LAM FUNG SIN v. LEE YUET WING

DCCJ 212/2023

[2024] HKDC 33

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 212 OF 2023

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JUDGMENT

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A.  Factual background

1.  This is the Defendant’s appeal against the Order of Master Stanley Ho (the “learned Master”) dated 14 September 2023 whereby the learned Master dismissed at the call-over hearing[1] the Defendant’s summons applying for a stay of these proceedings pending the determination of his application for ancillary relief against the Plaintiff (the “Stay Summons”).

2.  The Plaintiff and the Defendant were married in 1970 in the PRC. I shall refer to the Plaintiff and the Defendant as the Wife and the Husband respectively for convenience purposes although the Plaintiff, as will be explained below, obtained in the USA a judgment of divorce on 17 June 2020.

3.  These proceedings concern a property at Flat A on the 1^st Floor and the Flat Roof of On Lok Mansion of Nos. 35-37 First Street, Hong Kong (the “Property”). On 16 July 1988, the Wife purchased the Property in her own name. According to the Husband, although the Property was purchased under the Wife’s name, he paid part of the purchase price and he renovated the Property himself with his own hands and funds as he was a renovation contractor. The Property was subsequently rented out.

4.  In or about 1992, the Wife and the Husband started living apart. The Wife moved to the USA while the Husband stayed in Hong Kong.

5.  Since around 2000 and 2001, the Husband has been residing at the Property. According to the Wife, the Husband resided at the Property pursuant to a bare licence granted by her. The Husband denies it. His evidence is that he did not start residing at the Property pursuant to any “license”. Instead, it was a natural and mutual agreement and understanding between husband and wife that he could live at the Property, which had been one of their family assets.

6.  On 9 June 2019, the Wife filed a summons for divorce (the “US Divorce Summons”) in the Supreme Court of New York, USA. On 17 June 2020, by a judgment of divorce of the Supreme Court of the State of New York (the “US Divorce Judgment”), the US Court, in default of the Husband’s appearance, ordered that the marriage between the Wife and the Husband be dissolved. The Husband’s evidence, however, is that the US Divorce Summons was never served on him and the US Divorce Judgment was obtained by the Wife by lies and procedural irregularities.

7.  On 1 January 2021, the Wife served the US Divorce Judgment on the Husband. On 1 March 2022, the Husband applied for leave for financial relief against the Wife by commencing FCMP 30/2022 (the ‘FCMP Proceedings”) under section 29AC of the Matrimonial Proceedings and Property Ordinance (Cap 192) (“MPPO”). On 12 May 2022, His Honour Judge S. Lo ordered that the leave application be adjourned sine die with liberty to restore upon filing an expert report on US law.

8.  On 17 August 2022, the Husband changed his legal representatives to his current solicitors.

9.  On 17 January 2023, the Wife commenced these proceedings for delivery up of the vacant possession of the Property. The Husband then needed to apply for another legal aid certificate for these proceedings. His solicitors filed their Notice to Act in these proceedings on 6 April 2023.

10.  On 22 August 2023, the Legal Aid Department issued a legal aid certificate for the Husband to commence a divorce petition in the Family Court. On 4 September 2023, the Husband commenced FCMC 10121/2023 and applied for ancillary relief against the Wife subsequently (the “FCMC Proceedings”).

11.  On the same day when the Husband commenced the FCMC Proceedings (i.e. 4 September 2023), he also took out the Stay Summons. As mentioned at the beginning of this decision, the stay application was dismissed by the learned Master on 14 September 2023.

12.  On 21 September 2023, the Husband filed the Notice of Appeal. Afterwards, the Wife applied for the dismissal or a stay of the FCMC Proceedings. The Wife’s application is due to be heard on 24 March 2024.

B.  Applicable legal principles

13.  The relevant part of Order 58 rule 1 of the Rules of District Court (Cap 336H) states that:

“(1) …an appeal shall lie to a judge in chambers from any judgment, order or decision of a master, irrespective of whether the judgment, order or decision was given or made on the basis of written submissions only or after hearing.

…

(5) No further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds.”

14.  There is no serious dispute between the parties on the following legal principles:

(1)  An appeal from a master to a judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judge “will of course give weight it deserves to the previous decision of the Master; but he is in no way bound by it”. See Hong Kong Civil Procedure 2023 at §58/1/2.

