TYT v. TLH

FCJA 3690 / 2017

[2020] HKFC 53

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

JOINT APPLICATION

NUMBER 3690 OF 2017

----------------------------

------------------------

------------------------------------------------

J U D G M E N T
(Application for Transfer of Proceedings)

------------------------------------------------

1.  This is the 2^nd Applicant’s (W’s) application for the proceedings to be transferred to the Court of First Instance of the High Court (“CFI”) whereby the 1^st Applicant (H) opposed.

Brief background of the case

2.  The parties acted in person when they filed the Joint Application for divorce on 8 August 2017.  Attached to the Joint Application was a three-page divorce agreement (“nuptial agreement”) written in Chinese, with the last page bearing the signatures of the parties and the witnesses.  Both parties argued strenuously the circumstances leading to the signing of the nuptial agreement.

3.  As all the children in this case are grown-ups, the only outstanding matter is ancillary relief between the parties.

Applicable legal principles

4.  There is no dispute that the Family Court has unfettered discretion to order a transfer of proceedings to the CFI. When exercising the discretion, the Family Court is guided by Rules 32 and 80 of the Matrimonial Causes Rules, Cap 179A as well as Practice Direction 15.14.

“32 Order for transfer of cause

(1) The court may order that a cause or application pending in the District Court be transferred to the Court of First Instance, where, having regard to all the circumstances including the difficulty or importance of the cause or application or of any issue arising therein, the court thinks it desirable that the cause or application should be heard and determined in the Court of First Instance.

(3)   Any cause or application transferred to the Court of First Instance under paragraph (1) may be re-transferred to the District Court at any stage of the proceedings if the Court of First Instance thinks it desirable.”

“80. Transfer of application for ancillary relief: general provisions

(3) The court may order the transfer to the Court of First Instance of any application for ancillary relief pending in the District Court where the transfer appears to the court to be desirable. (25 of 1998 s. 2; L.N. 26 of 2002)

(5) In considering whether an application should be transferred to the Court of First Instance the court shall have regard to all relevant considerations, including the nature and value of the property involved, the relief sought and the financial limits for the time being relating to the jurisdiction of the District Court in other matters. (25 of 1998 s. 2; L.N. 26 of 2002)”

5.  A2 of the Practice Direction 15.14 states that,

“The fundamental principle is whether in light of the overall circumstances including the nature of the issues of fact or law involved, the proceedings or part of them are more desirable to be dealt with in the CFI.”

6.  Under the same paragraph, three cases, all unreported, were cited for the practitioners as examples of how the jurisdiction is exercised:

(1) B v B, FCMC3105/1999, unreported, 11 July 2000;

(2) H v H, FCMC7173/2000, unreported, 1 February 2002; and

(3) SWM v PYC, CACV308/2002, unreported, 6 November 2002.

7.  The Family Court still needs to be satisfied that the transfer is justified even when all the parties agree.

8.  When the proceedings or part of them are ordered to be transferred, it will impact on the future conduct of the case.  Thus an application for transfer should be made as soon as practicable after it becomes apparent that a transfer is required.  The summons should be supported by affidavit evidence setting out all the grounds for transfer.

9.  The Family Court may order a transfer at any time of the proceedings.  It is not bound to order a transfer as soon as the application is brought.  For example, it may order the transfer to take effect after the filing of the Form Es (annexed to PD 15.11), or after the parties have gone through the Financial Dispute Resolution (“FDR”) or after all or some outstanding interlocutory matters are disposed of, see PD15.14,

“B. Giving directions when ordering transfer

6. When ordering a transfer, the Family Court will give case management directions as may be necessary to ensure that the transferred proceedings will be expedited without delay. To facilitate the Family Court in making the appropriate directions to deal with the specific needs of the case, the following shall apply.

B1. Interlocutory applications

7. If a party wishes to pursue any interlocutory application, such as maintenance pending suit, challenge against jurisdiction based on lack of substantial connection or forum non conveniens, or specific discovery, he should, as far as possible, take out the summons before or at the same time of the application for transfer.

8. The Family Court may hear and dispose of the interlocutory application before ordering the transfer. In that scenario, the extant practice of the Family Court applies.

9. If the Family Court decides that the interlocutory application should be deferred to the Court of First Instance, it will give directions for future conduct, including filing of evidence, factual and expert (if required), with a view to ensuring that once the proceedings are listed in the Court of First Instance, the application will be disposed of expeditiously without delay.”

