YLHL v. YOWA AND ANOTHER

FCMC 10769/2017

[2020] HKFC 26

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10769 OF 2017

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J U D G M E N T

(S. 17 Application)

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The family background

1.  The 1^st respondent husband (‘the Husband’), aged 89, was born in 1930. The petitioner wife (‘the Wife’), aged 83, was born in 1936. They were married in 1960. The marriage has two children. The 1^st son (‘the 1^st son’) was born in 1961 and the 2^nd son (the 2^nd respondent herein) (‘the 2^nd son’) was born in 1962. The Wife retired as a government pharmacist in 1982 and is living on her pension and savings. The husband retired as a technician at a telephone company in 1989. The parties have lived in a flat situated in Prince Edward Road East (‘the Matrimonial Home’) for the period from about 1991 to 2017. The 1^st son immigrated to Canada in 1994. The 2^nd son was married in 2005 and moved to live in London in 2009. The Husband left the Matrimonial Home in May 2017.

The procedural background

2.  On 18 August 2017, the Wife issued the petition herein on behaviour praying for ancillary reliefs pursuant to ss. 3, 4, 6, 6A and 17 of the Matrimonial Proceedings and Property Ordinance (Cap.192) (‘MPPO’). On 19 March 2018, the Wife issued a summons (‘the 1st summons’) for an order that:

(1)  The 2^nd son be joined in these proceedings.

(2)  The Assignment dated 19 July 2017 in respect of the Matrimonial Home made between the Husband as the vendor and the 2^nd son as the purchaser for the purchase price of HKD4,320,000 be set aside;

(3)  Further or alternatively, the Husband and the 2^nd son do account to the Wife the purchase price, any rental income and rental deposit that they received in respect of the Matrimonial Home since 19 July 2017;

(4)  An injunction restraining the Husband and the 2^nd son from dealing with or otherwise disposing of the Matrimonial Home;

(5)  Costs; and

(6)  Further directions as the court may think fit.

3.  By an order dated 7 May 2018, the 2^nd son was joined as the 2^nd respondent herein.

4.  The Wife issued a summons dated 10 April 2019 (‘the 2^nd summons”) for an order that:

(1)  The following payments, transfers, transactions and withdrawals in the total sum of HKD10,451,695.24 be set aside:

(a)  Cashier order dated 12 December 2014 from the Husband’s bank account with the Bank of East Asia (‘BEA’) to the 2^nd son in the sum of HKD 3 million (‘the 1^st transaction’);

(b)  Cashier order dated 29 January 2015 from the said BEA account to the 2^nd son in the sum of HKD 3.8 million (‘the 2^nd transaction’);

(c)  Online transfer dated 4 January 2017 from the Husband and the 2^nd son’s joint account with HSBC to the 2^nd Son in the sum of HKD281,274.42 (‘the 3^rd transaction’);

(d)  Online transfer dated 15 March 2017 from the said HSBC joint account to the 2^nd son in the sum of HKD2,996,821.14 (‘the 4^th transaction’)’ and

(e)  Online transfer dated 8 August 2017 from the said HSBC joint account to the 2^nd son in the sum of HKD373,599.68 (‘the 5^th transaction’).

(2)  The 2^nd son do pay back the said total sum of HKD10,451,695.24 to the Husband;

(3)  Further directions as the court may think fit.

5.  After a succession of call-over hearings, by an order dated 13 June 2019 the trial of the 1^st and 2^nd summonses was fixed to commence on 2 January 2020, with 3 January 2020 reserved, and a time table for the filing and service of the affirmation evidence, the preparation of Trial Bundles and the parties’ Opening Submissions, etc. was given. A pre-trial-review of the 1^st and 2^nd summonses took place on 18 November 2019.  

6.  The Husband filed the Acknowledge of Service on 12 December 2019, stating that he did not intend to contest the divorce suit.

7.  Despite that solicitors for the Wife have filed 15 affirmations/supplemental affirmations of service providing proof that the 1^st summons and the 1^st Affidavit of the Wife filed on 19 March 2018, the 2^nd summons and the 2^nd affidavit of the Wife filed on 10 April 2019, the divers court orders made upon the hearings of the same, the Trial Bundles and the Wife’s Opening Submissions were served on the 2^nd son by ordinary post/registered post/leaving to/at the 2^nd son’s address for service in Hong Kong, the 2^nd son did not enter an appearance in these proceedings under the 1^st and 2^nd summonses, nor did he file any affirmation evidence or any other court documents in accordance with the court orders or the directions. The 2^nd son sent to the Family Court 8 letters dated 1 August 2018, 11 October 2018, 22 December 2018, 14 May 2019, 5 June 2019, 18 July 2019, 8 November 2019 and 18 December 2019 respectively making assorted complaints about the Wife’s solicitors, the Wife and her siblings. However, he did not appear at any hearings of the 1^st and 2^nd summonses. The 2^nd son was absent on 2 January 2020. After carefully considered all circumstances, I proceeded to hear the trial of the 1^st and 2^nd summonses in his absence.

