HSYC v. CLTK

FCMC 11141/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 11141 OF 2013

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J U D G M E N T
(Preliminary Issue)

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Introduction

1.  This is a hearing of a preliminary issue to determine whether or not the Respondent husband has any beneficial interest in a factory premises known as Factory 5B. If so, the court needs to consider the extent of that beneficial interest and how it should be treated when considering the distribution of the assets post divorce.

2.  This trial has thrown up some interesting issues with respect to the onus of proof and the approach to be taken generally in cases of this nature. As with all preliminary issues the Family Court follows the protocol first identified in TL v ML [2006] 1 FLR 465. This case is no exception. Consequently, the 1^st and 2^nd Interveners being the family company (that I will call X) and the husband’s elder sister, (F), filed Points of Claim on the 26 March 2015. In it they set out their case, namely that the family jewellery business was originally set up by the parents of the husband and F, back in the 1970’s. It is F’s case that she took over the running of the business although both the husband and their younger sister also work for it. In or about January 2003 F and the husband purchased Factory 5B as joint tenants. It is F’s case that although the property and mortgage is held jointly, that she alone purchased the property and that it is wholly and beneficially owned by her. It was understood, she says, that the property was purchased in order to be used as the main office and factory workshop for the jewellery business. Thus it was rented out to X. In the Points of Claim X and F state as follows:

6. The purchase price of Factory 5B in the sum of HK$1,750,000 was paid in the following manner:-

(a) HK$52,500 as initial deposit prior to the execution of the Agreement (“Initial Deposit”);

(b) HK$122,500 as further deposit upon the signing of the formal agreement on or before 28 January 2003 (“Further Deposit”); and

(c) The balance of the purchase price in the sum of HK$1,575,000 upon completion on 20 February 2003 (“Final Payment”).

7. The said Initial Deposit, the Further Deposit and part of the Final Payment in the sum of HK$525,000, the stamp duty payable on the formal agreement and the assignment of Factory 5B, the agency fee and all legal fees in respect of the purchase were all paid by the 2^nd Intervener [F] solely.

8. The balance of the Final Payment being HK$1,050,000 was financed by a mortgage loan provided by Bank of America (Asia) Ltd. on 20 February 2003 (“the Mortgage Loan”).

9. The instalments of interest and capital falling due under the Mortgage Loan have at all times been settled by the payments from the 1^st Intervener [X] as repayment of director’s loans advanced by the 2^nd Intervener [F] to the 1^st Intervener [X].

10. Ever since the purchase, Factory 5B has been exclusively possessed by the 1^st Intervener [X] and used as its main office and factory workshop.  All the management fees, the rates and the government rents and all charges related thereto have at all times been paid by the 1^st Intervener [X].

11. Apart from holding the Property on behalf of the 2^nd Intervener [F] for the sole use of the 1^st Intervener [X], the Respondent [the husband] did not contribute any money to the purchase of Factory 5B.

12. In the circumstances and by reason of the aforesaid, the Respondent holds Factory 5B as nominee and on resulting trust for the 2^nd Intervener [F] subject to the 1^st Intervener’s [X] right to occupy and use at all material times.

AND THE 1^ST AND 2^ND INTERENERS CLAIM AGAINST THE PETITIONER FOR:

(1) A declaration that Factory 5B is not beneficially owned by the Respondent and therefore not available for distribution between the Petitioner and the Respondent upon the dissolution of their marriage

(2) Further and/or other relief

(3) Costs

3.  Although F has expressed sympathy for the wife she says that she has no option but to fight this action given the effect that it may have on X.

4.  The position of the petitioner wife is simple – she says that it is for the husband to prove that he does not own a half share in Factory 5B. She does not advance any form of positive case. Her Points of Defence are one page long and state as follows:

1. Unless otherwise stated, in this pleading:-

a. The Petitioner [the wife] will adopt the abbreviations as used in the Points of Claim (“Points of Claim”) filed by the 1^st and 2^nd Interveners on 26^th March 2015.

b. References herein to paragraph numbers are to paragraphs in the Points of Claim.

2. Paragraph 1 is not admitted.

3. Paragraph 2 is not admitted.  The Petitioner further avers that the Respondent is also the managing director of the 1^st Intervener.

4. Paragraphs 3 to 12 are not admitted.  The 1^st and 2^nd Interveners are put to strict proof for each and every allegation raised thereof.

