LCC v. LTLA

HCMC 4/2019

[2022] HKCFI 3127

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSES NO 4 OF 2019

(Transferred from FCMC No 10000 of 2017)

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DECISION

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Introduction

1.  This is the Husband’s application for stay of execution pending appeal against the final judgment on ancillary relief given on 24 June 2022, requiring him to pay a lump sum of HK$292 million to the Wife according to a time schedule (“AR Order”).

2.  The intended appeal seeks to

(i)  reduce the quantum of the lump sum to a range of about HK$181 million to HK$197 million;

(ii)  change the schedule of payment, overall extending it by 15 months;

(iii)  have the Wife transfer 3 more companies to him; and

(iv)  require the Wife do forthwith vacate registration of Forms A against all landed properties to be sold.

3.  The Husband intends to adduce new evidence of drop in property prices by about 9% since the date of trial. He relies on the 5^th wave of the pandemic which happened 3 months after conclusion of the trial, and the recent increase in US interest rates to a new high post-trial.

4.  The application for stay of execution seeks the Court’s relief to allow the Husband to make payments in line with what he seeks in the appeal.

5.  The Wife opposes the application. She submits that the Husband’s appeal is hopeless. In any case, if the Husband is successful in the appeal, he can only reduce the amount payable to the Wife. The appeal will not be rendered nugatory as the Wife can always pay him back any surplus amount. If the real issue is the lack of cash, at most the Husband should be seeking an extension of time and not a stay of execution.

Legal principles

6.  The principles governing an application for stay pending appeal are well settled and summarized in Ng Yuk Pui Kelly v Dung Wai Man and ors, [2021] HKCA 134, §8:

(a)  The applicant must show an arguable ground of appeal (viz. one with reasonable prospect of success) before the discretion to grant a stay is engaged;

(b)  Even if arguable grounds exist, there must be other circumstances justifying the deprivation of the successful party of the fruit of the judgment, such as strong grounds of appeal or that the appeal would be rendered nugatory if no stay is granted. In either case, the court must also have regard to the prejudice that could be suffered by the successful party if a stay is granted. In all cases where the discretion is engaged, ultimately it is a balancing process with common sense; and

(c)  A broad bush approach should be adopted in assessing the strength of the appeal for the purpose of a stay application.

Intended grounds of appeal

7.  The Husband submits that there are strong grounds for an appeal which would justify the stay. The 9 grounds of appeal can be classified into the following limbs:

(1)  Size of the Lump Sum Ground (Grounds 1, 4 -7);

(2)  Mechanism for Payment Ground (Grounds 2 and 3);

(3)  Vacation of Registration Ground (Ground 8);

(4)  Transfer of Companies Ground (Ground 8); and

(5)  Equalization Ground (Ground 9).

8.  For the purpose of the stay application, I am satisfied that the Husband has diligently tried to monetize the assets. Neither he nor the Wife have reason to delay the monetization.

Size of the Lump Sum Ground (Grounds 1, 4 -7)

9.  This Ground is directed towards this Court’s notional add-back of the Husband’s huge gambling loss of HK$96.6 million to the matrimonial pot. It is an appeal against finding of facts that the Husband’s gambling loss was wanton, unjustified dissipation and was of a different nature from the social gambling of the Wife (Judgment §§114, 116, 121, 123, 147). It is well established that the Court of Appeal would be slow to interfere with such a decision.

10.  Ms Yip SC and Ms Yu submits that the Husband could not have gambled away HK$96.6 million, an amount which exceeded the SEHL loans that were unaccounted for. This point is simply unarguable. The gambling loss represented the Husband’s net deposits to the casinos (Judgment §13). He had received cash of at least HK$81 million from companies (Judgment §§135, 148, 151, 171). In any case, the Husband had been given the opportunity to explain at the trial.