The Wife’s case

Matrimonial Home

8.  The Wife’s case is set out in her 1^st and 2^nd Affidavits. The Wife sworn that:

(1)  In or around 1967, the parties bought a flat in Man Wai Street as joint tenants and they lived in there until they sold that flat at HKD660,000 in or around April 1991.

(2)  In or around December 1990, the parties bought the Matrimonial Home in the name of the Husband at HKD826,000 without mortgage. About 50% of the net proceeds of sale of the said flat in Man Wai Street was used to pay a part of the purchase price of the Matrimonial Home. The rest of the purchase price was met by the Husband with his retirement lump sum payment.

(3)  At all material times, she contributed to the family outgoings with her income.

(4)  In or around 1994, the 1^st son emigrated to Canada.

(5)  In or around 2001, the 2^nd son moved to live in Sai Kung. He was married in or around 2005. In 2009, the 2^nd son moved to live in London.

(6)  The parties continued to live on their retirement pension and savings in the Matrimonial Home.

(7)  The 2^nd son came back to Hong Kong in or around early May 2017. On 15 May 2017, the 2^nd son came to the Matrimonial Home and left with the Husband allegedly for lunch in a restaurant. The Husband did not come back that day. Having had no idea where he was and been worried, she called the 2^nd son but his phone was directed to a phone secretary who said that the 2^nd son had brought the Husband on a cruise trip for 2 weeks. It was totally astonishing to her as they had never mentioned a word about going on a trip.

(8)  After having not heard any news from the Husband for 2 weeks, she reported his missing to the police. The police decided that it was likely that the Husband was away with his son.

(9)  Afterwards, she discovered that the Husband had taken with him his bank books and other financial documents when he left.

(10)  At around noon on 9 June 2017, the 2^nd son appeared at the door with 6 workers. The 2^nd son forced her to leave and told her that he wanted to clear the place for renovation. She was shocked as there had never been discussion on renovation between the parties. The 2^nd son assured her that he was not selling the Matrimonial Home but was arranging a renovation of the Matrimonial Home. Before she could gather her thoughts, the 2^nd son suddenly forcefully pulled the land line phone from the plug on the wall and took away her mobile phone. The 2^nd son asked her to pack and to move immediately. After that, the workers started to throw away the furniture and electrical appliances and some of her personal belongings. She was terrified and felt she had no choice but to obey his instructions. The 2^nd son finally pushed her into a taxi and brought her to a serviced apartment at Causeway and told her to live in there. He asked her to pay the rent of HKD17,700 per month and the rental deposit of HKD17,700. She told him that he did not want to live in there but he threatened that, if she did not pay the rent and deposit, she would have to sleep on the street that night. She felt she had no choice and very reluctantly she paid the monthly rent and rental deposit.

(11)  The Wife sought help from her relatives after the 2^nd son left. On or around 20 June 2017, her brother and some other relatives accompanied her to return to the Matrimonial Home and they discovered that the lock was changed. They called the police and a report was made. Her brother suggested to the police that the Matrimonial Home might have been listed for sale and the police eventually found a key to the Matrimonial Home from a nearby estate agent. They understood that the Matrimonial Home was listed for sale at HKD5 million. With the help of the police officers, they entered the Matrimonial Home and saw that it was empty.

(12)  On or around 21 June 2017, the Wife sought legal advice. Upon legal advice the wife had her sister engaged a locksmith to change the door lock of the Matrimonial Home. A solicitors’ letter was posted at the metal gate of the Matrimonial Home.

(13)  Her siblings and the Wife tried to get in touch with the 2^nd son by telephone calls but to no avail. On or around 22 June 2017, the Wife made another police report on the missing of the Husband. Later on that day, the police informed the Wife that they had located the Husband but the Husband refused to return to the Matrimonial Home and the Husband did not wish to disclose his whereabouts to her. As a result, the police case file was closed.

(14)  On 23 June 2017, the Wife was informed by her brother that the 2^nd son had instructed a locksmith to break open the door of the Matrimonial Home. Her sister then locked the metal gate with a metal chain.