(2)  The phrase “special grounds” is the same expression as in RHC O.59, r.10(2) and requires the conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 to be satisfied. The Ladd v Marshall conditions are:

(a)  The evidence could not have been obtained with reasonable diligence for use at the hearing below;

(b)  The evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(c)  The evidence must be such as is presumably to be believed.

See Hong Kong Civil Procedure 2023 at §58/1/3.

15.  In the present case, the Wife also applied for leave to adduce new evidence on the evening of 27 December 2023 (i.e. the day before the hearing). I will first deal with the substantive appeal before the Wife’s application as it is easier to understand the merit of the Wife’s application after I set out my decision on the substantive appeal.

C.  The substantive appeal

C1.  The Husband’s case

16.  The Husband’s case is that the Property is part of the matrimonial assets of the parties. It has been the Husband’s home for over 20 years.

17.  In this action, the Wife is seeking vacant possession of the Property while the Husband counterclaims a declaration that he was and is the beneficial owner of 50% of the Property.

18.  Concurrently, in the FCMC Proceedings, the Husband is seeking ancillary relief against the Wife.

19.  Under the MPPO, the Court has the power to, for instance, order a transfer of the Property, or order a sale of the Property and divide the net sale proceeds between the parties. Section 6 of the MPPO states that:

“(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation, or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may, subject to the provisions of sections 10 and 25(1), make any one or more of the following orders, that is to say—

(a) an order that a party to the marriage shall transfer to the other party, to any child of the family or to such person as may be specified in the order for the benefit of such a child such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion;

…

(e) an order for the sale of such property as may be specified in the order, being property in which or in the proceeds of sale of which either or both of the parties to the marriage has or have a beneficial interest, either in possession or reversion, and for the use of the proceeds of such sale …”

20.  Ms. Chong, who appeared on behalf of the Husband, referred to and relied upon Chan Man Ki v Yau Chun For [2021] 2 HKLRD 366. In that case, the wife received certain items as wedding gifts, and later petitioned for divorce but made no application for ancillary relief. She commenced a DCCJ action to claim the return of the gifts or damages in lieu. The husband applied to strike out the wife's claim, which was dismissed. On appeal, the Court of Appeal dismissed the appeal and made an order to stay the DCCJ action pending the determination of the husband's application to the Family Court for ancillary relief in respect of the gift (notwithstanding the fact that the husband did not seek such relief in the court below and only added such relief by amending the Notice of Appeal after the court had raised the question at the hearing).

21.  In that case, Chu JA held that:

"53. I accept that it is a pertinent consideration that the parties were husband and wife and were involved in divorce proceedings. Generally speaking, it is desirable that one court should exercise its jurisdiction over all financial and property disputes between husband and wife. Ordinarily it would be appropriate to transfer financial and property claims that fall within its jurisdiction to the Family Court, provided that such a course will not do injustice to either party.

…

69. We had at the hearing of the appeal raised with counsel the issue of the further conduct of the parties' dispute over the Gifts. This is because, on the one hand, we have held that the commencement of the DCCJ Action is not an abuse of process, and we have upheld the Judge's refusal of the striking out application. It is thus open to the plaintiff to continue with the DCCJ Action.

70. On the other hand, we were mindful of the desirability of having all financial and property disputes between husband and wife resolved in one court, which ordinarily is the Family Court having regard to its wide discretionary power to do justice between the parties under the MPPO. Of course, as emphasized in Matz v Matz, such a course must not cause injustice to either party. Since the defendant has asserted that the Gifts are matrimonial assets, if he were to make an ancillary relief application in respect of them in the Family Court Proceedings, it would be appropriate to order a stay of the DCCJ Action. Until there is a decision by the Family Court on the dispute over the Gifts, including whether there should be a redistribution, there is no need or useful purpose to carry on with the DCCJ Action.” (emphasis added)

22.  Applying Chan Man Ki v Yau Chun For, it was submitted by Ms. Chong that I should stay these proceedings so that the parties’ disputes over the Property could be decided by one court, namely the Family Court, instead of by two sets of concurrent proceedings in two different courts.

23.  Ms. Chong further submitted that a stay of these proceedings would not cause injustice to the Wife:

(1)  There was no evidence adduced by the Wife setting out any injustice that she would suffer if these proceedings were stayed pending the determination of the FCMC Proceedings. She emphasised that this was not a criticism of the Wife, but that was the result of the dismissal by the learned Master of the Husband’s application at the call-over hearing.

