LCTD v. CKMC

FCMC 6340/2018

[2024] HKFC 98

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 6340 OF 2018

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D E C I S I O N
(Leave to file Reply and Witness’ Affirmation)

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1.  Today is supposed to be a PTR of the preliminary issue (on beneficial ownership) trial to take place from 3-13 June 2024. However, shortly before hearing, this court has received 2 summonses which need to be dealt with this morning:

(1)  The Interveners’ summons dated 17 April 2024 asking for leave to file and serve their Replies to the Petitioner Husband (“H”)’s Points of Defence dated 3 May 2022 and the Respondent Wife (“W”)’s Points of Defence dated 6 June 2022 in substantially the form of the draft Interveners’ Replies annexed to the summons.

(2)  W’s summons dated 29 April 2024 asking for leave to file and serve her witness (Madam CF)’s 1^st Affirmation within 3 days.

2.  H opposed both summonses.

3.  After hearing counsel submissions, I have decided to dismiss both summonses with costs. I have also given further directions for trial as per paragraph 28 below.

4.  These are my brief reasons.

Brief Background

5.  The core issue to be determined in these matrimonial proceedings is the ancillary relief (“AR”) application of H against W. But before the court could proceed with the AR proceeding, the Interveners, who are the siblings of W joined in and claimed to be joint beneficial owners in 2 family companies, namely CEC and CL. In their Points of Claim dated 28 March 2022, they claimed that W, being a 35% legal owner of CEC’s shares and 20% legal owner of CL’s shares, is in fact holding those shares on behalf of all 5 siblings, including W herself. In other words, W is holding on trust for each of the four Interveners 7% in CEC and 4% in CL.

6.  W in her Points of Defence dated 6 June 2022 accepted that she was holding 7% in CEC and 4% in CL on trust for each of the 4 Interveners. She accepted that her beneficial interest in CEC was 7% and in CL was 4% only.

7.  H in his Points of Defence dated 3 May 2022 denied the trust arrangement.

8.  A MFDR was conducted but not successful. The case came before this court for 1^st PTR on 4 September 2023, which was adjourned to 13 December 2023, with directions that all interlocutory applications were to be taken out in 28 days and all witnesses to file and serve their affirmations within 42 days. At the return PTR hearing on 13 December 2023, this court fixed the trial of the preliminary issue (on beneficial ownership of W’s 35% holdings in CEC and 20% holdings in CL) for a period of 8 days from 3-13 June 2024. Apart from giving the usual directions for trial, this court granted leave to W again for her witness Madam CF to file and serve witness affirmation within 28 days, which expired on 10 January 2024. No such witness affirmation was filed and no attempt was made to ask for time extension, until 3 days ago, when W issued her summons on 29 April 2024 (returnable today) to ask for further time to file and serve Madam CF’s affirmation.

9.  Also on 25 April 2024, i.e. less than 2 months before trial, the Interveners, after instructing a new team of counsel, issued their summons for leave to file and serve their Replies out of time with a return date also this morning.

The Interveners’ Summons

10.  I shall deal with the Interveners’ summons to file and serve their Replies out of time (“the Reply Summons”) first.

11.  The Interveners were represented by Mr. Martin Wong of counsel. It was admitted that the Reply Summons was late. But it was submitted that the ultimate determinative question to be asked is whether the trial will be disrupted and whether H will have a fair chance to respond before trial. It was submitted that there are no new factual circumstances being raised in the proposed Reply and H should not be allowed to shut out the Interveners’ evidence through a technical objection on pleadings. In his oral submissions, Mr. Wong reminded the court that H’s case is simply that there was no such trust arrangement as alleged and so it will purely be a matter for cross examination on the veracity of the Interveners and W’s evidence at trial. There is nothing for H to respond to and therefore, the trial on 3 June 2024 will not be delayed.