10.  Counsel for the respective parties do not have dispute on the applicable legal principles gleaned from the above cases in respect of transfer of a case to the CFI. The relevant considerations are:

(1) Whether there is a matter of public interest;

(2) Where there are novel or difficult points of law to be resolved;

(3) Where delay will work a clear injustice;

(4) Where there is unduly complicated or conflicting evidence the resolution of which is likely to be so protracted that it will unduly prejudice the Family Court lists and this work against the interests of other litigants;

(5) Whether the financial limits for the time being relating to the jurisdiction of the District Court in other matters (but this factor alone is not decisive);

(6) In general, whether there is special complexity.

Discussion

11.  Mr Benjamin Yu leading Ms Bonnie Cheng representing W submitted three reasons for transfer and I would deal with the easier one first.

(i) Value of the Properties involved

12.  Mr Yu submitted that the value of the assets involved is substantial whereas Ms Anita Yip leading Ms Lily Yu and Mr Caspar Ng for H disputed the figures put forward by Mr Yu.  Both Counsel have spent some time to draw my attention as to the respective parties’ Form E.  For my part, I have no intention to rule at this stage what the value of the family assets is but suffice to say that even Ms Yip has agreed in her oral submission that the amount involved in this case is not small, though not mega, she added.

13.  In B v B,FCMC 3105/1999, unreported, 11 July 2000, one of the cases specifically referred to in PD 15.14, Deputy Judge Jenkins said in page 4 of his judgment, “(Mr Peaker who appeared for the husband) pointed to the decision of Deputy Judge Saunders, as he then was, in DJ No 7929 of 1995, a case where the total assets were possibly in excess of HK$30,000,000.00.  An application to transfer those proceedings to the High Court failed. The judge noted that the amount at issue, though significant, was “not a sufficient ground to transfer the proceedings to the High Court.”

14.  In H v H, FCMC7173, unreported, 1 February 2002, another case also specifically referred to in PD 15.14, HH Judge Saunders also said in page 9 of his judgment,

“The High Court and the District Court have a concurrent jurisdiction in divorce and in ancillary relief. Parties are however required to commence their proceedings in the District Court. There are now 6 judges sitting on a permanent basis in the District Court who are solely engaged in matrimonial work. There is a separate Family Court Registry, and although the "Family Court" does not have any substantive legislative basis it exists as a de facto separate branch of the District Court. The effect of this has been to build a pool of judges who are very experienced in this particular field. The judges deal with a wide range of ancillary relief cases, regularly involving many millions of dollars and with international implications.

There is no equivalent "Family Division" in the Court of First Instance of the High Court. Ancillary relief cases rarely go to the High Court and when they do there is no assurance that the judge who tries the case will have any special expertise in the field. In most cases however, fortunately, trials are able to be allocated to a judge who has been promoted to the High Court from the District Court and who has gained experience in the Family Court.

In these circumstances there must be cogent reasons why a case should be removed from the ambit of a group of specialist judges. It is right that R 80 requires the court to take into account the financial limits for the time being relating to the jurisdiction of the District Court in other matters, but that is only one consideration. Very large sums of money alone will rarely be sufficient to justify transfer. There must be some special complexity in the case which will demand that it be given the attention of a Judge of the Court of First instance.”

15.  In light of the guidelines laid down by the decision, I refuse leave on the ground that the value of the assets is substantial.

16.  Whilst we are on the topic of H v H, Ms Yip also drew my attention that since H v H, we now have 11 full-time family judges who are dealing with family cases and unlike in 2002 where there had been quite a number of judges being promoted to the High Court from the Family Court, there are only one, i.e., Her Honourable B Chu.

17.  Ms Yip also pointed out that FDR which is an important aspect of the judicial process in the matrimonial financial dispute should be heard by family judges who have special expertise.

18.  Mr Yu on the other hand submitted that under s32(3), CFI can always transfer the case back to the Family Court.

19.  I have no comment as to the number of judges who has been promoted to the High Court and I am sure that the High Court Judges can handle the cases which we transfer but as Mr Yu rightly and repeatedly pointed out in his oral submission, the factors that I have to consider for transfer is to have regard to all the circumstances including the difficulty or importance of the cause (emphasis added).

(ii) Complex and difficult issues of law and facts

20.  Mr Yu submitted that the parties’ dispute involves complex and difficult issues of law and facts, in particular the nuptial agreement and the ownership of some shares in Shenzhen. 

21.  In relation to the nuptial agreement, Mr Yu submitted that the parties have advanced diametrically opposite versions of how the purported nuptial agreement came into being. 

22.  After reading the parties’ Affirmations, I agree that quite a number of witnesses would have to be called to support and/or to rebut their respective versions.  However, these are only facts finding which I disagree that it is complicated.

23.  As for Mr Yu’s submission that it is a protracted exercise, my view is that if calling of a number of witnesses are inevitable, the amount of judicial time taken would be the same be it in Family Court or CFI.

24.  Mr Yu also submitted that although our Court of Final Appeal in SPH v SA [2014] 17 HKCFAR 364 has adopted the principles laid down in Granatino v Radmacher [2011] 1 AC 534 and has provided some guidance, the jurisprudence has since developed further in England.  Mr Yu cited the case of LCYP v JEK & Anor [2019] HKCFI 1588 whereby A Chan J had referred to some of the English cases subsequent to Radmacher.

25.  Mr Yu also drew my attention to paragraph 137 of the judgment whereby A Chan J said,

“I do not believe that the law requires the court to quantify the amount of weight to be attached to an unvitiated nuptial agreement. In this case, it would not be right to attach no weight to the PNA. On the other hand, it would be wrong to place great weight on it because it would be unfair to do so.”

26.  Mr Yu submitted that this statement is neither here nor there as it does not assist much.

27.  Ms Yip on the other hand submitted that the law relating to nuptial agreement has been discussed by the Court of Final Appeal in SPH v SH [2014] HKCFA 56 (SPH) adopting the principles in Granatino v Radmacher [2011] AC 534 (Radmacher). The principle has been re-affirmed by the decision of A Chan J in LCYP v JEK & Anor [2019] HKCFI 1588 (Date of Judgment 8 July 2019).  She submitted that the law has not been changed in terms of the validity of the nuptial agreement or as part of the overall (or the weight to be given to the) s.7 consideration.

28.  Ms Yip also drew my attention to the case of FHM v KYM & Ors [2015] HKFLR 241. 

29.  In that case, the parties were from Hubei Province and they were married in Mainland China.  The husband came to Hong Kong in 1978 to develop his business.  The parties signed a Deed of Separation in 1985 and in the years after the Deed of Separation was signed, the husband had been doing very well in his business until he suffered a stroke in January 2012.  In 2013, the wife petitioned for divorce on unreasonable behaviour and the husband filed the Answer and cross-petitioned based on two years’ separation.

30.  In paragraph 19 of the judgment (“the Judgment”), Deputy District Judge G Chan (as she then was) (Judge G Chan) said,

“There is no doubt that this is a big money case. The husband estimates in his Form E….that his total assets amount to nearly $23 million. This has not taken into account the value of business/shares of the Transactions, and the withdrawal/transfer of over $500 million from the husband’s bank account(s) to Madam N between 2012 and 2013.”

31.  The wife applied for section 17 against the share transfer.  The husband applied for a preliminary issue to determine on the Deed of Separation.  Both validity and effect of the Deed were disputed by the Wife.  The husband then applied for the Court to transfer the whole set of the proceedings to CFI which was dismissed by this Court.

32.  When disagreeing with the Counsel for the husband’s submission that judicial guidance is warranted on how the Family Court should approach after SPH, Judge G Chan said that,

“44.…The law on the determination on the validity of a nuptial agreement is already set out in SPH in which the English authority of Radmacher is approved and which the Family Court being composed of a panel of specialized judges dealing with matrimonial proceedings on a daily routine basis, would have no difficulty in applying the law into the facts of the case.

45.  Although the facts and the development of this case may have spanned for over 5 decades, its factual matrix, in my view, does not give rise to particularly complicated questions of facts and law.”

33.  Furthermore, when agreeing with the submission made by the Counsel for the wife, Judge G Chan also said that,

“…..whether the Deed of Separation is valid, and if so, how much weight is to be given to it remains part of the section 7 exercise in the ancillary relief trial. (The Counsel) explains that even if the Deed is to be given full force, the Family Court still have to perform its quasi-inquisitorial role under section 7 of the MPPO, in particular to have regard to the income, earning capacity, property and other financial resources which each of the parties has or is likely to have in the foreseeable future (see section 7(1)(a) of MPPO). He further submits that it is more appropriate to consider the Deed under step (4) set out by the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537 under ‘conduct of the parties’ and ‘all the circumstances of the case’.”

34.  I agree in its entirety and I also disagree that there is a public interest to be served by trying the case in the CFI.

35.  With regard to the parties’ disputes over the ownership of assets, Mr Yu in his written submission submitted that,

“16.….it is plain that they will result in complicated and protracted trial(s) of preliminary issues.  To take the example of 深圳市坤祥投資有限公司 (“Shenzhen Kuncharm”), it is W’s case that H was and remains the ultimate owner of this company, which shares have been held on trust for him, under which H accepted that Shenzhen Kuncharm was one of the companies in which he held an interest directly or through nominees.  On the other hand, H now alleges that he had a mere 2% shares in the company which was sold through his nominee back in May 2018.  The record of registered shareholding shows the company’s shares have changed hands multiple times since 2003.  To determine the true beneficial ownership of these shares one needs to trace through each and every one of these transfers and examined the circumstances at the time including the parties involved, the consideration in question, the alleged reason(s) for the transfer, who was in control of the company before and after, etc.

17. It will be a colossal exercise in respect of one company.  It is probable that a similar exercise needs to be performed for other companies as well (such as 深圳市坤祥國潤電器有限公司), given the parties (particularly H’s) longstanding practice of holding assets in Mainland China through nominees.”

36.  He further submitted that another area of controversy is H’s position that multiple bank accounts under his name (one of which has a balance of HK$72 million) are allegedly subject to a “代為持有” arrangement and their true beneficial owner is his brother.  As W does not accept this and therefore, Mr Yu submitted that the matter will have to be litigated in these proceedings.

37.  Mr Yu submitted that this Court is not dealing with a question of TL v ML beneficial interest but also complicated trust arrangement which involves cross-border issue.

38.  I must admit that I do find some force in Mr Yu’s submission in this respect.  However, in the recent Court of Appeal decision in LLC v LMWA [2019] 2 HKLRD 529, the Court of Appeal directed for the first time that cases involving third party interests may still be suitable for FDR before the trial of the ownership dispute.

“21. We agree that issues on ownership between a spouse and a third party, insofar as it is necessary to determine the same, have to be decided by reference to the general law of property and in many cases formal pleadings should be required in order to identify the issues for such determination. However, we have reservations on prescribing that a trial of preliminary issue as the only way forward once an issue on third party beneficial ownership is raised. We also have reservations on prescribing that a FDR must be postponed until after the trial of preliminary issue.

22. One must not lose sight that the dispute on ownership in these cases often arisen from matrimonial proceedings. But for the breakdown of marriage and the application for ancillary relief by one spouse in a divorce petition, there would not be any claim on the property. In other words, the parties only raise the issues on beneficial ownership for the court to determine because of the matrimonial proceedings.

23. The underlying matrimonial dispute and the application for ancillary relief, in our judgment, is the origin and the substratum for the litigation on ownership irrespective of the procedural routes adopted by the parties and the court to resolve the same. If the underlying ancillary relief claim is settled or resolved satisfactorily between the spouses, often there would be no further need or justification for proceeding with a determination of a dispute on the ownership.

24. Alternatively, if the ancillary relief can be determined or settled without any adjustment to or encumbrance being imposed upon the title to and/or the proprietary interest in that property (e.g. where a spouse does not seek any transfer of property order or any charge being imposed on the same to secure a claim [“a proprietary order”], and content with the claim being satisfied by other properties in the matrimonial pot whilst having the value of the disputed property being taken into account), it may be possible to confine the dispute to one between the spouses.

25. Further, even in cases where a spouse seeks a proprietary order in respect of the disputed property, the third party must be involved only if he or she has a competing claim to that property.  In this respect, there is a difference between cases where the third party is the legal owner or one of the legal owners of the disputed property and cases where a spouse claims that the third party has a beneficial interest in a property legally held under the name of that spouse.  In the former case, the third party should be joined as a party since the legal title of the disputed property would have to be transferred or subject to encumbrance if the ownership issue is resolved by the making of a proprietary order.  In the latter case, the third party should be notified of the claim and if he or she decides to contest the ownership issue, he or she should apply to be joined as party to the proceedings.  If the third party does not apply to be joined, he or she shall be bound by the judgment: see Order 15 Rule 13A(4) of the Rules of the High Court, applicable by virtue of Rule 3 of the Matrimonial Causes Rules.”

39.  In this case, only one first appointment has been conducted so far.  The rests were all interlocutory applications.

40.  Mr Kwok, the instructing solicitor of H, in his affirmation dated 3 December 2019 stated that the parties including the interested parties have taken out 11 summons in total (excluding those summons which are procedural in nature such as summons for leave to file and serve additional affirmations)[1].

41.  Ms Yip has helpfully set out in her written submission of the long list of outstanding matters in this case,

“39. (1) H’s s17 application which was heard on 5 June 2019 with impending decisions;

(2) W’s re-opening, and adducing further evidence on H’s s.17 application, which will be disposed of on paper with impending decisions;

(3) W’s paper application to the Court of Appeal for leave to appeal against the Decision of Deputy Judge D To in relation to W’s specific discovery application, with impending decision;

(4) Clarification and/or further particulars to be sought by H arising out of W’s Answer to H’s 2^nd Questionnaire;

(5) Clarification and/or further particulars to be sought by W arising out of H’s Answer to W’s 2^nd Questionnaire;

(6)   Potential interlocutory applications(s) including TL v ML proceedings and/or s.17 application that W claims she intends to take out against H or other third parties in relation to companies and bank accounts.”

…

42.  Ms Yip also submitted that,

“41…..the outcome of W’s present application for leave to appeal as referred to in 39(3) against the Decision of Deputy Judge D To is very likely to alter the landscape of the whole case. One of the key issues of the intended appeal was whether the period for general discovery of bank statements in this case should be extended to January 2014 or remain as prescribed by Form E (i.e. from June 2017). H has complied with the disclosure requirement as per Form E. W on the other hand wants a carpet search of all H’s bank statements since January 2014. Apparently, if W succeed in her intended appeal, further questionnaires would arise because of the production of new bank statements.”

43.  Ms Hung, the instructing solicitor of W said in her affirmation dated 2 August 2019,

“Timing of Transfer

17. It is believed now is the suitable timing for transfer. Firstly, save and except the 1st Applicant’s application for specific discovery, which is schedule to be heard on 23rd September 2019, all interlocutory applications took out by the parties have been heard. For the 1st Applicant’s specific discovery application, it is likely that such application may be resolved by consent shortly as 2nd Applicant has already confirmed that she will provide the answer.

 18. The parties intend to take out TL v ML application…”

44.  In my view, if all interlocutory applications taken out by the parties have been heard except TL v ML, I agree that it is simply premature to transfer the case at this stage.  It is also my view that after TL v ML application is taken out by W and all pleadings are in order, this Court can conduct FDR first before the transfer application is re-visited.

45.  In this respect, I agree with what Ms Yip submitted in her written submission,

“31. The Family Court judges are not only experienced in dealing with ownership disputes involving third parties; they are also au fait and possess the expertise to give sound indications to ownership disputes at FDRs.”

46.  Mr Benjamin Yu also submitted that since all the interlocutory applications were heard by my learned colleague, Deputy Judge D To as the de facto docket judge of this case but now that the case has been re-assigned to me, therefore, it is the opportune time for the matter to go up to CFI. 

47.  I disagree.  As I have already formed the view that once TL v ML application to be taken out by W is in order, this Court can conduct FDR soonest possible so as to encourage parties’ settlement. I refuse leave on this reason.

(iii) Lack of jurisdiction to make formal declarations

48.  Mr Yu also submitted that this Court has no power to make formal declarations.  As for the declarations as to the ownership of properties, there is a financial limit imposed by s26(b) of the District Court Ordinance and in this case, the value is well exceeded that limit.  Mr Y therefore submitted that W could therefore be facing unnecessary difficulties in enforcement, including enforcement in Mainland China where the parties have substantial assets.

49.  Although I agree that I do not have power to make declarations in this case, I have no idea of what application W’s legal team has in mind to take out.  If it is purely a TL v ML application, I cannot see any reasons why I have to transfer this case to the CFI.

50.  In this respect, I borrowed what Judge G Chan said in paragraph 51 of the Judgment,

“The Family Court judges, being judges in this specialised field have been determining in a matter of daily routine, claims on third party beneficial interests and/or whether dispositions of property should be set aside under section 17 of the MPPO.”

51.  Furthermore, it has also been specifically set out in Practice Direction 15.14 that all interlocutory applications should be taken out before and at the same time as this application is made.  Without the benefit of knowing what application W is going to make, I refuse leave to transfer on this reason.

Conclusion

52.  W’s summons for application for transfer to CFI be dismissed.

Costs

53.  Costs should follow the event.  The costs of and incidental to this application be to H to be taxed if not agreed, with certificate for counsel.

54.  Last but not least, it remains my gratitude for both Ms Yip and Mr Yu for their helpful assistance.