MELCO CROWN GAMING (MACAU) LTD v. WONG YAM TAK

HCA 238/2013

ACTION NO 238 OF 2013

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JUDGMENT

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Introduction

1.  Melco Crown Gaming (Macau) Limited (“Melco”) is a judgment creditor of Mr Wong. Melco obtained a charging order nisi on 24 May 2013 (“the Charging Order nisi”) over a property registered in the sole name of Mr Wong (“the Property”). Madam Lam is the ex-wife of Mr Wong and she has intervened in these proceedings to discharge the Charging Order nisi claiming that she is the sole beneficial owner of the Property.

2.  This court is seized with three matters arising the disputes among the parties. First, as directed by the order of Master K. Lo dated 8 May 2015, there is a trial on the specific issue as to the beneficial interest in the Property of Mr Wong and/or Madam Lam, if any.

3.  Second, I have to dispose of a notice to show cause made on 24 May 2013 by Master Li (“the Notice”). Melco applies to make the Charging Order nisi absolute.

4.  Third, I am faced with Madam Lam’s application to be added as a party to these proceedings to discharge the Charging Order nisi.

5.  Madam Lam has attended the hearing and got ready to testify and be cross-examined. On the other hand, Mr Wong did not turn up.

Background facts leading to this hearing

6.  I first give a brief account of the background facts based on uncontroversial evidence and the circumstances under which the Charging Order nisi came into being.

7.  Madam Lam married Mr Wong in 1968 and their marriage was dissolved in 2013. Both of them are now in their mid-seventies. They have a daughter born in 1976 (“the Daughter”).        

8.  The Property is known as Ground Floor, The Tai On, 163 Kau Pui Lung Road, Kowloon, Hong Kong. The Tai On Co-operative Building Society Limited (“the Building Society”) was the first registered owner of the Property. Apparently the Building Society was a corporate vehicle whereby the Property was acquired and held to provide accommodation to civil servants.

9.  As evidenced by a letter dated 1 March 1976 of the Building Society, Mr Wong replaced one Mr Cheung to be a member of the Building Society and Mr Wong was required to make certain capital payments. Mr Wong then worked as a general clerical staff with the government.

10.  By virtue of his membership subscription, Mr Wong started his occupation of the Property with Madam Lam as their matrimonial home. Now Madam Lam resides alone at the Property.

11.  On 28 February 2008, by an assignment (“the Assignment”) executed by the liquidator of the Building Society in favour of Mr Wong upon his payment of HK$1,000 to the government as premium, Mr Wong became the sole registered owner of the Property.

12.  On 6 February 2013, Melco commenced this action against Mr Wong to recover his gambling debts.

13.  On 7 February 2013, the very next day, Mr Wong filed a petition for divorce to dissolve his marriage with Madam Lam under FCMC 1776/2013 (“the Matrimonial Proceedings”).

14.  On 8 February 2013, Mr Wong and Madam Lam signed a consent summons (“the 1^st Consent Summons”) which was subsequently filed on 21 February 2013 in the Matrimonial Proceedings.

15.  By the 1^st Consent Summons, Mr Wong and Madam Lam agreed that their marriage should be dissolved with no order as to costs and Mr Wong should transfer the title to the Property to Madam Lam.

16.  On 18 April 2013, they signed another consent summons (“the 2^nd Consent Summons”) in similar terms and to supersede the 1^st Consent Summons.

17.  On 13 May 2013, Melco obtained default judgment herein against Mr Wong for the sum of HK$4,954,280 with interest and costs.

18.  On 24 May 2013, Melco obtained a charging order nisi against Mr Wong’s interest in the Property (“the Charging Order nisi”).

19.  On 25 June 2013, Mr Wong took out a summons to set aside the default judgment.

20.  On 4 July 2013, an order was made in terms of the 2^nd Consent Summons in the Matrimonial Proceedings (“the Consent Order”).  By the Consent Order, Mr Wong should transfer the title to the Property to Madam Lam within 3 months after the decree absolute is made.