11.  Whilst a court sometimes has to estimate the gambling loss because the gambling habit has lasted for years and concrete evidence is lacking, the findings in the present case were based on figures established by documentary evidence. Opportunities had been given to the Husband to explain but he failed to answer questionnaires and gave explanations under cross-examination that were found to be incredible.

12.  The submission of Ms Yip that this Court erred in rejecting that there were cash transactions outside the bank accounts is equally not evidence-based. The submission overlooks the fact that there being cash transactions was only first raised by the Husband’s then counsel in the opening submission, which counsel failed to make good after trial (Judgment §§132-147).

13.  Accordingly, any “correct approach” suggested by the Husband in reckoning the amount to be added back to the matrimonial pot is arbitrary.

14.  I am not satisfied that the Size of the Lump Sum Ground has prospect of success.

Mechanism for Payment Ground (Grounds 2 and 3)

15.  Ms Yip submits that this Court “penalized” the Husband by asking him to single-handedly shoulder the risks, costs, incidence of loss and stamp duties in the monetization process. The value of properties has dropped by about HK$43 million since the time of the agreed Schedule of Joint Assets and Liabilities (as of 14 July 2021) (“Agreed Schedule”) representing about 9% of the matrimonial pot. The Court of Appeal is invited to take judicial notice that the property market has dropped significantly, caught in a downward trend and has become inactive. The timeline for payment of the lump sum was extremely tight under the AR Order. The Court went against the Wife’s own proposal of using the transfer of House 15 towards satisfaction of the first tranche of the lump sum.

16.  With respect to Ms Yip and to set the record straight:

(1)  The parties’ common view at the trial was that the Wife should receive a lump sum. In his opening submission, the Husband himself offered to pay 40% of the matrimonial pot, ie HK$200 million comprising the matrimonial home valued at HK$26.16 million;

(2)  Any drop in property value was already reflected in the updated Agreed Schedule but there was no evidence of what further drop was anticipated;

(3)  The onset of the 5^th wave of the pandemic (relied on in Ms Yip’s written submission) and increase in interest rate in the USA were not put forth in any party’s submission at the trial;

(4)  It was the parties’ common view that the task of monetizing assets to meet the lump sum order should be given to the Husband who had always been in charge of the family finance. In fact, monetizing of assets has started before the trial, eg Mei Foo Sun Chuen property was sold; and

(5)  During the closing submission, there had been considerable discussion of the schedule for payment of the lump sum, terms of the order and undertakings. Therefore, it is erroneous for Ms Yip (who is new to the case) to simply point to a paragraph in the closing submission of a party to say that he/she has proposed something or undertaken something. In fact, one of the undertakings of the Husband was to procure SEHL to transfer House 15 to the Wife free of encumbrance on the date of payment of the last instalment of the lump sum.

17.  At the end of the trial, this Court already told the Husband to start monetizing and expressly stated that he would be given 18 months to do so, counting the time before handing down of the judgment. That was merely asking him to continue what he had already started, but with a time frame in mind. There was therefore no issue of the Court “penalizing” the Husband with a task faced with risks and pressurizing him as to time.

18.  The Judgment devoted 7 paragraphs (§§179-185), under Step 5 of LKW v DD to address the issue of the Wife taking the copper-bottomed assets whilst the Husband would have to monetize illiquid and risk-laden assets.

19.  There was no evidence on the transactional costs for disposing of the assets. This Court had to apply a common sense approach to anticipate the potential costs (Judgment §183). On the Wife’s own case in §10 of the Grounds of Appeal, the transactional costs in selling the assets are estimated at HK$3,000,000 plus stamp duty of HK$667,561. This would have been adequately covered by the 1% departure from equality representing HK$5.87 million. (Judgment §§183, 190)

20.  The rest of §10 of Grounds of Appeal relies on the HK$43 million drop in property value which was unknown at the trial.