(2)  In any event, these proceedings and the FCMC Proceedings were both at an early stage. This was not a case where the civil proceedings were at an advanced stage while the family proceedings had just started, such that a stay of the civil proceedings would cause delay and injustice.

C2.  The Wife’s case

24.  Mr. Cheung, who appeared on behalf of the Wife, submitted that she commenced these proceedings as of right and hence, this court should only grant a stay when there were “very good reasons” and only in “rare and compelling circumstances”. To this end, he relied on Poon Ka Man Jason v. Cheung Wai Tao and others (HCA 304/2011, 13 April 2018), [2018] HKCFI 771 where Au-Yeung J held that:

“36. The court has discretion, as a matter of case management, to grant a stay of proceedings generally or until a specified date or event: High Court Ordinance, Section 16(3); Order 1B, rule 1(2)(e) of the Rules of the High Court (“RHC”).

37. Where, as here, the action was commenced as of right, the court should only grant a stay when there are “very good reasons” and in “rare and compelling circumstances”. The stay must not cause injustice to the Plaintiff, and the Defendants must show that continuing the proceedings would be unjust to them. See: Zhang Xiuhong v Liu Wenchen & ors (HCA 2118/2012, 20 July 2017), §34, per Au-Yeung J, citing Ng J’s judgment in AIG Europe Ltd & ors v Fast-Link Express Ltd & ors (HCAJ 114/2014, 10 January 2017), §§9-13. The ultimate question is what would serve the ends of justice.

38. Exercise of discretion would involve balancing between (1) possible wastage of Court’s time and resources and also parties’ time and costs (if there is no stay) on the one hand and (2) possible delay of the proceedings for a short period of time (if there is a stay) on the other hand: see The Al Dhabiyyah [1999] 4 HKC 414, at p 420A-F.

39. The court must bear in mind that the underlying objectives of the court is to increase cost-effectiveness of court proceedings; ensure that a case is dealt with as expeditiously as is reasonably practicable; promote reasonable proportion and procedural economy in the conduct of proceedings; and to facilitate settlement of disputes: Order lA, rule 1(a), (b), (c) and (e) of the RHC.”

25.  Mr. Cheung also referred me to China Forestry Holdings Co Ltd (in official Liquidation) v. Top Wisdom Overseas Holdings Ltd and Another (HCA 1089/2016, 26 March 2020), [2020] HKCFI 526 where K. Yeung J held that:

“19. The Court has the discretion under s 16(3) of the High Court Ordinance and Order 1B rule 1(2)(e) to order a stay of proceedings.

20. When deciding how the discretion is to be exercised, the basic principle is what would serve the ends of justice between the parties and as far as the administration of justice is concerned. Whether there is identity of parties is also an important consideration. As observed by Ma J (as he then was) in Linfield Ltd v Taoho Design Architects Ltd [2002] 2 HKC 204:

“14. One starts with the basic principle: what would serve the ends of justice between the parties to the litigation and as far as the administration of justice is concerned? This recurrent theme can be found in all cases involving stays on the basis of lis alibi pendens: see The Abidin Daver at 412B-D (noting in particular the well known words of Lord Diplock, ‘It is a recipe for confusion and injustice’). I have also found helpful a statement of principle contained in the judgment of Sellers LJ in Compagnie Nouvelle France Navigation SA v Compagnie Navale Afrique du Nord (The ‘Oranie’ and The ‘Tunisie’) [1966] 1 Lloyd’s Rep 477, where at 487(1), he said:

The guiding principles are:

(1) that the stay must not cause injustice to the claimant in the arbitration, and

(2) that the applicant for a stay must satisfy the Court that the continuance of the arbitration would be oppressive or vexatious to him or an abuse of the process of the Court: in short, that it would be unjust.

I would add that where a plaintiff institutes proceedings as of right (and not in breach of an arbitration agreement or exclusive jurisdiction clause) he is not to be deprived of carrying on those proceedings unless very good reasons exist to the contrary.

…

16. … Even if there are multiple sets of proceedings involving similar or even the same issues, if there is no identity of parties, I fail to see how it is desirable or even possible for one or more of such proceedings involving different parties to be stayed pending the resolution of any other set or sets of proceedings. The determination of any issues in proceedings between different parties would not be binding on any other party in another set of proceedings. I recognize immediately that this may give rise to a risk of inconsistent findings, but where findings made in earlier proceedings (even on the same issues) are not binding in later proceedings, the risk is inevitable. However desirable it may be to have consistency, findings made in different proceedings between different parties cannot be made binding on other persons.””

