial;

(3) to enable the other side to know with what evidence they ought to be prepared and to prepare for trial;

(4) to limit the generality of the pleadings, the claim and the evidence;

(5) to limit and define the issues to be tried, and as to which discovery is required;

(6) to tie the hands of the party so that he cannot without leave go into any matters not included (although if the opponent omits to ask for particulars, evidence may be given which supports any material allegation in the pleadings).

…

Care must be taken to plead issues clearly, and not draft pleadings either vaguely or ambiguously perhaps in the hope that the other side might not readily or easily understand a party’s real case. While vaguely or ambiguously drawn pleadings may enable a party to escape a strike out application (since striking out is only for plain and obvious cases), this is not to say that where a court has to decide whether or not an issue is to be permitted to be run, it will smile kindly on such types of pleading ( Wing Hang Bank Ltd v. Crystal Jet International Ltd [2005] 2 H.K.L.R.D. 795 , para.6(2)).

…

(emphasis added)

128.  For the reason that the father failed to particularize the conducts that he intended to rely upon, I should not permit this issue to be run. In any event, on the analysis of the evidence set out above, the conducts of the relevant parties do not support the father’s contention that there was a common intention (tacit understanding) among them whether in respect of the matters pleaded in paragraph 16.1 to 16.8 or in respect of the “holding” as pleaded in para 32.

129.  I remind myself that each case depends on its own facts and that all the relevant facts and circumstances have to be taken into account in the deliberation. Context is everything and a holistic approach has to be adopted. Looking at the sequence of events back in 2012, it is not difficult to understand what was intended on the part of the father. KC quitted school in 2011. The husband intended to follow suit. At the same time, he proposed to the wife. Whilst the wife was hesitant to get married before completion of her education, the father was eager to see this happened sooner. At the same time, he wanted to help the husband, the wife and KC in the building up and continuation of the family business. Against this backdrop and on the totality of evidence analysed above, the wife’s version that the Assets were gifts is closer to the truth. That was the common intention of the parties. In coming to this conclusion, I have borne in mind the fact that the father carved out a part of his business of SL for JK and that he was in control of the policies and strategies of the company. Nevertheless, while the degree of “control” may be an important factor, it is not the only or decisive factor. A case in point is Leung Wing Yi Asther v Kwok Yu Wah (2015) 18 HKCFAR 605. This case is about the beneficial ownership of some shares ‘given’ to the wife by her father. The father, as the “patriarch” of the family, provided all the working capital and operational funds of the company in question, and retained sole control over the operation of its bank accounts. The father controlled the company throughout and no dividends were ever declared. He regarded the company as his personal “piggy bank”. The wife and her brother, who was the other shareholder, did not gain any benefit, nor did they bear any responsibility from holding the shares: see LWYA v KYW, & LLP, CACV 151/2013 & CACV 152/2013 (date of judgment: 4 December 2014), at [25]. Nevertheless, it was held that the wife was the beneficial owner of the shares. In my judgment, the father in the present case is not quite unlike the father in Leung Wing Yi Asther.

130.  With the conclusion that I have come to, it is not necessary for me to consider the father’s claim on resulting trust.

131.  On the above analysis, I find in favour of the wife. The father’s claim must be dismissed.

132.  I now turn to the wife’s ancillary relief claim.

Ancillary Relief

133.  As the husband chose not to engage in the proceeding, his affirmation, Form E, Answers and other documentary evidence were not subject to test; and in the absence of his oral evidence, the court was not able to examine the veracity of his assertions. Little weight should be given to his documentary evidence in support of his assertions.

Applicable Legal Principles

134.  The jurisdiction of the court in granting financial provision for a party and for a child of the family is governed by sections 4 and 5 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”). Pursuant to sections 6 and 6A of the same legislation, the court has the power to grant orders for transfer, settlement or sale of properties.

135.  The principles upon which this case is to be considered are the conventional ones, namely those set out in section 7 of MPPO which confers a broad discretion on judges dealing with ancillary relief. That said, these principles are to be interpreted in the light of the Court of Final Appeal judgment in LKW v DD (2010) 13 HKCFAR 537. In that case, Riberio PJ referred to the four principles which are applicable to all ancillary relief proceeding, viz, (1) the objective of fairness: [56], (2) rejection of discrimination: [57], (3) the yardstick of equal division: [58] – [61] and (4) avoidance of ‘minute retrospective investigation’: [62] – [69].