5. Save as expressly admitted or not admitted hereinabove, the Petitioner denies each and every allegation in the Points of Claim as though the same were set forth in full and traversed seriatim.

5.  Counsel for X and F has pointed out, and this must be right, that in such circumstances it is not possible for the wife to now advance a different case from that pleaded. What I have to determine is infact very narrow in scope. Attempts were made to widen the perimeters of the hearing after the first tranche of the trial. The wife issued additional summonses on the 16 May 2016 with respect to a further property and another related family company. It seemed to me that it was not appropriate to do so half way through a trial and those summonses were either subsequently withdrawn or adjourned.

6.  It would be fair to say that Counsel are not of one accord with respect to who has the onus of proof in these circumstances. Mr Surman for the wife, following what he says are established family law principles, argues that it is for the husband to prove that he does not beneficially own a property in which he has a legal interest. Mr Harry for the interveners says that in a situation as here where the real issue of ownership of Factory 5B lies between brother and sister and not between husband and wife or cohabitants, then normal trust principles must apply. He makes a number of points – but perhaps most importantly he states as follows in his closing:

48. There are 2 points here.  1^st, this is not a situation where a legal co-owner is saying that he or she has the whole beneficial interest, and the other co-owner is resisting that contention.  Here L [the husband] accepts that the F [2^nd Intervener] is entitled to the whole beneficial interest, and that her version of events is correct.  It is a third party, C [the wife], who is trying to disturb that accepted position.  So the overall onus of controverting that position should be on C [the wife].

53. So C [the wife] cannot rely on what was said in relation to the onus of proof in Stack in the present context.  Here F provided the initial purchase price, and the overarching burden must be on C to show why F is not entitled to the whole beneficial interest.

7.  In any event he says that the outcome is the same, whichever way this matter is approached - if F can show that she has paid for Factory 5B then the property should be hers.

Background

8.  The parties have been in and out of court on a number of occasions, mainly with respect to maintenance pending suit/interim maintenance and litigation funding applications made by the wife. In addition, there have been ongoing concerns with respect to disclosure and there have also been very frequent appearances at First Appointment hearings. In my first judgment dated the 2 April 2014 I set out the background to the marriage as follows:

3. The parties married on the XX April 2000 and separated on the 8 December 2011 when the husband left the former matrimonial home following allegations by the wife of infidelity on his part. The wife issued a divorce petition on the 1 August 2013 and the decree nisi was pronounced on the 9 October 2013. The parties sensibly came to terms in relation to the boys and they subsequently agreed joint custody with care and control to the wife and reasonable access to the husband.

4. The wife has been a housewife since marriage. The husband is a Managing Director of a family jewellery business.

Each party’s case

The wife’s case

5. The wife’s case is that the husband works for the family business – which was established by his parents many years ago. It has now developed into what appears to be a substantial jewellery company with X retail shops in Hong Kong dealing in all kinds of jewellery and precious stones including diamonds. It seems that this business has evolved over time and that originally the company sold more traditional gold items and jewellery. The wife also says that the family business holds a number of properties through various corporate structures. Although the wife accepts that the husband’s actual income is fairly minimal, it is her case that a significant portion of the family’s regular monthly expenses were paid for by the husband’s family company/ies and that this is a financial resource that is currently available to the husband. 

6. The wife points out that she is totally reliant on the husband financially. The parties married when she was only 24 and they had their first child within the year. She says that she became a housewife by agreement. Although she has a degree in Hotel and Catering Management she has not worked since marriage and even prior to marriage her work experience was fairly minimal. She also suffers from rheumatoid arthritis, which may make an immediate return to the workforce problematic.

The husband’s case   

7. In contrast it is the husband’s case that he has had an easy life and that he is not actively involved in the running of the family business. Although he accepts that additional monies have been made available to him and his wife and children, he says that these monies are gifts from his parents and that this money is not something that he is entitled to as of right. In his affirmation of the 25 February 2014 he said at paragraph 8 that

8. Being the youngest son of my parents, I am not expected by the family to take an active role in the family business nor to make any contribution to the business.  I am not very interested in running business or working.  All along, I have been leading a relatively unambitious and relaxing life.  I only spend a few hours or less on work every day and do not need to attend work at the company on the daily basis.

8. It is the husband’s case that his parents have cut down on their financial support because a) the wife’s maintenance claims have increased significantly, b) the wife refused to let his parents see the grandchildren and c) the wife has made a claim against the property in which she is presently living, which is a property owned by a family company. He says that this has angered his parents.