21.  Accordingly, I am not satisfied that the Mechanism of Payment Ground is arguable.

Vacation of Registration Ground (Ground 8)

22.  It is said that the Wife has refused to vacate registration of the Forms A against the properties to be sold. That has seriously disturbed the sale of the properties and has contributed to the price-drop.

23.  With respect, vacation of registration was not an order sought by the Husband nor an undertaking given by the Wife at the trial and I fail to see how there can be an appeal on this Ground.

24.  Moreover, the Husband claims that the Wife failed to vacate registration whilst the Wife claims that she was willing to vacate on terms to prevent the Husband from using the proceeds of sale for his own purpose instead of meeting the AR Order. Their contentions reveal that vacating registration should be a consequential order to facilitate implementation of the AR Order and should more appropriately be dealt with by the trial judge.

25.  I am not satisfied that there is reasonable prospect of success in the appeal on the Vacation of Registration Ground.

Transfer of Companies Ground (Ground 8)

26.  It has never been the Wife’s intention to hold onto any shares. At the trial, Mr Man SC gave the Court a list of companies to be transferred for inclusion into the AR Order. There was no comment from the Husband’s side that the list was incomplete. Judgment §192(4) expressly invited the parties to set out the companies in the AR Order for the sake of clarity. I do not see why clarification could not be made and have the AR Order amended to include the 3 further companies in the list instead of appealing.

27.  The Husband himself asked for transfer to him of all the Wife’s shares in the companies jointly held with him although the time frame was 28 days whereas the Court imposed some conditions. The final order on transfer was reached after considering both parties’ proposals.

28.  I see no reasonable prospect of success on this Ground. In any case, failure to transfer 3 companies on the Husband’s proposed terms cannot be a reason for granting stay of execution.

Equalization Ground (Ground 9)

29.  I acknowledge that it should have been stated clearly in the AR Order that the assets in the Wife’s name in the Agreed Schedule (with no add-backs as found by the Court) should be reckoned as part of the lump sum awarded to her. That is because my intentions were clear. The lump sum was arrived at based on the matrimonial pot as found by the Court. The figures in Judgment §§173 and 190 included monies/assets in the Wife’s name.

30.  Judgment §189 was to explain why I asked the Husband to start monetizing and the rationale for a schedule for payment. Without disrespect, it was not my intention (as Mr Man suggests) that since the Husband has had the time value of the lump sum awarded to the Wife for 4 years, therefore the Wife could keep her own monies.

31.  Had the parties sought clarification from me, I would have amended the AR Order under the slip rule. Even if this is a matter that should be corrected only on appeal, it would not justify a stay of execution of the AR Order.

Appeal not rendered nugatory if stay is refused

32.  By way of update, the Husband has managed to sell workshops (one of which was held by the Husband as 50% shareholder) with gross sale proceeds of HK$164,300,000. The expected completion date is 10 January 2023. Although he may be late in compliance, that sale would enable him to almost meet the 2^nd and 3^rd instalments of HK$188 million due in July and October 2022 respectively.

33.  The Wife can always pay back the Husband if the lump sum is reduced on appeal. It is not the case of the Husband on affirmation that the Wife would dissipate the lump sum to a point of no return pending appeal.

34.  The fact that the Husband contends for a different timetable for payment does not mean that the appeal would be rendered nugatory if a stay is refused. If the Husband is successful, he will be spared from paying same interest. Any injustice caused by having the Husband pay too much or too early can be redressed by monetary orders.

35.  Further, I tend to agree with Mr Man that if the Husband does face difficulty of monetization despite his best endeavours, the proper application should be for an extension of time instead of an appeal.

Conclusion

36.  In summary, I am not satisfied that there are reasonable prospects of success in the appeal on any of the Grounds. This is sufficient to dispose of the application. It has also not been shown that the appeal will be rendered nugatory even if no stay is granted. I therefore dismiss the stay application.

37.  On a nisi basis, costs of the stay application shall be to the Wife, summarily assessed at HK$140,000.

38.  I thank counsel for their assistance.