136.  Ribeiro PJ further set out the steps to be taken by the courts in undertaking the exercise. In brief, they are:

(1)  The ascertainment of the financial resources of each of the parties calculated as at the date of the hearing: [71] to [73];

(2)  The assessment of the parties’ financial needs. If the total resources are not enough to meet the parties’ needs, the s.7 exercise should stop at this step and there is no room to apply any sharing principle: [74] to [79];

(3)  If surplus assets would remain after the parties’ needs have been catered for, the next step should normally be for the court to apply the sharing principle to the parties’ total assets, with a yardstick of equal division as part of that principle. This means that the total assets should be divided equally between the parties unless there is good reason for departing from an equal division: [80] to [82];

(4)  In considering whether good reasons exist for departing from equal division, the answer is to be found in the terms of s.7 and the implicit objective of a fair distribution of the assets. Factors like source of the assets, conduct, financial needs, duration of the marriage, contribution to the family and compensation are all material considerations: [83] to [130]; and

(5)  The weight to be given to each of the factors is a matter of discretion for the court: [131].

137.  Lastly, I do bear in mind the reminder given by Thorpe LJ in Parra v Parra [2003] 1 FLR 942 at [22] that the proper judicial task of the court is to exercise a singularly broad judgment that obviates the need for the investigation of minute detail.

Identification of Assets

138.  With the dismissal of the father’s claim, the logical conclusion is that the Shares, CS, the Car and the License are assets of the matrimonial pot. These assets are essentially the only assets of significant values that merit consideration in this judgment.

139.  According to the wife, the Shares, the Car and the License are worth $1,300,000, $70,000 and $757,000 respectively, totalling $2,127,000.

The financial resources of the wife

140.  The wife has no other assets of significant value.

The financial resources of the husband

141.  The evidence compellingly points to the fact that the husband’s financial resources are not just limited to the monthly $20,000 drawn from JK. What is known from the MPS application was that the husband’s credit card bills were paid by the mother. There is no evidence suggesting this is not the case now. In March 2017 (ie a few months after the couple had separated), the husband was able to offer the wife a monthly sum of $30,000 plus a lump sum of $50,000 to $100,000 per year as vacation expenses. He also agreed to pay the children’s school fees and provide a 7-seater vehicle for the wife’s use and he was willing to cover 80% of the car expenses. In August 2017, he was able to offer, in addition, a yearly sum of $200,000 to $300,000.

142.  Ms Chong urged the court to take into account not only what the husband actually has in law, but also resources that he has or likely has access to but to which he may not have a legal entitlement. This include the financial assistance made by the husband’s parents, in particular, the father. The relevant legal principles and the proper approach to be taken have been articulated by Ma CJ in KEWS v NCHC (2013) 16 HKCFAR 1 at [31] – [39]. As I have already set out the relevant paragraphs in the MPS Judgment,[17] I do repeat the same here. Suffice to say is that, in the factual context of this case, there are two critical evidential questions for the court to consider:

(1)  What is the extent of the financial assistance provided by the parents of the husband, in particular, the father, to him?

(2)  What is the likelihood of such financial assistance continuing in the foreseeable future?

143.  In considering these evidential questions, the court needs to look at the reality of the situation and has regard to matters of substance and not just form. The court could take into account not only what the husband actually had, but what might reasonably be made available to him if a request for assistance were to be made.

144.  As regards the first question, ie the extent of financial assistance, I said at [33] of the MPS Judgment that it is common ground that the comfortable life-style enjoyed by the couple and their children, which I shall detail in the ensuing paragraphs, could not have been made possible during the relationship if it had not been for the support of the father. This remains to be my finding. I would add it is not an exaggeration to say the fact that the father was/is the fountain of the husband’s finance permeated throughout the trial.

145.  In respect of the second question, ie the likelihood of such financial assistance continuing in the foreseeable future, past conduct is often a useful guide: see SR v CR (Ancillary Relief: Family Trusts) [2009] 2 FLR 1083, at [27].