(15)  On 29 June 2017, her brother was informed by her neighbour that the 2^nd son had arranged a locksmith to weld open the metal chain in the presence of police officers.

(16)  On 30 June 2017, her brother accompanied her to return to the Matrimonial Home and they discovered that the metal chain was gone. She made a report to the police again.

(17)  On 5 July 2017, the Wife once again instructed a locksmith to open the lock of the Matrimonial Home as she wanted to return to live in there.

(18)  On 12 July 2017, her sister was arrested by the police for theft allegedly committed by her at the Matrimonial Home on 21 June 2017.

(19)  On 16 July 2017, the Wife found a warning letter written by the Husband in Chinese posted at the metal gate of the Matrimonial Home.

(20)  The Wife withheld the decision about moving back to the Matrimonial Home.

(21)  On 29 July 2017, the Husband sent a letter to the Wife informing her that he had sold the Matrimonial Home.

(22)  The Wife found out that by an Assignment dated 19 July 2017 the Husband transferred the Matrimonial Home to the 2^nd son allegedly for the price of HKD4,320,000.

(23)  On or around 19 October 2019, the 2^nd son mortgaged the Matrimonial Home in favour of Hang Seng Bank (‘HSB’).

(24)  According to a valuation report dated 14 September 2018 prepared pursuant to the court order dated 23 August 2018, the market value of the Matrimonial Home was HKD5,010,000 as at 19 July 2017.

(25)  On 18 January 2019, her solicitors sent a letter to HSB notifying them of the s.17 application by the 1^st summons.

(26)  By a letter dated 14 February 2019, the Husband said that the 2^nd son did not pay and he did not receive the purchase price of HKD4,320,000.

(27)  On 6 April 2019, her solicitors sent a reminder letter to HSB to enquire whether the bank would join in these proceedings.

(28)  By a letter dated 25 April 2019, HSB certified that the outstanding loan amount under the above mortgage was HKD1,941,208.79.

(29)  Copy of the police report cards, police statements, letters/correspondence sent/exchanged between the Wife’s solicitors and the Husband and/or the 2^nd son and the letters exchanged between the Wife’s solicitors and HSB were produced by the Wife and marked exhibits to her Affidavits.

(30)  It is the Wife’s submission that in the circumstances the Assignment dated 19 July 2017 between the Husband and the 2^nd son was made in contemplation of getting a divorce of the parties’ marriage and with the intention of defeating her claim for financial provision.

The 1^st, 2^nd, 3^rd, 4^th and 5^th transactions

9.  Upon the request of her solicitors, on or about 30 January 2019 the Husband provided the Wife’s solicitors the statements of his bank account with the BEA and the Husband and the 2^nd son’s joint account with HSBC. Upon perusal of the said statements, she discovered the 1^st, 2^nd, 3^rd, 4^th and 5^th transactions. By two letter both dated 8 February 2019 sent by her solicitors, she requested the Husband and the 2^nd son to provide an explanation for the said transactions. By the letter dated 14 February 2019, the Husband replied that the said total sum of HKD10,451,695.24 was transferred to the 2^nd son at his request and for the 2^nd son’s use. The 2^nd son did not make any reply. It is the Wife’s case that the said transactions were made by the Husband, with the help of the 2^nd son, with the intention of defeating her claim for financial provision.

The Husband’s case

10.  The Husband did not file any affirmation evidence or any court documents in accordance with the court order or the directions.

The 2^nd son’s case

11.  The 2^nd son has not filed any affirmation evidence or any other court documents and was absent from the trial.

12.  The Wife and the Husband were present on 2 January 2020. The Wife gave oral evidence. The Husband did not give oral evidence and did not put any question to the Wife.

The Law

13.  The Wife is now relying on s.17(1)(b) of the Matrimonial Proceedings and Property Ordinance, Cap.192 (“MPPO”) in the present application:

‘(1) Where proceedings for relief under any of the relevant provisions of this Ordinance (hereafter in this section referred to as "financial provision") are brought by a person (hereafter in this section referred to as "the applicant") against any other person (hereafter in this section referred to as "the other party"), the court may, on an application by the applicant-

(a)   if it is satisfied that the other party is, with the intention of defeating the claim for financial provision, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;

(b)   if it is satisfied that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property);

(c)   if it is satisfied, in a case where an order under the relevant provisions of this Ordinance has been obtained by the applicant against the other party, that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies, make such an order and give such directions as are mentioned in paragraph (b);

and an application for the purposes of paragraph (b) shall be made in the proceedings for the financial provision in question.

(2) Paragraphs (b) and (c) of subsection (1) apply respectively to any disposition made by the other party (whether before or after the commencement of the proceedings for financial provision), not being a disposition made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any such intention as aforesaid on the part of the other party.