9.  In my second judgment on litigation funding dated the 1 December 2015 I added as follows:

3. It would be fair to say that I was fairly critical of the husband and the approach taken by his legal team in the maintenance pending suit judgment. In particular I found that the husband had taken a de minimalist approach to disclosure and that there was a catch me if you can element to it. I added at paragraph 30 that:

   c) Alleged drop in income

   30. The husband’s main point is that in any event, regardless of the financial resources that were made available to him previously, that this has now changed. As indicated above it is not possible for me to make any definitive findings of fact in relation to this at the current stage of the proceedings. I would however accept the point made by counsel for the wife that if indeed that is the husband’s case then the onus is on him to provide clear and unequivocal evidence in support of what he says. To date such evidence has not been forthcoming.

4. Since then there have been three further rounds of discovery. It is the husband’s case that he has provided a great deal of additional information to the wife at her request. It is of note that she has not set out her case on further disclosure in correspondence or otherwise. Indeed, there have been no further requests for additional information for about a year or so. Infact even in this hearing her position was only explained in very general terms. It was said on her behalf by Mr Surman that:

22. Given the complex and opaque corporate structure of H’s family business included but not limited to X and X D with X adopting trade names such as “X” and “Y”; it has been an almost impossible task for W and her legal team to understand the true financial position of H as he had offered little to no assistance coupled with bare denials and patchy information in this regard throughout these proceedings.

23. W has a pressing need to obtain specific discovery on H’s family companies in order to fully understand H’s financial position by obtaining assistance from forensic accountants, property/ business valuers and experienced lawyers. However, she is unable to given the lack of funds to obtain proper legal and expert assistance.

5. However it is still not clear exactly what it is that the wife wishes to further discover and what her case is precisely other than as set out above. The rather unfortunate impression is that she is set to embark on a fishing expedition. Mr Surman pointed to a number of small points in his submission, but unfortunately this does not really take the matter very much further forward. Counsel for the husband suggested that:

15. The Wife seems determined to run her case by blaming it on the Husband’s non-disclosure.  But increasingly such an argument does not seem to hold water after rounds of discovery (see Appendix A).  Other than two US investment accounts that the Husband is jointly holding with and for the benefit of the Children and life insurance policies having the Children as beneficiaries, the only valuable asset of the Husband that was found to have been omitted to include in his Form E is a second handed Alfa Romeo Spider vehicle with a market value of $70,000.  Apart from the above, there is no evidence supporting the Wife’s allegation that the Husband still holds assets that have not been fully disclosed in the action.

6. Time will tell if this is right or not. However given the way in which this case has evolved since the maintenance pending suit hearing I have to say that I now have some sympathy with the husband on this aspect of the case.

7. The husband’s case continues to be that he is a laid back individual who supported his wife and children by relying in part on the financial assistance of his parents. This assistance is no longer forthcoming – for reasons which I will not go into here. Consequently he has turned to his sister, the 2nd intervener for financial support. She has filed an affidavit in which she has set out the difficulties that she is now facing plus the present financial status of the family companies. Although it is of course correct that I can take into account what the husband’s current financial resources are, including his ability to borrow, that does not mean that I should ignore completely what now appears to be the reality of the situation. Certainly there is no reason for me to disbelieve the sister’s evidence.

8. The preliminary issue has now been set down for trial for four days in April 2016. This hearing is concerned with establishing whether or not the husband has any beneficial interest in a factory premises. If so what is the extent of that beneficial interest and how should it be treated when considering the distribution of assets between the parties on the breakdown of their marriage. I think it is important at this stage to put that dispute into its proper context. The value of the factory premises is put at HK$7 million. There is very little otherwise that is arguably held in the husband’s name. The wife owns very little. Thus

18. In the event that the Wife is unsuccessful in the Preliminary Issue, the total asset left in the family pool will be reduced to about $1M to $1.4M.  Both the Wife and the Husband claim that they are borrowing moneys from their own family to maintain this action, if these “soft” loans are to be further deducted from their assets, each of Husband and Wife has only net debt.

10.  I then concluded as follows:

24. Finally – a word of warning. It seems to me that the parties should seriously take steps to try to settle this case. The alternative is likely to be huge and unrecoverable costs for all concerned. This is something that needs to be avoided if at all possible.  