146.  In his affirmation in opposition to the wife’s MPS application, the husband explained why the family was able to afford a high standard of living was because of the financial support of his parents but such support was non-existent now. The father has not been willing to support him since the breakdown of the marriage. However, as I mentioned at [141] above, it is striking to note that notwithstanding their separation the husband was able to offer to pay the wife living expenses well exceeding his claimed financial ability.

147.  Mostyn QC (as he then was) said the following in TL v ML (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at [125 (v)],

Where the paying party has historically been supported through the bounty of an outsider, and where the payer is asserting that the bounty had been curtailed but where the position of the outsider is ambiguous or unclear, then the court is justified in assuming that the third party will continue to supply the bounty, at least until final trial (M v M).

148.  Further, what HH Judge Bruno Chan said in [77] of DX v LN, FCMC 7870/2014 (unreported; 21 September 2015) is apposite:

77. I have earlier in this judgment already expressed my grave doubts over the allegation that his father would seriously cut him off simply because of being told by the Wife of his extra-marital affair, which doubts have been reinforced by all the evidence that were before me that such financial provision has in fact continued up to the presence albeit in various different forms or guises, and hence in the absence of any expressed desire or intention from his parents, in reality the likelihood that such financial assistance would suddenly cease or be withdrawn can safely be put down as virtually nil, and even if the parents were to do so tomorrow, I am unable to think of any valid reason why they would other than as suspected by the Wife to gang up against her in these proceedings which if true is certainly a conduct not acceptable by the court.

149.  At [40] of the MPS Judgment, I drew inferences that either the husband had the funds with him or he continued to have the backing of the father.

150.  The is no evidence from the father that the husband has not been under his support or that the extent of such support has been cut. I am sure that the husband continues to enjoy the finances that he used to have during the relationship. On that basis, I am prepared to draw adverse inferences against the husband’s financial ability.

Liabilities

151.  The husband failed to provide any maintenance for the wife and the children as from January 2017. It was subsequently upon the wife’s MPS application that the husband started to pay some maintenance of varying amounts but at its maximum $25,000 per month. That sum is far below the sum ordered by this Court for the support of his wife and children.

152.  It has to be recalled that the father purchased two insurance policies as gifts for the children of the family. During the time when the parties’ relationship was good, the monthly premiums, which was at a considerable sum of $46,000, were paid by the father or from the family business. The father admitted he refused to continue to pay the insurance premiums as from 2017 because the wife did not concede to his demand to change the name of the beneficiary from herself to that of the father. I commented in the MPS Judgment that the demand was extortionate and utterly unreasonable. This remains to be my view. I am told the insurance premiums paid by the wife were $1,752,000.

153.  Added to the above are the legal costs incurred by the wife in the present proceedings.

154.  All these monies were financed by loans from the wife’s mother and relatives. I am told these loans, which bear some interests, amount to the region of $4 million. I accept this is the case. Apart from the loans for legal costs, the rests were for the support of the wife and the children which should have been paid out from the matrimonial pot.

155.  As regards the husband, I do not know the extent of his liabilities, if any. As I have decided to draw adverse inferences against the husband’s financial situation, the extent of his liabilities, if any, should carry little weight.

The Wife’s Earning Capacity

156.  The wife is 34 years old. She terminated her study prematurely in June 2012. At that time, she was only 24 years old and had just completed the 1^st year of a 3-year Hospitality Foundation Course. She has been taking care of the children on a full time basis since January 2017. The children are still of tender age. I do not see any possibility that the wife would be able to re-join the labour force in the near future. I do not think this would happen in say 4 to 5 years’ time. Even if she could, given her limited work experience and absence of any qualification, the likely jobs opened to her would only be clerical or non-skilful ones.

The Husband’s Earning Capacity

157.  The husband is of the same age as the wife. There is nothing before me showing that the husband has not been doing the same type of work that he did during the relationship. It is obvious that he has not been suffering from the inherent disadvantage arising from absence of qualification that the wife is facing.

