LKW v. KY

CACV 182/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 182 OF 2015

(ON APPEAL FROM FCMC 530 OF 2011)

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REASONS FOR JUDGMENT

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Hon Chu JA (giving the Reasons for Judgment of the Court):

1.  This is the petitioner’s appeal against the order of His Honour Judge Bruno Chan (“the Judge”) made on 17 July 2014 in the respondent’s application for ancillary relief. Leave to appeal was granted by the Court of Appeal. At the hearing, we dismissed the appeal with costs to the respondent. Our reasons appear below.

FCMC 530/2011

2.  The petitioner and the respondent are formerly husband and wife.  They married in China on 23 November 1998.  At the time of the trial before the Judge, they were aged 51 and 43 respectively.  They had one son, who unfortunately was born with a congenital heart disease and passed away at the age of 11. 

3.  The petitioner operates a transportation business which was already set up at the time he married the respondent.  The Judge found his income from the business to be no less than HK$38,000 per month (Judgment §95).  The respondent had worked in factories and restaurants, and, save for about one year in 2004, has not worked after the marriage.

4.  In 1999, the parties purchased their matrimonial home at Jia Jun Court, Shenzhen (“Matrimonial Home”).  It is held in their joint names.  The property is subject to a bank mortgage and the petitioner has been responsible for discharging the monthly instalment.  In mid-2009 when the marriage began to break down, the petitioner moved out of the Matrimonial Home.

5.  In the latter part of 2009, the parties entered into discussions about divorce and financial settlement.  On 10 November 2009, the petitioner gave RMB 500,000 to the respondent.  According to the petitioner, it was agreed that the payment was to be in full and final settlement of the respondent’s financial claims.  The respondent denied agreeing to this.   

6.  On 13 January 2011, the petitioner issued a petition for divorce based on unreasonable behaviour, which was subsequently amended to be based on one-year separation.  The decree nisi was granted on 28 July 2011.

7.  The parties were unable to agree on the question of ancillary relief and the matter went to trial.  Initially both parties were legally represented.  Shortly before the trial commenced in February 2014, the respondent became unrepresented.

The Judge’s decision

8.  The Judge made the following findings on the major factual disputes between the parties:

(1) Contrary to the petitioner’s assertion, the respondent never had any interest in an aquarium business in Shenzhen, China (Judgment §36).

(2) Most, if not all, of the RMB500,000 which the petitioner gave the respondent had been used up (Judgment §45).

(3) The respondent has some earning capacity, but is limited to employments that give a few thousands dollar monthly income (Judgment §93).

(4) The petitioner’s earnings and income from his transportation business was more than what had been disclosed in his Form E, and he was financially capable of owning either or both of the two properties in Shenzhen (see (6) below, Judgment §58).

(5) The value of the interest that the petitioner retains in the ancestral home of his late father in Danshui, China is not substantial (Judgment §61).

(6) The petitioner has failed to fully and frankly disclose his interest in two properties in Shenzhen (respectively “Fumin Property” and “Lung Kong Property”, collectively “the Properties”), which are of significant value and together probably worth RMB2.6 million if not more; and the court is entitled to draw adverse inference that the respondent was the beneficial owner of the two properties (Judgment §§79 and 89).

9.  The Judge considered it was a case of meeting the needs of the parties, particularly the respondent, upon the divorce, and rejected the approach of an equal sharing of marital assets.  He concluded that (Judgment §§100 to 103):

“101. In the circumstances it is in my view not only necessary but also fair for the Wife’s housing needs be met by allowing her to keep the former matrimonial home for herself, and while I accept that the Husband may not be able to pay off the outstanding mortgage in one go as requested by the Wife, I have no doubt that he can and should continue to pay off the outstanding mortgage by monthly instalments which may have only a couple more years, and to pay her periodical maintenance albeit not necessarily at the rate of her requested amount of HK$8,000 but instead at HK$5,000 per month as she should be able to find a job to help pay her living expenses.

102. While this may appear that the Wife would be getting the most valuable item of their marital acquests, the fact that the Husband gets to keep the bulk of his income and profits from his business and his said other properties some of which he had tried to conceal from the court and hence their true value are never known and for which he was no doubt entirely to blame, but even on the Wife’s rough estimation and by drawing inference adversely against him in respect of those 2 properties, the Husband’s share of the remaining assets cannot in my estimation be less than what the Wife is to get, and may in fact probably be more.