(3) Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or to a disposition or other dealing with property which is about to take place and the court is satisfied-

(a)in a case falling within subsection (1)(a) or (b), that the disposition or other dealing would (apart from this section) have the consequence, or

(b) in a case falling within subsection (1)(c), that the disposition has had the consequence,

of defeating the applicant's claim for financial provision, it shall be presumed, unless the contrary is shown, that the other party disposed of the property with the intention aforesaid or, as the case may be, is, with that intention, about to dispose of or deal with the property.’

My views

14.  After carefully considered all circumstances, I accept the Wife’s evidence as the facts of the present case.

15.  It is of note that:

(a)  Under s.17(1) (b), the court will have the power to set aside the Assignment dated 19 July 2017 and the 1^st, 2^nd, 3^rd, 4^th and 5^th transactions, if it is satisfied that: - (1) the Husband has made such dispositions with the intention of defeating the Wife’s claim for financial provision, and (2) if the disposition is set aside, financial provision or different financial provision will be granted to the Wife;

(b)  Under s.17(2), s.17(1) (b) applies to any disposition made by the Husband not being a disposition made for valuable consideration to the 2^nd son who, at the time of the disposition, has acted in relation to it in good faith and without notice of any such intention as aforesaid on the part of the Husband;

(c)  Under s.17(3), if a disposition is made within 3 years prior to the application and would have the consequence of defeating the Wife’s claim for financial provision, it shall be presumed, unless the contrary is shown, that the Husband disposed of the property with the intention aforesaid.

16.  As per the Wife’s Form E dated 4 November 2017, apart from HKD1,112,753.25 in bank accounts, she has no assets. She is living on a monthly pension of HKD9,594.85 and an allowance for elder of HKD1,325 per month. Her current monthly expenses are totally HKD20,390, including general expense of HKD12,800 per month and personal expenses of HKD7,590 per month. According to the Husband’s Form E dated 12 February 2019, he has no assets whatsoever and is living on CSSA. It is clear from the above that the Matrimonial Home and the said total sum of HKD10,451,695.24 that were disposed of by the Husband at the material times represent the bulk of the matrimonial assets. The parties had a very long marriage and there is little doubt that the Wife has contributed to the welfare of the family. Evidently, if the dispositions above are set aside, financial provision or different financial provision will be granted to the Wife.

17.  The presumption under s.17(3) applies to the transfer of the Matrimonial Home by the Assignment dated 19 July 2017 and the 3^rd, 4^th and 5^th transactions respectively dated 4 January 2017, 15 March 2017 and 8 August 2017 that took place less than 3 years before the date of the 1^st and 2^nd summonses. There is no evidence before this court to rebut such presumption. By reason of matters aforesaid, it shall be presumed that the Husband made the Assignment dated 19 July 2017 and the 3^rd, 4^th and 5^th transaction with the intention of defeating the Wife’s claim for financial provision.

18.  It is clear from the Wife’s evidence that the 3^rd, 4^th and 5^th transactions are not made for valuable consideration. For that reason, s.17(2) does not apply to the 3^rd, 4^th and 5^th transactions.

19.  As to the Matrimonial Home, the market value of the Matrimonial Home being HKD5,010,000 as at 19 July 2017, the purported purchase price of HKD4,320,000 is undervalued. What is more, the 2^nd son has not actually paid the purchase price of HKD4,320,000. Consequently, the transfer of the Matrimonial Home is not made for valuable consideration. That is to say, s.17(2) does not apply to the Assignment dated 19 July 2017, too.

20.  In addition, I take the view that the circumstances of the Assignment dated 19 July 2017 and the 3^rd, 4^th and 5^th transactions are suspicious. Coupling the court’s finding that the presumption under s.17(3) applies to the transfer of the Matrimonial Home by the Assignment dated 19 July 2017 and the 3^rd, 4^th and 5^th transactions with the suspicious conduct of the 2^nd son as set out in the Wife’s case in the above, I take the view that the 2^nd son at the time of the Assignment dated 19 July 2017 and the 3^rd, 4^th and 5^th transactions was acting together with the Husband to fritter away the family assets and did not act in relation to them in good faith or without notice of the Husband’s intention of defeating the Wife’s claim for financial provision.

21.  Taking the matters in the round, I take the view that s. 17 (1) (b) applies to the Assignment dated 19 July 2017 and the 3^rd, 4^th and 5^th transactions and I make the order that the Assignment dated 19 July 2017 and the 3^rd, 4^th and 5^th transactions be set aside.