Financial Needs of the Wife and the Children

158.  Needs should be “generously interpreted”. The court should try to ensure that each party and their children have enough to supply their needs set at a level that equates, in so far as resources allow, to the standard of living they enjoyed during the marriage; those needs should not be assessed according to some perceived lowest common denominator, but with flexibility in the light of all the relevant circumstances. See: LKW v DD (2010) 13 HKCFAR 537, at [79].

159.  In EJB v CJB [2011] 5 HKLRD 508, Hartmann JA (as he then was) said at [37],

37. It is now well-settled therefore that, the primary responsibility of a judge determining matters of ancillary relief is to make provision for the parties’ needs, particularly their housing needs and, insofar as it is possible, some security financially. Those needs are to be judged generously in accordance with the circumstances of the case. Only if surplus assets remain after the needs of the parties have been met will the court then apply the sharing principle, that principle being measured by the ‘yardstick of equal division’.

160.  The wife, taking the children with her, has since August 2016 moved to live with her mother in a public housing unit in Chai Wan. This is a studio type flat of about 300 ft² in size. She has not been working since January 2017 and has been taking care of the children with the assistance of her mother.

161.  During the relationship the family lived in a spacious and comfortable house in Palm Springs of about 2,200 ft² large and had the service of a domestic helper. When the family was in Longgang, Shenzhen, the wife said they lived in a house of about 6,000 ft². I am aware there is a dispute over the size of this house. It seems to me the dispute arises from the fact that the father referred to the legally built floor areas only while the wife’s figure included the areas of structures not approved by the relevant authorities. The family did not have to pay rents for their homes nor was it required to pay any relating outgoings.

162.  The wife had the use of a supplementary credit card limited to $40,000 per month; the father and the mother gifted her on average $300,000 a year. I accept her evidence that she was able to pay family expenses from JK. The husband was too busy to go for vacation with her. The wife was provided with monies for a sea-cruise with her mother in Europe and several trips to Japan with the children.

163.  The family had the use of 2 vehicles (ie the Car and the 7-seater) and was able to afford medical and dental treatment at a first class private hospital in Hong Kong. The husband from time to time bought her luxurious items and jewelleries as gifts.

164.  The daughter used to attend an international kindergarten but due to the absence of support from the husband she had no choice but to attend a local primary school.

165.  The evidence of the father at trial is generally in support of the standard of living claimed by the wife.

166.  It is clear that the wife and the children led a comfortable lifestyle before the breakdown of the marriage. In stark contrast, the wife and the children are now being cramped in a small public housing unit. The current accommodation is definitely undesirable. The children are growing and so are their needs; their housing needs should be on the top of list. The children need more space; and, in my view, they deserve it. I cannot image that the husband, as their father, and if the children are really close to his heart, would have allowed this to happen in the last 5 years or so. I agree with the wife that she and the children need to rent a reasonable accommodation in East Hong Kong Island that is close to her mother’s home and the children’s school. I also agree that the likely monthly rental is about $30,000.

167.  Some weight should be given to the fact that the wife sacrificed her education for raising a family with the husband. I am aware that they had “joined-hands” in conducting the “family” business but this business, as far as the wife is concerned, vanished upon the termination of their relationship. This is not the case for the husband, who, I am definitely sure, has been maintaining not only his living standard but his business, too.

168.  I am told the son is found to have Speech Developmental Delay. I also need to take his special needs into account.

169.  I have carefully considered the wife’s evidence regarding their financial needs. I accept the general expenses for 3 of them are $47,000 (inclusive of rental $30,000), her personal needs are $18,000 and the children’s needs are $39,800, totalling $104,800. This sum would not allow her and the children to replicate their previous living standard; for instance, they would not have the use of any private means of transportation, the enjoyment of a spacious home or the ease that they used to have in vacation trips. On that view, I am satisfied that $104,800 is definitely a reasonable amount.

Financial Needs of the Husband

170.  There is little convincing evidence before me about the husband’s financial needs. I infer he is able to meet his needs comfortably.

Meeting the financial needs of the wife, the children and the husband

171.  I agree with Ms Chong that the present case is one where this court should make use of the available financial resources for meeting the needs of the family, notably, those of the wife and the children’s. If the total resources are not enough to meet the parties’ needs, the s.7 exercise should stop at this step and there is no room to apply any sharing principle.