21.  On 6 November 2013, Mr Wong took out another summons to discharge the Charging Order nisi.

22.  On 7 May 2014, Mr Justice To dismissed both applications of Mr Wong.

23.  On 5 August 2014, Madam Lam applied to intervene in these proceedings and by consent she was added as an intervener on 4 September 2014.

24.  On 23 April 2015, Madam Lam issued a summons to discharge the Charging Order nisi.

Beneficial ownership of the Property

25.  I shall first determine the beneficial ownership of the Property. Madam Lam claims that she is the sole beneficial owner of the Property. She has filed three short affidavits and testified in court. Mr Wong has done nothing to support her contention even though he was represented by the same firm of solicitors.

26.  Madam Lam’s evidence can be summarised as follows. She worked as a registered nurse from 1965 to 2000 and she has retired for a long time. Her last salary was about HK$31,000. She always earned more than Mr Wong and has been financially better off.

27.  Prior to their habitation in the Property in 1976, they rented a flat as their matrimonial home. They pooled their savings together to pay Mr Cheung a sum of HK$93,000 to subscribe the membership of the Building Society so as to acquire the Property. She claims that she paid HK$60,000 and Mr Wong paid about HK$30,000. She further paid the renovation expense of about HK$20,000.

28.  Madam Lam finds Mr Wong to be an irresponsible husband throughout with compulsive gambling habits. From 1976 to 2009, when the Daughter resided at the Property before her marriage, Madam Lam paid at least 50% of all household expenses, including provisions made to the Daughter.

29.  Madam Lam further says that during 2002 to 2004 and 2007 to 2013 when Mr Wong’s business in the Mainland was bad, she paid all the household expenses.

30.  Indeed, Mr Wong moved out from the Property in 2005 leaving behind the Daughter and Madam Lam. She always wanted a divorce.

31.  She explained that it was her understanding that the Property was subject to transfer restrictions and could only be assigned to a non civil servant with hefty payment of premiums. She asserted the common understanding of Mr Wong and she was all along that she was the sole beneficial owner of the Property.

32.  Under cross-examination she claimed that Mr Wong always told her expressly that the Property belonged to her entirely. He did so even before his subscription of the membership of the Building Society.

33.  As regards her divorce, she claimed that she asked the Daughter to look for a lawyer to commence divorce proceedings to protect her financial position when she knew that Mr Wong was being sued. When pointed out to her that Mr Wong and not she was the petitioner in the Matrimonial Proceedings, she explained that her legs were weak and not so mobile after an operation and so she asked Mr Wong to commence the Matrimonial Proceedings with the assistance of the lawyers recommended by the Daughter, which were Messrs Yeong & Co. (“Y & C”).

34.  She accepted that she knew that Mr Wong was sued in mid 2013. The Daughter assisted Mr Wong throughout in this action. She paid for his legal representation too. Though Madam Lam denied any knowledge about the Charging Order nisi, she learnt from the Daughter that the present action concerned the Property as well.

35.  On the issue of the beneficial ownership of the Property, I have little difficulties in coming to the conclusion that Mr Wong and Madam Lam are equal owners and I do not accept the allegation of the common understanding between Madam Lam and Mr Wong for the following reasons.

36.  First, it was the first property that Mr Wong and Madam Lam purchased as their matrimonial home. Both of them contributed to the purchase price in 1976 and each of them had a stable job. Though I understand only Mr Wong could become a member of the Building Society (Madam Lam was a registered nurse at a private hospital), I cannot accept that Mr Wong intended himself to be a mere nominee holding the Property on trust for Madam Lam. He never said so in his evidence filed in his failed application to set aside the Charging Order nisi.

37.  Second, when the Property was formally assigned to Mr Wong under his sole name in 2008, Madam Wong should know very well about Mr Wong’s vice habits. She said he was always in debt. He actually had already moved out of the Property and was carrying on an unsuccessful business in Mainland China. Factually she had already separated from him according to her own version. Though I may accept that she wanted to avoid premium payments and so she did not ask the Property to be assigned to her outright, at the very least she should do something to safeguard or demonstrate her sole beneficial ownership of the Property (such as demand of a written acknowledgement by Mr Wong /a declaration of trust) if all along it was the mutual understanding that she was the real owner. Her complete inaction under those circumstances negatives the alleged common understanding in my view.