I do not know if there have been any serious attempts to settle this case. However, even though I have been informed during this hearing that the value of factory 5B has likely increased, the concern about costs remains.

11.  The wife then sought further assistance with her legal costs following the preliminary issues trial going part heard. In the third Ruling dated the 30 August 2016 I further commented as follows:

2. Unfortunately the preliminary issues hearing went part heard. It is due to come back before the court on the 1 November 2016 for a further three days. Some of the difficulty arose because of the very late disclosure of documents by the husband and the interveners. They sought leave to file additional documents on the last day of trial. I am told that it was not until the 27 June 2016 that audited reports and other financial documents relating to the 1^st Intervener Company were actually produced. It seems to me that this approach is also indicative of the litigation tactics employed by the husband and the interveners to date. For example, I have referred previously to the de minimalist approach taken by the husband to disclosure and the “catch me if you can” element to it.

3. In addition I have also been critical of the wife’s rather dogged approach to disclosure. The concern of course is that ultimately the legal costs may outstrip the value of any assets held by the couple and that this will render any final award nugatory.  

4. The wife’s legal team complain, and with some justification that it is proving increasingly impossible to understand the financial arrangements surrounding the 1^st Intervener company and other related companies. They wish to employ a forensic accountant to assist them. However given the stated financial circumstances of the parties it is hard to see how that will be possible.

5. The husband for his part says that his position is now untenable. He says that he is not avoiding his responsibilities but that he simply does not have the means to pay the maintenance ordered – either for litigation funding or generally. He says that the business has suffered of late and that his elder sister (the 2^nd Intervener) is no longer in a position to advance him funds. Likewise lending institutions are no longer willing to loan him money. He says that he has borrowed HK$150,000 from a friend and that this will hopefully be sufficient for the next six months. As I said in the previous judgment on litigation funding

7.   … Although it is of course correct that I can take into account what the husband’s current financial resources are, including his ability to borrow, that does not mean that I should ignore completely what now appears to be the reality of the situation. ...

6. I am though concerned that the preliminary issues trial should conclude with the same legal teams in place. I accept that it would not be in the interests of justice for that to be altered in any way now. 

I concluded:

11. Previously I reluctantly made an order with the intent of taking this matter up to a Financial Dispute Resolution hearing. That did not happen. The fault for this lies entirely at the door of the interveners and the husband; the wife is entirely blameless for this rather unfortunate turn of events.  

12. In such circumstances I will at this stage make an order with a view of taking this matter up to the preliminary issues hearing only. Thereafter it may be that the wife will need to give some thought to making a further application for legal aid.

This was then the position prior to the second tranche of the trial taking place.

The issue

12.  As indicated above therefore there is only one issue to be determined namely who is the legal and beneficial owner of Factory 5B.

Background to the issue

13.  On the 13 January 2003, about three years after the husband and wife married and before there were any problems in their relationship, a provisional sale and purchase agreement was entered into for Factory 5B. At that stage X was identified as the purchaser. On the 28 January 2003 F and the husband entered into a formal sale and purchase agreement as joint tenants of Factory 5B. A down payment of 40% was paid and a joint mortgage in the names of F and the husband was also obtained. A bank account for that purpose was also set up. The property was subsequently re mortgaged on the 28 August 2007. Since the date of purchase Factory 5B has been used as X’s main office and jewellery work shop and X have rented it for that purpose.

The law

14.  Generally speaking when faced with a preliminary issue concerning the ownership of a property, the Family Court will begin by reference to the very useful analysis contained in Bhura v Bhura & Others [2014] EWHC 727 which states as follows:

8. The applicable legal principles concerning a property dispute such as this are tolerably clear and have most recently been re-stated by the Supreme Court in Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776.  In summary I think they are as follows:-

i) If there is an express declaration of beneficial interests then that is, almost invariably, the end of the matter.  Such an express declaration can only be displaced if it has been procured by fraudulent conduct.  In this case it is said by the wife that the signed TR1 for Mayfield Avenue is a sham.  A sham is of course a species of fraud.  It involves the parties entering into a dishonest compact, i.e. a conspiracy, to express the true state of affairs falsely in the written agreement.  I will analyse the law relating to sham transactions a little later.

ii) If there is no express agreement about the beneficial interests then there is likely to be (at least) a tacit understanding.  This is hardly surprising as one would expect that when people enter into what may very well be the most important economic transaction in their lives – buying a home – they would have a pretty clear understanding of who owned what share of it.  In determining whether there was such a tacit understanding, and if so what it was, the court will look at all the evidence holistically and will examine the whole course of the parties’ conduct in relation to the property.