103. In conclusion and for all the reasons discussed above, I am convinced that fairness between the parties would be achieved by having the former matrimonial home transferred to the Wife upon the discharge of the existing mortgage by the Husband who is to continue to be responsible for its monthly instalment until its full discharge, while he is to keep the rest of the assets in full and final settlement of all their financial claims against each other save and except for the Wife’s claim for periodical payment, for which the Husband shall pay her a monthly sum of HK$5,000 to meet her future living expenses.” 

10.  Accordingly, the Judge ordered:

(1) The petitioner to continue to pay the monthly instalment of the mortgage over the Matrimonial Home until its discharge, whereupon he shall transfer his share and interest in the property to the respondent at his costs and expenses;

(2) The petitioner to pay the respondent monthly maintenance in the sum of HK$5,000 until she dies or remarries or until further order of the court; and

(3) On a nisi basis, the petitioner to pay the respondent her costs of and incidental to the ancillary relief proceedings to be taxed if not agreed.   

The appeal

11.  The issues with which this appeal is concerned all relate to the Judge’s finding that the petitioner had failed to make full and frank disclosure of his interests in the Properties and the adverse inferences that the Judge drew against him.  The grounds of appeal which the petitioner was given leave to argue are:

(1) The Judge erred in law and on the evidence to draw adverse inference against the petitioner that he was the beneficial owner of the Properties.

(2) The Judge erred in law and on the evidence to draw adverse inference against the petitioner that the Properties together probably worth as much as what the respondent has alleged, namely, RMB 2.6 million, or more.

(3) The Judge erred in law and on the evidence to accept the respondent’s hearsay evidence over the delivery notes concerning the Properties (see §§14 and 15 below).

Discussion  

12.  The Judge found that the petitioner was the beneficial owner of the Properties.  In respect of the Fumin Property, it was registered in the name of a Mr Tang, whom the petitioner accepts is his relative. As to the Lung Kong Property, the petitioner’s case is that the owner, Mr Tze, is his friend.

13.  The respondent’s case is that the petitioner is the beneficial owner of the Fumin Property where he cohabited with a Ms Man from 2008 until August 2011 when they moved to the Lung Kong Property, also owned by the petitioner beneficially.  It is also the respondent’s case that in June and July 2011, the petitioner arranged for decoration work and purchase of furniture for the Lung Kong Property, and that after moving out of the Fumin Property, the petitioner further arranged for redecoration of the Fumin Property and put it up for rent or sale.

14.  In support of her case, the respondent produced in her 3^rd affirmation four delivery notes all addressed to a Mr Lau (the same surname as the petitioner), whom she believed was the petitioner.  One of the delivery notes, which was dated 8 August 2011 (exhibit KY-7, “Fumin delivery note”), was issued by a shop called “深圳市星華衛浴” for delivery to the Fumin Property of materials for decorating a bathroom and the labour charges for installing a toilet and a shower cubicle and furniture.  The other three delivery notes, which were dated 13 and 23 June and 14 July 2011 (exhibit KY-6, “Lung Kong delivery notes”), were issued by a different shop for various building materials to be delivered to an incomplete address in the same building as the Lung Kong Property and charges for installations and renovation.

15.  The respondent’s evidence on how she came by these four delivery notes is this.  In about October 2011, after learning of the petitioner’s cohabitation with Ms Man at the Fumin Property and the property was put up for sale or rent, the respondent visited the property posing as an interested purchaser.  In the course of viewing the property, she recognised some clothing and personal belonging on the property as belonging to the petitioner.  She also saw on a desk the four delivery notes which were being stashed together in a bundle, which she took away secretly.  Later on, she brought the Fumin delivery note to the shop that issued it, pretending to be a neighbour wishing to hire the shop to do decoration for the property and asked to contact the owner.  When the shop staff telephoned the petitioner in her presence, the petitioner gave his address of the Lung Kong Property, as a result of which the respondent came to know the full address of the Lung Kong Property.  The respondent then visited the Lung Kong Property and discovered that it was under renovation.      