38.  Moreover, it should be noted that the 1^st and 2^nd Consent Summonses and the Consent Order were all prepared by Y & C and they were recommended by the Daughter to Madam Lam to take care of her interest in light of the present action. There is no reason why the true picture was not shown and there was no mention about her alleged sole beneficial interest in the Property in all those documents. Instead on the face of such documents, Mr Wong had the entire interest in the Property.

39.  On the other hand, I have no hesitation in rejecting Madam Lam’s allegation that Mr Wong repeatedly told her that she was the sole owner of the Property. As rightly pointed out by Mr Chan, counsel for Melco, this highly relevant allegation is nowhere to be found in her three affidavits and only emerged for the first time in cross-examination.

40.  To my mind, the Property was clearly the family asset of Mr Wong and Madam Lam. It is the only property that they acquired during their marriage. It had long been their matrimonial home. I accept that both of them have contributed to its purchase monies and upkeep and other household expenses though Madam Lam could not produce any documentary evidence of her payments.  I believe she was responsible to her family.

41.  I am hence of the firm view that, on balance, each of them should have half share of the Property.

42.  Mr Lam, together with Mr Derek JY Chan, appearing for Madam Lam, relies heavily on Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985 to advance the claim of Madam Lam based on common intention constructive trust. However, my factual findings make this case a very different one.

The Consent Order

43.  In the first place, I accept the submission of Mr Chan that since the Charging Order nisi was made and registered prior to the Consent Order, if this court is minded to make it absolute, it would take effect from the date of its creation. It follows that the Consent Order made in the interval cannot defeat or undermine the Charging Order nisi: Brereton v Edwards (1888) 21 Q.B.D. 488.

44.  Indeed, as Fox LJ said in Harman v Glencross [1986] Fam. 81 (CA) at p.103G, if a charging order is made, any subsequent order for the transfer of property made in the matrimonial proceedings will be subject to it.

45.  The Consent Order at one stage caused me some concern as to whether it has any effect on my determination of the parties’ respective beneficial interest in the Property. In light of the foregoing, I have little doubt about the relationship between the Charging Order nisi and the Consent Order.

46.  However, Mr Chan suggests a different course in his written closing submission. He submits that unless and until the Consent Order has been set aside or amended, my determination of the beneficial interest in the Property may be academic. He therefore urges this court to remit this matter to the Family Court for determination.

47.  This latest submission of Mr Chan does not sit well with the legal principles he has highlighted to this court. I cannot agree with him. The Consent Order cannot have the immediate effect of transferring Mr Wong’s beneficial interest in the Property to Madam Lam. It is still subject to the Charging Order nisi if made absolute eventually. Thus, my determination of the beneficial ownership of Mr Wong will shed light on the extent of the parties’ respective beneficial interest in the Property and hence how much should be charged by the Charging Order nisi.

Whether the Charging Order nisi should be made absolute or be set aside?

48.  Both parties place reliance on, at different stages, the usual practice as stated by Sakhrani J in Chan Ting Wai William v Lam Sai Pak & Anor [1999] 1 HKC 843 at pp.845I to 846. The relevant passage in that authority is as follows:

“It is also stated there (para.22.35.1 of Jackson’s Matrimonial Finance and Taxation) that if the charging order nisi has been made after the spouse’s petition for divorce, then the court should consider whether the circumstances are such that it is proper to make a charging order absolute before the spouse’s application for ancillary relief has been heard. The usual practice would be to transfer the application for the charging order to the court deciding the issue of ancillary relief. The authority in support of that proposition is Harman v Glencross [1986] Fam. 81. It was held there, inter alia, that where the order nisi has been made after the wife’s petition, the court should consider whether it is proper to make the order absolute, even before the wife’s application for ancillary relief has been heard. The usual practice should be to transfer the application to the Family Division to come on together with the application for ancillary relief so that one court can consider all the circumstances of the case.