172.  The wife accepts that her marriage with the husband, which was short of 4 years, was not a long one. She seeks a lump sum as a clean break between herself and the husband. She considers that a spousal maintenance capitalized at 4 years should allow her to re-establish herself; by then the children will be 12 and 10 years old respectively.

173.  The children’s share of general expenses should be apportioned on 2/3 basis, and so it should be $31,333 ($47,000 ÷ 3 X 2). Adding this $31,333 to the children’s expenses of $39,800 gives a total of $71,133. The children are growing; I round it up to $72,000 per month.

174.  As for the wife, her monthly needs would be $33,667 (her share of general expenses of $15,667 ($47,000 ÷ 3) + personal expenses of $18,000). I round it up to $34,000 per month. Calculated on a period of 4 years would give a figure of $1,632,000.

175.  The husband was never in compliance of the MPS Order. In considering the level of lump sum ought to be paid by him, I have no doubt that I need to take the following into consideration:

(1)  The outstanding maintenance that ought to have been paid by the husband the amount of which up to August 2022 was $2,587,500. There has been a lapse of about 6 months since then; without condescending to minute calculation I round up the figure to $2,800,000;

(2)  The outstanding insurance premiums that the wife paid in order to keep the policies alive for the benefit of the children were $455,000; and

(3)  The outstanding medical and dental expenses incurred by the wife were $180,000; and

176.  Considering all the above in the round, I conclude that $5,100,000 should be an appropriate amount for a clean break as between the husband and the wife. This is the lump sum that the husband should pay. I would allow the husband to pay by way of 3 monthly instalments of $1,700,000 each.

177.  I need to consider the irresponsible conduct of the husband towards the wife and his children after the breakdown of the relationship, his litigation conduct in the proceeding and the fact that he is not a Hong Kong resident. I come to a view that the lump sum should be secured by the Shares. I am sure the wife’s legal representatives would take appropriate steps for safeguarding the wife’s interest.[18] The husband is reminded that judgments of the Family Court in this jurisdiction are now enforceable in the Mainland by virtue of the Mainland Judgments in Matrimonial and Family Cases (Reciprocal Recognition and Enforcement) Ordinance (Cap 639).

Orders

The Third Party Ownership Claim

178.  For the reasons aforesaid, the father’s claim is dismissed.

Ancillary Relief

179.  I make the following orders in favour of the wife:

(1)  The husband do pay the wife a lump sum of $5,100,000 by 3 instalments of $1,700,000 each; the first instalment of $1,700,000 is to be paid within 7 days of decree absolute and the 2^nd and 3^rd instalments are to be paid on the 1^st day of the subsequent months. The lump sum is to be secured by the Shares.

(2)  Upon the full payment of the lump sum, the wife do transfer CS, the License and the Car to the husband or his nominee. The husband is to bear all the costs of the transfer.

(3)  If the husband fails to pay the lump sum in full, the wife is at liberty to have CS, the License and the Car sold for partial satisfaction of the lump sum in which event the husband and the father do forthwith deliver all the title and necessary documents to the wife. There be liberty to apply.

(4)  The husband do pay the wife $72,000 per month as maintenance for the 2 children of the family (ie $36,000 each). The first payment to be made on 1^st April 2023 and thereafter on the 1^st day of each and every subsequent month until the children respectively reach the age of 18 years or upon completion of his/her full time education, whichever is the later.

Costs

180.  There is no reason why costs should not follow the event. As the father’s claim is dismissed, he should pay the wife her costs of the Third Party Ownership Claim proceeding. Likewise, the husband should pay the wife her costs of the Ancillary Relief proceeding. The two set of costs are inclusive of all costs reserved and with counsel certificate; and they are to be summarily assessed. Separate case management directions on the summary assessment will be issued to the parties. The costs orders are made by way of orders nisi.

Section 18 Declaration

181.  Lastly, I am satisfied that the arrangements made in respect of the children of the family to whom section 18 of MPPO applies for their welfare are satisfactory or are the best that can be devised in the circumstances and I accordingly make a declaration to this effect.