22.  It is of note that the 3^rd, 4^th and 5^th transaction were made in respect of the Husband and the 2^nd son’s said HSBC joint account. There is no evidence before this court about the Husband and the 2^nd son’s respective share of the beneficial interest in the said HSBC joint account. In the circumstance, I shall apply the maxim that ‘equity is equality’ and treat that each of them is entitled to an equal share of the money in the said HSBC joint account. As a corollary of that, upon the setting aside of the 3^rd, 4^th and 5^th transactions, the 2^nd son shall pay back only the Husband’s share i.e. 50% of the sums of HKD281,274.42, HKD2,996,821.14 and HKD373,599.68 = HKD1,825,847.62.

23.  As stated in the above, the Matrimonial Home is subject to a mortgage in favour of HSB. The Wife accepts that it is a mortgage in good faith for value without notice on the part of HSB. In a District Court case HKCB Finance Ltd v Yuen Yi Wan Sandy and Another [2005] HKCU 5 (unreported, DCMP 2017/2002, 29 November 2004), HHJ To (as he then was) held that

40. Accordingly, I am of the opinion that the effect of an order under section 17 of the Matrimonial Proceedings and Property Ordinance is to render the disposition thus set aside void with effect from the date of the order. It does not have the effect of rendering the disposition void ab initio as would affect third parties acting in good faith in relation to that disposition without notice of the disponor's intention to defeat the spouse's claim for financial provision. What is therefore re-vested in the other party or the disponor must be whatever interest that other party has subject to whatever interest any third party may have acquired in the intervening period between the date of the disposition and the date of the order in good faith for value and without notice of the disponor's intention to defeat the spouse's claim for financial provision.

The above District Court decision was approved by the Court of Appeal in HKCB Finance Ltd v Yuen Yi Wan Sandy and Another [2006] HKEC 1425 (Rogers V-P and Sakhrani J, Cheung JA dissenting) (unreported, CACV 355/2005, 1 August 2006). As a result, the mortgage to HSB will be a valid mortgage even if the Assignment dated 19 July 2017 is set aside by this court. Despite that, the Wife has not taken out an application for any relief for loss arisen from the mortgage to HSB dated on or around 19 October 2019. As such, I shall not give a view on the matter.

24.  In light of the accepted evidence that no purchase price has been paid or received, I make no order as to the alternative prayer for an order that the Husband and the 2^nd son do account to the Wife the purchase price of the Matrimonial Home.

25.  It appears from the correspondence exchanged between the Wife’s solicitors and the 2^nd son that the 2^nd son as landlord has rented out the Matrimonial Home. Under s. 17(1)(b), upon the making an order setting aside a disposition the court has the power to give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property). Accordingly, I make the order that the 2^nd son do account to the Husband any rental income and rental deposit that he has received in respect of the Matrimonial Home since 19 July 2017.

26.  The Wife having the sealed copy of her Notice of Application for Ancillary Relief registered in the land registry as an encumbrance against the Matrimonial Home, I regard that an injunction order restraining the Husband and the 2^nd son from dealing with or otherwise disposing of the Matrimonial Home is no longer needed.

27.  The 1^st and 2^nd transactions were made on 12 December 2014 and 29 January 2015 respectively. I take notice that there is not a shred of evidence exists that can show that it was in the Husband’s contemplation to divorce the Wife in or about December 2014 or January 2015, so despite the Wife’s arguments to the contrary I do not accept that the 1^st and 2^nd transactions were made with the intention of defeating the Wife’s claim for financial provision. All in all, I take the view that s.17(1)(b) does not apply to the 1^st and 2^nd transactions.

Disposal

28.  In conclusion, it is ordered that:

(i)  The Assignment dated 19 July 2017 be set aside;

(ii)  The 3^rd, 4^th and 5^th transactions be set aside;

(iii)  The 2^nd son do account to the Husband the rental income and rental deposit that he has received in respect of the Matrimonial home since 19 July 2017;

(iv)  The 2^nd son do pay back the sum of HKD1,825,847.52 to the Husband;

(v)  There be liberty to apply.

Costs

29.  To a great extent, the Wife is the successful party in the present application. I see no reason why costs should not follow the event. It is ordered nisi that the Husband and the 2^nd son do jointly and severally pay the Wife’s costs of the 1^st and 2^nd summonses, including reserved costs, to be taxed if not agreed. The costs order nisi becomes absolute 28

days after the order is made unless a party has applied to the court for varying the order.

30.  The parties should take step to restore the 1^st Appointment hearing (Ancillary Relief) as soon as possible.