     That seems to me to be a sensible course.  The court, of course, has a discretion whether or not to make a charging order either nisi or absolute and before it does so, it should consider all the circumstances of the case including circumstances of any other creditor and more particularly, the position of the spouse of the judgment debtor requires separate consideration.”

49.  In the present case, the Charging Order nisi was made after the divorce petition. However, as the matter now stands, the Matrimonial proceedings have already been concluded and there is no outstanding application for ancillary relief for the Family Court to deal with. More importantly, given the unequivocal evidence of Madam Lam about her long-term financial independence and the poor financial condition of Mr Wong, I do think Madam Lam will ask for any ancillary relief against Mr Wong for herself and/or the Daughter. I believe I am in a position to consider all the circumstances of Mr Wong and Madam Lam here so as to exercise my discretion whether or not to make the Charging Order nisi absolute. I see no reason why I should transfer the parties’ applications in respect of the Charging Order nisi to the Family Court thereby incurring more costs.

50.  Section 20(3) of the High Court Ordinance, Cap. 4 provides:

“(3) In deciding whether to make a charging order the Court of First Instance shall consider all the circumstances of the case and, in particular, any evidence before it as to –

(a) the personal circumstances of the debtor; and

(b) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.”      

51.  This provision is modelled on section 1(5) of the Charging Orders Act 1979, which the English Court of Appeal considered the in some detail in Kresmen v Agrest [2013] EWCA Civ 41. The following dictum of Lord Justice Moore-Bick (at §§11 to 13) is apposite:

“11. In cases where the available assets are insufficient to satisfy both the financial claims of one former spouse (usually the wife) and the debts of the other (usually the husband) a conflict arises between the interests of the claimant and those of the creditors. The conflict is all the more acute when a creditor has obtained a judgment which, in the ordinary way, he could expect to enforce by means of a charging order. This question was considered at some length in Harman v Glencross [1986] Fam 81, on which Mr Feehan QC placed a good deal of reliance. In that case the sole asset available to satisfy the claims of the wife and those of the judgment creditor was the former matrimonial home. Without a charging order the judgment creditor was unlikely to recover anything, but if a charging order were made in this favour, the remaining assets would be insufficient to provide a home for the wife and children. The court held that in such cases it was necessary to strike a balance between the normal expectation of a judgment creditor that an order would be made to enforce his judgment and the hardship that such an order would entail to the wife and children. In a passage at page 97, to which Mr Feehan particularly drew our attention, Balcombe LJ said:-

“… unless the transfer of the husband’s share in the house to the wife is necessary to give her adequate protection so that she may have a home for herself and the children, it is difficult to see why the judgment creditor’s undoubted rights should not take preference to the wife’s claim to a transfer of property order.”

12. Later, at page 99 he said:-

“When considering the circumstances, the approach of the court should be to recall the statement of Sir Denys Buckley in the Hegerty case [1985] QB 850, 866, that a judgment creditor is justified in expecting that a charging order over the husband’s beneficial interest in the matrimonial home will be made in his favour.  The court should first consider whether the value of the equity in the house is sufficient to enable the charging order to be made absolute and realised at once, as in Llewellin v Llewellin (unreported), even though that may result in the wife and children being housed at a lower standard than they might reasonably have expected had only the husband’s interests been taken into account against them.  Failing that, the court should make only such order as may be necessary to protect the wife’s right to occupy (with the children where appropriate) the matrimonial home.  The normal course should then be to postpone the sale of the house for such period only as may be requisite to protect the right of occupation – a Mesher type of order – again bearing in mind that the court is holding the balance, not between the wife and the husband, but between the wife and the judgment creditor.  If the judgment creditor asks, even in the alternative to his claim to an immediate order, for a Mesher type of order, then it seems to me that it would require exceptional circumstances before the court should make an order for the outright transfer of the husband’s share in the house to the wife, thereby leaving nothing on which the judgment creditor’s charging order can bite, even in the future.”