iii) In the rare case where the evidence does not reveal a tacit understanding about ownership the court can reach for the presumptions.  An obvious presumption is that beneficial ownership is the same as legal title (see Jones v Kernott at paras 17 and 51(1)).

iv) Another is the presumption of the resulting trust.  In Pettitt v Pettitt [1970] AC 777 at 824 Lord Diplock doubted that it was of much relevance in the modern era.  In his view it would be “an abuse of the legal technique for ascertaining or imputing intention to apply to transactions between the post-war generation of married couples ‘presumptions’ which are based upon inferences of fact which an earlier generation of judges drew as to the most likely intentions of earlier generations of spouses belonging to the propertied classes of a different social era.”  Some commentators believe that the doctrine has a medieval origin.  The principal problem with it is that that is allows the “solid tug of money” (as Woodhouse J evocatively put it (echoing George Eliot) in Hofman v Hofman [1965] NZLR 795 at 800) “to submerge any faint suggestion that other [non-financial] contributions play a valuable part in the acquisition of family assets”.

v) A further presumption is the presumption of advancement but this can be regarded as being on its death-bed given that it is abolished by s199 Equality Act 2010, which is awaiting implementation.

vi) But presumptions are only presumptions.  In a memorable dictum Lamm J in Mackowick v Kansas City St. J. & C.B. Ry., 196 Mo. 550, 571, 94 S.W. 256, 262 (1906) stated that “presumptions may be looked on as the bats of the law, flitting in the twilight, but disappearing in the sunshine of actual facts”.

vii) “Actual facts” are those which suggest that a result steered by a presumption is unfair.  Although there are different degrees of emphasis and nuance all of the Justices in Jones v Kernott accepted that where a tacit agreement could not be found by a process of inference the court could impute to the parties a fair agreement which they never in fact made but which they should “be taken” as having made (see paras 45, 60, 72, 85(2)).  Of course, as Woodhouse J pointed out, this involves a “fictional attribution of intention”, but the process has a long pedigree.  One only needs to remind oneself of Lord Denning MR’s statement in Appleton v Appleton [1965] 1 WLR 25 at 28 to see how the wheel has turned full circle.  There he said “A judge can only do what is fair and reasonable in the circumstances.  Sometimes this test has been put in the cases:  What term is to be implied?  What would the parties have stipulated had they thought about it?  That is one way of putting it. But, as they never did think about it at all, I prefer to take the simple test:  What is reasonable and fair in the circumstances as they have developed, seeing that they are circumstances which no one contemplated before?”  I cannot see any difference between that statement and that of Lord Wilson in para 87 where he rhetorically asked “where equity is driven to impute the common intention, how can it do so other than by search for the result which the court itself considers fair?”

15.  In doing so however I accept that this analysis generally refers to litigation between married couples. Counsel for the wife has also referred to Jones v Kernott [2012] 1 AC 776 and to my sister judge’s decision in TSC v KWH 7 Anor (FCMC 2755/2014) where Deputy Judge Grace Chan, as she was then, says as follows:

39.   The burden of proof is on the party who seeks to show that the beneficial title does not follow its legal title (See: Lewin on Trusts (19^th ed) at §9-07; Snell’s Equity (3^rd ed) at §24-049; TL v ML (supra) at §§38-39; Rossi v Rossi [2007] 1 FLR 790 at §§39-40; Fisher Meredith v JH [2012] 2 FLR 536 §§42-44).

16.  In the latter case there was a similar disagreement between what might be described as matrimonial and non matrimonial counsel. In his retort, Mr Harry for the interveners says that Mr Surman is simply wrong and in doing so he relies on Mr Mostyn’s well known dictum in TL v ML [2006] 1 FLR 465:

[34] It is to be emphasised, however, that the task of the judge determining a dispute as to ownership between a spouse and a third party is of course completely different in nature to the familiar discretionary exercise between spouses. A dispute with a third party must be approached on exactly the same legal basis as if it were being determined in the Chancery Division.

