CYCC v. NYT

FCMC 1223/2021

[2023] HKFC 99

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 1223 OF 2021

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DECISION
( Costs )

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1.  This decision concerns the question of costs of the preliminary issue proceedings, which is disposed of on paper without oral hearing.

Background

2.  On 18 January 2021, the Respondent (“Wife”) took out a summons under the previous divorce proceedings (FCMC2385/2020) for leave to join her mother as an intervener (“Joinder Application”) which was supported by an affirmation made by the Wife’s mother dated 14 January 2021.

3.  The Petitioner (“Husband”) did not resist the Joinder Application.

4.  On 29 January 2021, Judge KK Pang granted leave to join the Wife’ mother as an intervener (“Intervener”) and ordered that the issue as to whether she was one of the beneficial owners of the property in La Salle Road, Hong Kong (“FMH”) and the joint name bank account of the Husband and the Wife (“Joint Account”) to be tried as a preliminary issue.  Standard directions for filing of the pleadings, mutual exchange of documents, witness statements etc were also given.

5.  The Intervener filed her Points of Claim on 5 March 2021, in which she pleaded, inter alia, a “common understanding” between the parties that the amounts extended by the Intervener to the Husband and the Wife for the purchase of the FMH (“First Promise”) and other sums deposited by the Intervener into the Joint Account (“Second Promise”).

6.  The Wife filed her 1^st Answer to the Husband’s Questionnaire dated 29 January 2021 claiming that she beneficially owns 77% of the FMH after taking into account of the Intervener’s contribution.

7.  The Husband filed his Points of Defence on 1 April 2021 denying, inter alia, the First Promise and the Second Promise.

8.  With the indication given by Judge CK Chan at the 1^st PTR on 26 August 2022, the Intervener’s case appeared to be one of loan rather than beneficial interest.  By consent, the learned judge ordered, inter alia, that there is no need to conduct a preliminary issue trial on beneficial interest.

9.  At the 2^nd PTR before me on 20 January 2023, I also doubted as to the propriety of the Intervener as a party to the proceedings albeit she may remain as a witness for the Wife concerning the dispute of the alleged loan at the trial.

10.  Originally, the Wife and the Intervener were legally represented by the same firm of solicitors (Ling & Lawyers) but after the 1^st PTR and before the 2^nd PTR, they are separately represented.

11.  On 17 February 2023, all the parties signed a Consent Summons for, inter alia, leave to the Intervener to withdraw from the proceedings with the question of costs to be determined by the court on paper.  I made an order in term of this Consent Summons with some minor amendments as to the directions.

Discussion

12.  Parties have no dispute that the court has very wide discretion on costs pursuant to Order 62 rule 3 of the Rules of the High Court, Cap 4A.  In exercising the discretion, the court has a list of factors to consider, such as conduct of all the parties, etc.   

13.  Ms Leung for the Wife submitted that the Intervener and the Wife all along possessed a bone fide claim concerning a proper question to be tried and suggested no order as to costs of preliminary issue proceedings.

14.  Ms Lee for the Intervener also suggested no order as to costs.

15.  Ms Choy for the Husband asked for costs of and incidental to the Joinder Application and preliminary issue proceedings, including all costs reserved.

16.  To start with, I would dare to say that for the last 10 odd years in the Family Court, it becomes more and more common for a third party, the party or parties to the divorce proceedings to apply for joinder of a third party as an intervener or 2^nd respondent for the purpose of determination of a preliminary issue, usually relating to the ownership of the beneficial interest of a landed property, shares of a company or money in the bank account.     

17.  The determination of such a preliminary issue would no doubt significantly increase the parties’ legal costs and also delay the trial of the ancillary relief.  The party who intends to apply for the joinder order should seriously seek legal advice and his/her legal representatives should exercise abundant caution and bear heavy duty to give proper advice to their clients before issuing such application.

18.  As such claim for the beneficial interest by a third party usually involves a very complicated legal issue of trust whether express, implied, constructive, common intention or resulting, court directions for filing of pleadings etc, similar to a civil claim, are always necessary.  That is the rationale behind the UK landmark case TL v ML [2006] 1 FLR, in which the court should direct the parties to file their respective pleadings rather than just affidavits or witness statements.

19.  In the present case, I think that the crux is the serious allegation of the Wife in her Answer stating the Intervener’s 77% beneficial interest in the FMH and of the Intervener in her supporting affirmation filed 18 January 2021 asserting herself as “a beneficial owner” of the FMH, which triggered the Joinder Application.  In my view, it is extremely difficult for the Husband to oppose such an application although the burden of proof must be on the Wife and the Intervener.

20.  I consider that since at the material time, the Wife and the Intervener were legally represented by the same firm, their lawyers must have properly advised them on what legal basis the Intervener could claim 77% (but not other percentage) beneficial interest in the FMH.

21.  Unfortunately, in view of the signing of the Consent Summons for leave to the Intervener to withdraw from the proceedings, I think that the present legal representation for the Intervener must have conceded that the real issue to be tried should only be whether the Intervener did lend certain amount of money to the parties jointly and/severally, or individually.  In other words, such alleged loan or loans are simply personal debt due to the Intervener from the parties. 

22.  In any event, the preliminary issue must not be the beneficial ownership of the FMH or Joint Account as ordered by Judge KK Pang on 29 January 2021.  If the Wife made it clear to the learned judge that the issue to be determined is simply the loan due to the Intervener, it is highly unlikely that the learned judge would grant leave to join.  In my view, the purpose of the ancillary relief trial between the Husband and the Wife is not to determine the loan due to the Intervener.  Just like, when the parties borrow certain amount of money from a bank, it is wholly unnecessary to join the bank as a party in the ancillary relief trial, whether or not they are going to dispute the loan to the bank.  The bank can always commence a separate civil action against the parties, which I disagree to be tried in the family court.  I consider that this court has no power to order the parties repay the loan to the Intervener under the MPPO.  Therefore, I reject the submission of Ms Lee for the Intervener that there is nothing to legally precludes the Intervener from joining as a party.

23.  Further, it is not unreasonable for the Husband not to oppose the Joinder Application due to the Wife’s allegation of the Intervener’s beneficial interest in the FMH.  Besides, on 26 September 2022 (ie after the 1^st PTR), solicitors for the Husband wrote to the Intervener’s solicitors asking for withdrawal from the proceedings as a party but such request was refused by the respective solicitors for the Wife and the Intervener. 

24.  Hence, I conclude that the Wife is wrong to issue the Joinder Application in the first place and that the Intervener is equally to be blamed for that. Even if the preliminary issue as ordered by Judge KK Pang has to be tried, the court will obviously determine against the Wife and the Intervener.  I do not see any good reason that costs shall not follow the event.  

25.  Regarding the costs for the preparation of the Intervener’s affirmation dated 14 January 2021 in support of the Joinder Application, I accept that since the Intervener can always be the witness for the Wife, it is still necessary for the trial of the ancillary relief in any event.  Thus, costs for such affirmation are not wasted to this extent and shall form part of the costs of the ancillary relief.

Conclusion

26.  In the circumstances, I exercise my discretion to order that save as to the costs relating to perusal and consideration of the Intervener’s affirmation dated 14 January 2021 by the Husband, costs of and incidental to the Joinder Application and preliminary issue proceedings, including all costs reserved and this application, with certificate for Counsel, be paid by the Wife and the Intervener jointly, to be taxed if not agreed.

27.  There be no order as to costs as between the Wife and the Intervener for the Joinder Application and preliminary issue proceedings.

28.  Last but not least, I thank all Counsel for their assistance.