12.  W was represented by Mr. Yim of counsel and he adopted a neutral stance on the Interveners’ Reply Summons.

Discussion

13.  The first observation to be made is that the Reply Summons is very late. According to Ms. Chow, counsel for H, the deadline for the Interveners’ to file and serve their Replies expired on 31 May 2022, which was 2 years ago. H’s solicitors by their letter dated 25 July 2022 has made it clear that all parties would proceed on the assumption that no Reply would be filed. Two years have lapsed and we are now only 1 month away from trial. Worse still, judging from the wordings of the Reply Summons that the Interveners are now asking for leave to file and serve their Replies “in substantially the form of the draft Interveners’ Replies” indicating that the draft Replies were still not finalized. They asked for them to be filed within 14 days. If allowed, that will take us to the latter half of May with about 2 weeks before trial. Although Mr. Wong submitted at today’s hearing that the Replies could be filed within 3 days, but there was no indication whether they will be in the draft as annexed or in a from to be finalized. This I must say is highly unsatisfactory. I agree with Ms. Chow’s submission that extreme delay, on its own, may already justify a dismissal.

14.  In view of such late application for filing of further pleading, the interveners are expected to give a full and accurate account of the reasons why the application has not been made earlier. However, the only supporting affirmation was filed by their solicitor (Mr. Hart). In that 2.5 page affirmation, the only reason given was:

“5. Mr. Martin Wong and Ms. Kelly Cheng of Counsel were instructed at the beginning of last month to advise and appear at the PTR and the Trial on behalf of the Interveners. Following advice by counsel, it was recommended that a Reply be filed on behalf of the Interveners in order to better identify and delineate the issues in dispute in this Trial...”

15.  If the proposed Replies is simply to “better identify and delineate issues”, it does not sit well with Mr. Wong’s submission that proper evidence from the interveners will be shut out if H’s technical objection on pleadings is upheld. Moreover, it is well established that reasons such as change of lawyers or last minute engagement of legal assistance are no longer acceptable as good reasons for late applications: CMW v WTY & LCL (unrep., FCMC 8759/2010. 5/10/2015) per Deputy Judge Own (as HH Judge Own then was) at §35.

16.  If one should look at the draft Replies, it seems that the interveners are pleading a marked different factual basis to support their claim of trust as compared to their Points of Claim. As pointed out by Ms. Chow for H, the factual basis as pleaded in the Points of Claim was that the trust was instigated by the father of W who wanted to protect the interests of his first wife, LHS, and each of the children from the first marriage, against possible claims by his second wife, Madam CF, and also due to the fact that he viewed the making of a will for such purpose as unlucky.

17.  However, completely new factual circumstances are now put forward as to how or why the trust was created. The new factual circumstances include:

(1)  A meeting around January 2014 was summoned at the office of CEC by the father;

(2)  Due to the 2^nd Intervener’s US resident status, there may be tax implications if she was to hold the shares directly under her name;

(3)  It would be more convenient for W to continue managing and dealing with the affairs of CEC and in turn CEC Shenzhen as its legal representative (法定代表人);

(4)  W was told by Madam CF that the 20% in CL was given to W because a sum of Canadian dollars, equivalent to about HK$2,000,000, out of the funds used for purchasing Fortress Tower office came from W’s mother (LHS), as such the benefit of such interest was not W’s alone but that of all children of LHS.

18.  I agree with Ms. Chow’s submissions that these marked different factual circumstances would constitute a new ground of claim that is inconsistent with the Points of Claim. In that case, the interveners should amend their Points of Claim, instead of introducing this new ground of claim by disguising it as part of their Replies.

19.  Furthermore, if this new ground of claim is allowed to be pleaded at this very late stage, the inevitable outcome is for the trial to be aborted because without affording H proper opportunity to consider the new ground and to follow up on the questions of foreign law would be highly prejudicial to H’s case. I am afraid that an adjournment of this milestone date will not be allowed.

20.  The interveners’ summons dated 17 April 2024 is dismissed. As I have indicated during the hearing that the direction for the filing of the interveners’ Replies previously given on paper was a slip and so it was being set aside without objections from the parties. Therefore, I would hereby order that the Replies already filed by the interveners to be expunged from the court files.