17.  Nevertheless it seems to me that the two approaches need not necessarily be mutually exclusive. I also note Mr Harry’s concluding paragraph in his submission in reply dated the 16 November 2016:

73. Whether the Court approaches the matter with the burden of proof being squarely on C [the wife] (F’s contention), or whether the Court takes the “holistic” approach to which reference is made by Mr Mostyn J, or whether the Court (contrary to F’s contention) regards the burden of proof as being on F, the results should be the same i.e. that L [the husband] and F are holding the entire beneficial interest in Factory 5B on trust for F.

18.  I agree. I will then in the first instance follow the guidance provided in Bhura v Bhura and if necessary I will consider the issue of trusts when I come to that part of the protocol. In such circumstances I do not intend to enter into a debate about what is or is not the correct approach. Nor do I intend to discuss whether this might be a resulting trust scenario or a common intention constructive trust scenario.     

19.  Thus it seems to me that in the first instance the court is asked to ascertain whether or not there is an express statement of beneficial interest with respect to Factory 5B. In the event that there is not, as is the case here, then the court is required to determine whether or not there was a “tacit understanding” with respect to that ownership. In doing so I am asked to view the whole history of the ownership of the property holistically and over time. In particular, I am asked to examine the parties conduct with respect to the property. I also accept that it is important to guard against the benefit of hind sight when going through this exercise.

20.  In the event that it is not possible to ascertain a “tacit understanding” then the court will look to presumptions to assist in reaching a decision. Even then a presumption – is just that – a presumption that can be displaced depending on the available facts. It is probably at this stage of the protocol, if indeed we get to that stage, that a number of potential trust issues may arise.

Discussion  

Was there a ‘tacit understanding’ with respect to the ownership of Factory 5B?  

21.  Although there is no written agreement, both F and the husband have consistently stated that it was always understood that F was the sole beneficial owner of Factory 5B. To that extent I accept that this was not so much a “tacit understanding” but an explicit one.

22.  F maintains that she purchased the property in order to provide an office and a workshop for the business. I accept that her explanation is entirely credible. She says that although originally the main office and workshops had been located in the back of retail shops, this model became less satisfactory as the shops moved into shopping malls. She was particularly concerned about the smell coming from some of the chemical solutions used and the fact that they often needed to work late into the night. She said that originally she had thought about renting a premises, but over time the prospect of owning a property became more appealing. Initially she had considered purchasing the property in the name of the company, but she decided against that as she was concerned that she may not get a mortgage as the business was not doing particularly well at the time. She was also concerned that she might need to pay a very large down payment if the property was purchased in the name of X. The evidence produced by F supports what she says in this respect. In particular, the audited accounts for X for the years 2002/03 and 2003/04 show the business making a loss.

23.  Consequently, F decided to purchase Factory 5B herself. Mr Harry says, and I would accept this to be the case, that this is entirely consistent with her being the driving force behind X. F says that she asked the husband to put his name on the documents in order to bolster her chances of obtaining a mortgage. She added, and again she has produced evidence of this, that she decided to ask the husband as opposed to other family members, as everyone else already had mortgage liabilities of their own. Again F’s explanation on this point comes up to proof and is a credible explanation in the circumstances.

24.  The husband for his part says he had absolutely no qualms about helping his sister out – he trusted her completely and knew that she had the ability to make the mortgage repayments. He says that he was not asked to contribute towards the down payment or to the mortgage repayments and that he has never made a contribution of any kind towards the purchase of the property.  

25.  Consequently, F was able to obtain a mortgage for 60% of the asking price, which meant that she only had to put down 40%. Although this has been challenged by the lawyers for the wife, I accept that F has been able to show that she paid for the initial deposit and further deposit as follows:

85. The documentary evidence clearly indicates that the 40% down-payment and all conveyancing expenses were paid out of F’s own money.  The documentary evidence produced by F includes:

a. Two cashier’s order application receipts dated 13 January 2003 and 25 January 2003 for the payments of the Initial Deposit and Further Deposit (in respective sums of $52,500 and $122,500) from her account at Hang Seng Bank in favor of the vendor Bank of China (HK) Limited [B/380-1 & 380/2];

b. A further cashier’s order and cashier’s order application receipt dated 18 February 2003 for a sum of $543,125 paid in favor of her conveyancing solicitors Fan Wong & Tso Solicitors & Notaries [B/382] as part payment of the Final Payment and full conveyancing costs and disbursements.  See also a Statement of Account prepared by Fan Wong & Tso Solicitors & Notaries dated 18 February 2003 [B/384]; and

c. F’s bank statement at Hang Seng Bank dated 14 January 2003, 14 February 2003 and 14 March 2003 [E/38, E/40, E/43] confirming that the above payments were made out of her account.

(See Mr Harry’s closing submission)

26.  Both F and the husband have consistently stated that the husband did not contribute in any way to the purchase of the property. Despite valiant attempts by Mr Surman in cross examination it does not seem to me that the wife has been able to show otherwise. Further I accept that it was never the wife’s pleaded case that the husband had made payments into F’s bank account in order to assist with the purchase.

27.  After the purchase, F set up an account with the mortgagee bank in order to facilitate the payment of the mortgage. I accept that this would be entirely normal in the circumstances and that given that the property was legally held by the husband and F the bank account was also held in both of their names.

28.  It is F’s case that as the Chairman, Director and shareholder of X, that she effectively ran X. She was in charge. Her parents, as the original founders of the company were also directors. However, since in or around 1996 when her father became ill, she has become more and more involved in the running of the business. It is the wife’s case that the husband was the Managing Director of X and founder of X Ltd and that he opened new stores and ran that side of the business. She says in her witness statement that Factory 5B was purchased as an office for X Ltd. However, F was able to show that infact X Ltd was a dormant company and that the new stores that were opened did so under the auspices of X. In other words, the wife’s understanding was incorrect. Further although the husband was the Managing Director of X he was not a director or shareholder. F says that he was involved in product design and held the title of Managing Director so that he could sign cheques when she was out of town – that was all. It is also of note that F was able to show that she was the ultimate beneficial owner of X in that she holds 299,999 of the original bearer stock certificates of an off shore company called G Ltd. She also holds the remaining one share in her own name. Although much was made of this during the trial – I accept that this simply reaffirms what appears to be the position from the other evidence produced – namely that X was effectively F’s company.

29.  In keeping with this it is F’s case that she would transfer money to X when cash was tight and that on other occasions she would not seek reimbursement when she purchased items for or on behalf of the company. Thus she always had a significant Director’s loan with X. Although, when the company was doing well, some of this would be clawed back, it was F’s evidence that generally the company always owed her more than she was able to take out. Thus she arranged for the mortgage to be paid by X. It is F’s case that X would then off set this sum against the significant sums owed to her.

30.  Although F was not able to produce evidence going all the way back to 2003, she was able to produce more recent evidence which supported her version of events. For example, the joint named passbook was produced to show ongoing payment of the mortgage and it was also possible to see payments being made into that account, sometimes in cash. Further I accept that F was able to show that X owed her money by way of a Director’s loan. I accept that ultimately F came up to proof on a great deal of this, despite the long passage of time and the fact that there was no hint at the time that Factory 5B was purchased that she would ever be required to do so. Although the evidence was sometimes produced in a fairly haphazard way and some of it was produced very late in the day, nevertheless she was able to support her case by cogent evidence. Perhaps more importantly there is no evidence to suggest that the husband made any of these payments. Further it seems to be accepted that X paid for all of the other outgoings on the property including the management fee and government rates, consistent with them renting the property from F.

31.  The alternative of course is that in truth Factory 5B is beneficially held by X. However, I accept that this has never been pleaded by anyone and that on the evidence presently before me is rather unlikely.

32.  On a balance of probabilities therefore I accept that the husband and F are holding the entire beneficial interest of Factory 5B on trust for F. For the avoidance of doubt I accept that Factory 5B is not beneficially owned by the husband and that it is not available for distribution between husband and wife in the current matrimonial proceedings.   

33.  Given that I am able to come to this conclusion by examining the whole history of the ownership of the property holistically since its purchase to date and by reference in particular to F’s and the husband’s conduct in relation to it, there is no need for me to look to presumptions or to consider whether or not that this is indicative of a resulting trust or a common intention constructive trust.

Costs 

34.  As stated above I have expressed my concern about costs on several occasions and in particular the potential effect that a costs order might have on the eventual outcome of this case. There have also been issues with respect to the late production of documents etc. In such circumstances I will in the first instance reserve the issue of costs for argument. Both sides are invited to file and exchange a written submission on costs within the next 28 days. It is the court’s intention to then try to deal with this matter on paper only without the need for a further hearing on the issue. In addition, there shall be a further First Appointment hearing on the 13 April 2017 at 10:30 am. Both parties do personally attend that hearing. Any further applications, restored or otherwise shall also be fixed in the first instance for directions on that date.