16.  Although the petitioner denied having any beneficial interest in the Properties, he accepted he had temporarily resided in the Fumin property for one month, but said he lived there alone for the purpose of helping Mr Tang to oversee the decoration work.  He agreed under cross-examination that the Fumin delivery note was a genuine document and he was the Mr Lau to which it was addressed.  He explained that he took delivery of the items in the delivery note on behalf of Mr Tang.  The petitioner, however, maintained he had nothing to do with the Lung Kong delivery notes, and said he had only gone to the property a few times to see Mr Tze.

17.  The Judge accepted the respondent’s evidence (Judgment §72) and rejected the petitioner’s suggestion that the Lung Kong delivery notes were forged and fabricated by the respondent.  He held that they are genuine documents and the petitioner was the customer to whom they were issued (Judgment §73).

18.  The Judge rejected the petitioner’s evidence that he was merely overseeing the decoration work of the Fumin Property for Mr Tang, and that the Lung Kong Property belonged to Mr Tze (Judgment §§74 and 75).

19.  In respect of the Lung Kong Property, in addition to noting the petitioner’s prevarications under cross-examination, the Judge pointed out that there could be no credible reason for the Lung Kong delivery notes to be found among the petitioner’s belongings if he had nothing to do with the property (Judgment §75).  The Judge (at Judgment §79) further referred to the respondent’s evidence, which he accepted, that the Lung Kong delivery notes were put in a bundle together with the Fumin delivery note, and held that the only logical conclusion in the circumstances was that the petitioner was also the customer to whom the Lung Kong delivery notes were addressed.  The Judge also had regard to the content in the Lung Kong delivery notes and concluded that the decoration work undertaken was inconsistent with what a tenant would have undertaken (at Judgment §§77 and 78).  He therefore ruled out the possibility (which as he noted was never the petitioner’s case) that the petitioner was a tenant in the property.  The Judge held that the inference was that the petitioner was the beneficial owner of the Lung Kong Property and that he had been concealing his interest with a view to mislead the respondent and the court.      

20.  In our view, there is no proper basis to interfere with the Judge’s findings on the credibility of the parties.  Having read the transcript of their evidence and considering the reasoning given by the Judge, we see no ground for faulting his acceptance of the respondent’s evidence and rejection of the petitioner’s evidence.  The Judge had the advantage of seeing and listening to the parties, and was in the best position to determine their credibility.

21.  Ms Wong for the petitioner argued that the Judge erred in acting on hearsay and inadmissible evidence of the respondent, namely, (i) The respondent overheard a conversation between Ms Man (whom she believed was the petitioner’s girlfriend) and an estate agent in which Ms Man mentioned that the petitioner intended to sell the Fumin Property and to move to the Lung Kong Property; (ii) The respondent’s visit to the Fumin Property where she saw personal items belonging to the petitioner and discovered the four delivery notes; (iii) The respondent’s conversation with the shop staff through which she came to know the petitioner should be the owner of the Lung Kong Property; and (iv) Two forms bearing the heading “家家順二手房買賣按揭過戶稅費表” with the contents manually filled in, based on which the respondent contended that the Properties worth RMB 2.6 million in total.  This last piece of evidence was relevant to the Judge’s finding of the value of the Properties (see §9(6) above).

22.  Ms Wong referred to sections 47 and 49 of the Evidence Ordinance, Cap. 8 and argued that the above hearsay evidence was inadmissible and/or should not be acted upon because the content was equivocal and the makers were either unknown or not called to testify.

23.  We disagree.  Firstly, whether to receive hearsay evidence and the weight to be attached to the evidence are matters within the trial judge’s discretion.  The appellate court will not interfere unless it can be demonstrated that the trial judge has gone plainly wrong.  We are not satisfied that this is the case. 

24.  Secondly, the hearsay evidence complained of only set the background to the respondent’s case.  The crucial evidence on the issue of the beneficial ownership of the two properties is the respondent’s oral evidence and the four delivery notes.  There is no dispute that the Fumin delivery note is a genuine document issued to and received by the petitioner.  The evidence on the conversation that the respondent overheard and her visit to the Fumin Property posing as potential purchaser was mere background explaining how the respondent came to have the four delivery notes. 

25.  Thirdly, what the respondent saw and did during the visits she made to the Properties is not hearsay evidence.  Her evidence in this regard was accepted by the Judge, including her evidence that the four delivery notes were found from the Kumin Property stapled together in a bundle.  For the reasons given by the Judge, he was entitled to find the Lung Kong delivery notes to be genuine documents (Judgment §72).  He was also entitled to infer that the petitioner was the Mr Lau to whom the Lung Kong delivery notes were issued, and to reject the petitioner’s account that he had no interest in the Lung Kong Property.  In the circumstances, what the shop staff told the respondent about the owner of the Lung Kong Property only served to reinforce the respondent’s case. 

26.  In our view, even without regard to the hearsay evidence complained of by Ms Wong, it was open to the Judge to conclude on the evidence in the case that the petitioner had an interest in the Properties and that he had not been frank with the respondent and the court as to the true position of his financial resources. 

27.  On the issue of the value of the Properties, the Judge, while accepting that the two forms produced by the respondent (see §21(iv) above) fell short of a proper expert report, noted that it would be difficult if not impossible for her to obtain a proper valuation report when the petitioner denied having any interest in the properties and she therefore could not gain access to the Properties for the purpose of valuation.  The Judge was of the view that “any unfairness occasioned by the court’s necessarily imprecise assessment of the extent of the [petitioner’s] interest in that property as a result of his failure to make proper disclosure should fall on him” (Judgment §82).

28.  The Judge went on to consider a number of authorities: J v. J [1955] P215, F v. F [1994] 1 FLR 359, Baker v. Baker [1995] 2 FLR 829 and Al-Khatib v. Masry [2002] 1 FLR 1053.  Applying the principles stated in them, the Judge concluded that adverse inference should be drawn against the petitioner and that given his failure to make full and frank disclose in relation to the Properties, it was to be inferred that they were of significant value and together probably worth more than RMB 2.6 million, as asserted by the respondent (Judgment §89).

29.  We have, for reasons stated above, concluded that the Judge was justified in finding on the evidence that the petitioner had beneficial interest in the Properties, which he concealed from the respondent and the court.  Given the petitioner’s failure to make full and frank disclosure of his financial resources, the Judge was further entitled in law to draw adverse inferences against him on the value of the Properties.  Even without the two forms adduced by the respondent, objectively speaking it cannot be seriously disputed that the Properties are of substantial value.  As the Judge had observed, had it not been the case, the respondent would not have to conceal from the respondent his interest in the Properties.  The Judge was alert to the fact that the valuation evidence adduced by the respondent was not entirely satisfactory, but he noted the difficulties the respondent had in producing a full expert valuation report.  Although the handwritten information in the two forms were hearsay in nature, we do not consider the Judge could be said to be plainly wrong in receiving them into evidence and to give weight to the documents.    

Disposition

30.  For the reasons given above, there is no merit in the petitioner’s grounds of appeal.  We have accordingly dismissed the appeal and ordered the petitioner to pay the respondent’s costs of the appeal, which we summarily assessed at $500.             

Other matters

31.  Before leaving this judgment, we wish to draw attention to two matters of practice and procedure. The first relates to service of notice of appeal outside jurisdiction. The respondent in this case is resident in Shenzhen. The notice of appeal was sent to her address in Shenzhen by ordinary post.  This is irregular.  Order 59 rule 3(1) of The Rules of the High Court, Cap. 4A provides that appeals to the Court of Appeal must be brought by motion, and the notice of motion is referred to as notice of appeal.  Order 11 rule 9(1) and (7) extend the application of Order 11 rules 1 and 5A to a notice of motion.  Accordingly, the court’s leave is required to serve a notice of appeal outside jurisdiction: see also Hong Kong Civil Procedure 2017 Vol.1 para.59/3/14.  In the case of service of a notice of appeal on a party in mainland China, the procedure prescribed in Order 11 rule 5A must be followed.

32.  The second matter relates to the preparation of appeal bundles.  It is the duty of all litigants and their legal representatives to familiarize themselves with, and to follow closely, the requirements set out in Practice Direction 4.1 section F (formerly section E).  These include placing the page numbers at the bottom right-hand corner, not the top of the pages, and putting transcripts in separate bundles.  As in this case, these requirements are often neglected.  Practitioners in particular should bear in mind that failure to observe the Practice Direction could result in costs sanction, including an order disallowing them the costs for preparing the bundles not only inter partes but only between solicitors and own clients.