13. These passages support the conclusion that when striking a balance between the interests of the judgment creditor and those of the wife, the interests of the judgment creditor should be respected, save to the extent that it is necessary to override them in order to make appropriate provision for the wife and any minor children.  In some cases that can be achieved by an order postponing the sale of the property (usually known as a Mesher order – see Mesher v Mesher and Hall [1980] 1 All ER 126), or in a more extreme case by withholding a charging order altogether and transferring the husband’s interest to the wife free of any encumbrance.  However, each case depends on its own facts.  As Waite J observed in Austin-Fell v Austin-Fell [1990] Fam 172, there can never be automatic predominance for any claim; each case depends upon striking a fair balance between the normal expectations of the judgment creditor and the hardship to the wife and children if a charging order is made.  In some cases justice to the creditor will demand that the wife accept a degree of provision that in other circumstances would have been regarded as inadequate.”

52.  Bearing these wise words of Lord Justice Moore-Bick in mind, I proceed to examine all the circumstances of this matter and strive to strike a balance between the interests of Melco and those of Madam Lam.

53.  It does not appear that Mr Wong is able to meet the judgment debt or any part of it and his only asset appears to be his half share of the Property. In other words, Melco only has Mr Wong’s beneficial interest in the Property to lay its hands on.

54.  On the other hand, the essential needs of Madam Lam should be identified. Her evidence is that Mr Wong has never supported her financially. The Daughter is financially independent too. It is clear that she wants to retain the Property as her residence for the rest of her life.

55.  There is no evidence as to the market price of the Property and how much premium payments that Mr Wong is required to pay in case of a sale. This court has no idea how much Madam Lam’s share in the net proceed amounts to and cannot form any view as to whether alternative accommodation by the use of such a share is a viable idea.

56.  I note that in her evidence she opposes the Charging Order nisi on the sole ground that she is the actual beneficial owner of the Property. She does not allege any financial difficulties though she once mentioned that she has limited financial means. She does not say that if a charging order absolute is made, she will suffer any hardship.

57.  Further, since I find that Madam Lam is one of the equal beneficial owners, Melco can hardly proceed to commence Order 88 proceedings to obtain an order for sale of the Property. At most, Melco may apply for the appointment of a receiver to receive the income or profit attributable to beneficial interest of Mr Wong in the Property by way of equitable execution: per Lam J (as he then was) in Chan Chui Mee v Mak Chi Choi Nelson & Ors [2009] 1 HKLRD 343 at §14(b). See also: Chan Ching Kit Katherine v Lam Sik Shi, unreported, HCMP 2239 of 2000, 24 June 2002, Kwan J (as she then was) and Fortis Bank v Yu Kam Hoi, unreported, HCMP 134 of 2002, 4 March 2004, Reyes J.

58.  Hence, it is most likely that the Charging Order nisi will remain a security over the half share of Mr Wong of the Property even if it is made absolute and Madam Lam can still remain in exclusive occupation of the Property.

59.  In the circumstances, I am of the view that a fair balance can be struck by making a charging order absolute over the half beneficial interest of Mr Wong in the Property. The normal expectation of the judgment creditor can be met whereas no apparent serious hardship is caused to Madam Lam. I shall accordingly make an order to such an effect.

Conclusion and Order

60.  On the issue of the beneficial ownership, I rule that both Mr Wong and Madam Lam are equal beneficial owners of the Property.

61.  I refuse to discharge the Charging Order nisi. On the contrary, I make a charging order absolute over Mr Wong’s half share of the beneficial interest in the Property in favour of Melco.

62.  Madam Lam has to intervene so as to establish her beneficial interest in the Property, which Melco denies and Mr Wong never mentions. So her intervention and this trial of the specific issue are necessary and to a certain extent she has succeeded. However she has failed to persuade me that the Charging Order nisi should be discharged.

63.  As between Melco and Madam Lam, a fair costs order in respect of her summons dated 23 April 2015 should be no order as to costs.

64.  As between Melco and Mr Wong, the latter did not take part in the trial at all and so no issue of costs arises. However, Melco has to come to this court to obtain the charging order absolute over his half share of the Property in any event. I see no reason why Mr Wong should not be required to pay Melco costs of its application. I thus order that

Mr Wong should pay Melco its costs of its application, to be taxed if not agreed.