26.  Mr. Cheung further submitted four grounds in opposition to the Husband’s stay application:

(1)  Taking into account the procedural history of the proceedings between the parties, it was prejudicial to the Wife if the resolution of the present action was further delayed (the “First Ground”).

(2)  The present action and the Family Court’s proceedings were different in nature (the “Second Ground”).

(3)  The stay application was merely a delaying tactic and an abuse of process (the “Third Ground”).

(4)  Little costs could be saved if the present action was stayed (the “Fourth Ground”).

C3.  Legal analysis

27.  To start with, I do not see any real difference between the applicable legal principles contained in the cases cited to me by the parties.

28.  In my view, the principle laid down by the Court of Appeal in Chan Man Ki is that in the context of an application for a stay of civil proceedings where the subject matter is arguably a matrimonial asset and there are pending concurrent Family Court proceedings, the general rule is that it is desirable that one court should exercise its jurisdiction over all financial and property disputes between husband and wife. Therefore, it will be appropriate to stay the civil proceedings until there is a determination by the Family Court over the subject matter provided that such a course will not do injustice to either party.

29.  Neither Poon Ka Man Jason nor China Forestry Holdings Co Ltd (in official Liquidation) is inconsistent with such a principle. As emphasised in both cases, when deciding how the discretion for a stay is to be exercised, the basic principle is what would serve the ends of justice between the parties and as far as the administration of justice is concerned.

30.  In respect of the Wife’s First Ground, Mr. Cheung submitted that the US proceedings and the FCMP Proceedings were commenced a long time ago and the parties’ dispute should be resolved as speedily as possible. Therefore, the Husband’s stay application should be rejected as it would cause further delay in these proceedings.

31.  I do not agree with Mr. Cheung’s submission. A stay of these proceedings does not mean that the resolution of the parties’ dispute will be paused, but rather that it will be conducted in the Family Court rather than in this action. Once the Family Court determines how the Property should be dealt with (e.g. by an order of transfer or an order of sale), it is likely that the issue of delivery up of vacant possession by the Husband (if it still remains) can be resolved in a relatively straightforward way by the parties.

32.  I also agree with Ms. Chong’s submission that these proceedings and the FCMC Proceedings are both at an early stage. This was not a case where the civil proceedings were at an advanced stage while the family proceedings had just started, such that a stay of the civil proceedings would cause delay and injustice.

33.  So far as the Second Ground is concerned, I do not consider it to assist the Wife. There is no dispute that there are differences between these proceedings and the Family Court’s proceedings. As submitted by Ms. Chong, even if this action proceeds all the way to trial and there is a determination of the beneficial ownership of the Property, the determination will not be final. Assuming the Wife succeeds in this action and is found to be the 100% beneficial owner of the Property, the Husband is still entitled to apply for ancillary relief against the Wife in the FCMC Proceedings, in which the Family Court will have to deal with the Property again based on wider considerations under the MPPO.

34.  Therefore, as held by the Court of Appeal in Chan Man Ki, “it is desirable that one court should exercise its jurisdiction over all financial and property disputes between husband and wife”.

35.  Regarding the Third Ground, Mr. Cheung submitted that the Husband’s FCMC Proceedings were devoid of merit, and this stay application was a mere delaying tactic and an abuse of process. I do not consider this Court to be in a position to conclude the merit of the FCMC Proceedings at this stage. There is no proper or sufficient evidence for this court to come to the conclusion contended by the Wife. Nor am I satisfied that this stay application is a mere delaying tactic and an abuse of process.

36.  As for the Fourth Ground, I agree with Ms. Chong that costs will be saved if the parties can resolve their disputes in one set rather than two sets of proceedings. In any event, this is not just a matter of costs; it is the benefit of having one court, instead of two courts, which will exercise its jurisdiction over all the financial and property disputes between the parties.

37.  For these reasons, I accept Ms. Chong’s submissions and reject Mr. Cheung’s submissions. I will allow this appeal and set aside the decision of the learned Master.

D.  The Wife’s application for adducing new evidence

38.  I now turn to consider the Wife’s application for adducing new evidence. The Wife’s application came extremely late. The proposed new affirmation (around 40 pages) was only sworn on 21 December 2023 (i.e. a week before this hearing). The summons for such an application was only taken out on 27 December 2023 (i.e. the day before the hearing). There was no proper explanation for the delay and the Husband had no opportunity to respond to such evidence. For these reasons alone, I will reject the Wife’s application.