W’s Summons

21.  W is asking for extension of time to file Madam CF’s witness affirmation.

22.  Again, the application is very late in the sense that it is out of time for 6 months and we are now less than 1 month before trial. The previous discussion on delay of course also applies to W’s summons to file witness affirmation out of time.

23.  In order to explain the late application, W filed her 6^th Affirmation saying that Madam CF has been busy in looking after W’s father who has contracted Covid in January 2023 and suffered a stroke in May 2023. I find the explanation unconvincing. Despite the father’s health issues in 2023, his conditions generally remain stable (§6 of W’s 6^th Affirmation) and there is no good reason why Madam CF could not file her witness affirmation earlier.

24.  Moreover, W’s late application to file and serve Madam CF’s witness affirmation seems to be an attempt to support the new ground of claim in the Interveners’ draft Replies. She tried to testify on LHS (mother of W) giving HK$2,000,000 to W to purchase the Fortress Tower office and the establishment of CL resulting in the father holding 80% of CL, and W holding 20% of CL but on behalf of LHS. This is in fact inconsistent with §11(6)(i) of W’s Points of Defence in which W said the trust arrangement on CL was “an agreement, understanding and/or common intention among the Father, [W] and the 1^st to 4^th Interveners”. There was nothing mentioned about the HK$2,000,000 from LHS being used to purchase the Fortress Tower office or the establishment of CL.

25.  Based on the above discussion, I am not satisfied that it is a proper exercise of my discretion to allow W to file Madam CF’s witness affirmation at such a late stage of the proceeding. W’s application to file and serve Madam CF’s witness affirmation out of time is dismissed.

Interveners’ Supplemental List of Documents

26.  On 12 April 2024, the Interveners have filed and served an Supplemental List of Documents disclosing 135 pages of bank documents, purportedly linked to the Interveners’ draft Replies. Ms. Chow asked this court to direct that the materials disclosed in the Supplemental List of Documents to be inadmissible.

27.  In my view, discovery is a continuous process and there is no formal application before me to rule on the admissibility of the materials disclosed in the Supplemental List of Documents. If needed, the issue has to be argued at trial and I would make no determination on the Supplemental List of Documents at this stage.

Further Directions for Trial

28.  In addition to the determination on the 2 summonses, I hereby give the following directions for trial:

(1)  The witnesses’ affidavits/affirmations do stand as evidence in chief;

(2)  All witnesses to attend court for cross examination;

(3)  The trial to be conducted in English and an English/Punti interpreter to be arranged by the court if any party decides to give evidence in Punti;

(4)  No further affidavit/affirmation to be filed without leave of court;

(5)  No further interlocutory application to be made without leave of court; and

(6)  All parties to lodge and exchange their Opening Submissions 14 days before trial, i.e. on or before 20 May 2024.

Summary of Orders and Directions

29.  By way of summary, I hereby make the following orders and directions:

(1)  The Interveners’ summons dated 17 April 2024 is dismissed.

(2)  The Interveners’ Replies that were filed are to be expunged from the court files.

(3)  W’s summons dated 29 April 2024 is dismissed.

(4)  Further directions for trial as per paragraph 28 above.

Costs

30.  Both the Interveners’ summons and W’s summons were dismissed. Costs of both summonses be to H on a party and party basis with certificate for one counsel. This order will be in the form of costs order nisi to be made absolute upon the expiry of 14 days from the handing down of this Decision. Upon order being made absolute, I direct H to lodge and serve a 1-page statement of costs for each summons within 7 days for summary assessment and the Interveners and W be at liberty to lodge and serve their list of objections also restricted to 1-page within 7 days thereafter for the court’s consideration.

31.  Costs of PTR to be in the cause of preliminary issue, with certificate for one counsel. Again, this will be in the form of costs order nisi to be made absolute upon the expiry of 14 days from the handing down of decision.

32.  Last but not least, I thank counsel for their assistance.

Representation: