TYT v. LSC

FCMC13567/2012

[2019]HKFC32

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 13567 OF 2012

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DETERMINATION
(Joinder)

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1.  These divorce proceedings commenced in September 2012. The parties failed to reach any agreement at the FDR hearing that was taken place before HHJ Grace Chan on 11 August 2017.  By the order of HHJ C.K. Chan dated 12 January 2018, PTR hearing in relation to ancillary relief was taken place before me on 21 February 2018, during which Mr. Yim counsel appearing for the respondent husband (the “H”) mentioned for the first time that H intended to take out a s. 17 application.  On 19 June 2018, H took out an application by way of summons for an order that:

(1) Pursuant to s. 17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192, the disposition made by the petitioner wife (“W”) in favour of her mother (the “proposed intervener”) in respect of 1 share of (or 50% shareholding in) a Hong Kong company (“UV Asia”) on or about 28 February 2014 (the “Disposition”) be set aside and;

(2) The proposed intervener be joined as an additional party to these proceedings as the intervener;

(3) All consequential directions and orders for the purposes of giving effect to the above;

(4) Further or other directions;

(5) Costs; and

(6) H’s own costs be taxed in accordance with Legal Aid Regulations.

2.  This is the hearing of the paragraph (2) of the above summons dated 19 June 2018. 

3.  According to the Instrument of Transfer and the Sold and Bought Note provided by W’s solicitors by the letter dated 3 July 2018, the Disposition took place on 6 March 2014 after these divorce proceedings were commenced.  It is not disputed that W did not disclose her shareholding in UV Asia in her Form E dated 13 August 2013.  Nor did she inform H or the court before or after she made the Disposition.  H contended that that was a classic s. 17 situation.

4.  W contested the joinder of the proposed intervener on the following grounds:

(1) UA Asia has been de-registered and struck off from the roll of register of companies pursuant to s. 750 of Cap. 622 since 7 December 2018;

(2) The proposed intervener is 78 years old and is suffering from various illness such as vertigo, mobility problem and ankle injury; 

(3) Although the Disposition was made because the proposed intervener wanted to help W to start a business, the new business did not happen.  No bank account was ever opened for UV Asia.  W has provided two letter of IRD respectively dated 5 February 2013 and 14 December 2015 as well as UV Asia’s tax return – corporation final assessment of the year 2014/15 and provisional payment in 2015/16, relying in support of which W contested that UV Asia was never in operation and had never received income or made profits;

(4) W did not disclose the shareholding in UV Asia was because the company was never in operation and had no profit; and

(5) The Instrument of Transfer and Sold and Bought Note both dated 6 March 2014 showed that the Disposition was supported by valuable consideration.

5.  In the premises, W contested that UV Asia was valueless and it could not be just and convenient to join the proposed intervener in these divorce proceedings.

6.  I take the view that the core of W’s contestation is her allegation that UV Asia was valueless. 

7.  At all material times, UV Asia and UV Hygiene are related companies.  H took notice that in UV Hygiene’s balance sheet as at 31 March 2012, there was an item described as “Loan from a related company” in the amount of $800,000.  After H having repeatedly raised questions to W about that item, pursuant to the order of HHJ Grace Chan to re-answer the question No. 4 of H’s 3^rd questionnaire W eventually answered that the “related company” was UV Asia.  W affirmed that $800,000 was advanced by UV Asia to UV Hygiene.  By her answer to H’s 4^th questionnaire, W affirmed that the aforesaid loan was made by cash of $300,000 on 1 September 2010, $300,000 on 12 November 2010 and $200,000 on 11 January 2011.  I take the view that, despite the contents of the two letter of IRD respectively dated 5 February 2013 and 14 December 2015 and UV Asia’s tax return – corporation final assessment of the year 2014/15 and provisional payment in 2015/16, and W and the proposed intervener’s affirmation evidence to the contrary, the above casts serious doubt on the allegation that UV Asia was valueless.  In the circumstance, I am satisfied that there is serious issue to be tried in the intended s. 17 application.

8.  My attention was drawn to the statement of UV Hygiene’s bank account for the month of November 2010.  Upon perusal of the said bank account, it transpires that the payment of $300,000 dated 12 November 2010 was made by way of “credit as advised”.  Mr. Yim contended that in contrary to W’s allegation that such payment was by cash, it seems that the said $300,000 was transferred from a bank account and, accordingly there is question on W’s allegation that UV Asia did not have bank account.

9.  W transferred her shareholding in UV Asia to the proposed intervener for $1 only.  Mr. Yim contended that there is no suggestion that W has actually received the $1 consideration and apparently the Disposition was not supported by any valuable consideration.  In view of the matters aforesaid, it seems to me that no matter whether the $1 consideration was paid and received there is a serious question as to if the Disposition was an undervalued transaction to be tried.

10.  Mr. Lam counsel for W drew my attention to the background fact that at the inception of UV Asia, W was neither a director nor shareholder.  When UV Asia was incorporated in February 2011, the two directors and shareholder were W’s brother and sister.  The sister transferred her 1 share in (or 50% shareholding of) UV Asia to W in October 2012.  At the same time, her sister resigned and W was appointed the director of UV Asia.  Nevertheless, I am unable to see how the background that W was not a shareholder or director of UV Asia before October 2012 could resolve the question on the value of UV Asia as at the time of the Disposition. 

11.  It is not disputed that UV Asia that was de-registered pursuant to s. 750, Cap. 622 can be re-instated pursuant to s. 760, Cap. 622. 

12.  Joinder of parties is governed by Order 15 rule 6, Rules of the High Court, Cap 4A, which provides that the court may order any person to be joined if (i) any person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon or (ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relation to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the court would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter. 

13.  Rule 74(3) of the MCR requires any s. 17 application to be served on the person in whose favour the disposition is alleged to have been made.

14.  In Fisher Meredith v JH & PH [2012] 2 FLR 536 at §[43], Mostyn J stated that in the case where a claimant is saying that a property held in the name of a third party is the property of the respondent there is a clear obligation on the claimant to apply to join the third party at an early stage and to seek to invoke the discipline in TV v ML (Ancillary Relief: Claim Against Assets of Extended Family).

15.  By reasons of matters aforesaid, I accept that the proposed intervener should be joined as a party to these proceedings. 

16.  I make an order in terms of the paragraph 2 of the summons dated 16 June 2018.

17.  H is successful in the present application.  For now, I see no reason why costs should not follow the event.  It is ordered nisi that W shall pay H’s costs of the present application including reserved costs with certificate for counsel’s attendance.  The costs order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.

18.  I take this opportunity to express my gratitude for counsel’s assistance.