39.  In any event, I do not consider the application to satisfy the Ladd v Marshall conditions. Most of the evidence contained therein goes to the background of the parties’ disputes. At the hearing, Mr. Cheung specifically referred me to paragraphs 16, 48 and 95 of the proposed new affirmation.

40.  I do not agree that these paragraphs satisfy the second condition, namely “the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive”:

(1)  Paragraph 16 is only relevant to the merit of the Husband’s beneficial ownership defence in these proceedings. As explained above, this court is not in a position to decide the merit conclusively at this stage.

(2)  Paragraphs 48 and 95 are relevant to the Wife’s assertion that the Husband did not ask for an order of transfer of the Property in the FCMP or FCMC Proceedings. According to Ms. Chong:

(a)  The OS in the FCMP Proceedings sought leave to apply for ancillary relief. It is unsurprising that the Husband did not spell out the exact relief sought at that stage; and

(b)  In the FCMC Proceedings, the Husband prayed for inter alia a transfer of property order in his divorce petition. In the Form 25 filed by the Husband, he inter alia applied for a transfer of property order and specified the Property. In the Form E filed by the Husband, he also specifically asked for a transfer of property order in relation to the Property.

(3)  The documents in the FCMC Proceedings are not before me. I therefore cannot determine whether the Wife’s assertion is true. Even assuming it is, I still do not consider it to have an important influence on the result of this application. As indicated by Ms. Chong, it is certainly the Husband’s intention to apply for a transfer of property order in FCMC Proceedings. The Husband is entitled, if necessary, to amend his Forms in those proceedings and add such relief.

E.  Conclusion

41.  For the reasons above, I allow this appeal, set aside the learned Master’s decision and dismiss the Wife’s application for adducing new evidence.

42.  As for the way forward, Ms. Chong submitted that I could grant an order of a stay of these proceedings pending the determination of the FCMC Proceedings. Alternatively, I could make an order of the directions as originally agreed between the parties for the call-over hearing on 14 September 2023, namely:

(1)  The Plaintiff do file and serve her affirmation in opposition within 42 days;

(2)  The Defendant do file and serve his affirmation in reply (if any) within 28 days thereafter;

(3)  No further affirmation be filed without leave of the Court;

(4)  The Stay Summons be adjourned for argument to a date to be fixed with an early date be given and 2 hours reserved.

43.  I will adopt the alternative route, save that I consider that the Stay Summons should not be heard before the determination of the Wife’s application for dismissal or a stay of the FCMC Proceedings which is to be heard on 24 March 2024:

(1)  As the Stay Summons was dismissed at the call-over hearing, the Wife has not had the opportunity to adduce evidence in opposition to the Husband’s application. As a matter of fairness, she ought to be given such an opportunity.

(2)  If the Stay Summons is to be adjourned for argument to a date after the determination of the Wife’s application for dismissal or a stay of the FCMC Proceedings, the parties will have a better assessment of whether they should continue their battle in relation to the Stay Summons.

(a)  If the Wife wins the application, there is no further reason to stay these proceedings.

(b)  If the Wife loses the application, she can have a better assessment of whether she should continue to resist the Stay Summons in light of this decision and the result of her application.

44.  I therefore make the following orders:

(1)  The Defendant’s appeal be allowed and the Order of Master Stanley Ho dated 14 September 2023 be set aside.

(2)  Notwithstanding paragraph 2 of the Order of Master B. Mak dated 10 August 2023, leave be granted to the Defendant to take out application for stay of proceedings.

(3)  The Plaintiff do file and serve her affirmation in opposition within 42 days.

(4)  The Defendant do file and serve his affirmation in reply (if any) within 28 days thereafter.

(5)  No further affirmation be filed without leave of the Court.

(6)  The Stay Summons be adjourned for argument to a date to be fixed (not before the determination of the Wife’s application for dismissal or a stay of the FCMC Proceedings) with 2 hours reserved.

(7)  There be a costs order nisi that:

(a)  The costs of this appeal and the costs of the Plaintiff’s application for adducing new evidence be to the Defendant (to be taxed if not agreed) with certificate for counsel.

(b)  The Defendant’s own costs be taxed in accordance with the Legal Aid Regulations.

45.  I thank Ms. Chong and Mr. Cheung for their assistance.