TKM also known as WTKM v. WHG

FCMC 5723 / 2021

[2023] HKFC 30

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER FCMC 5723 OF 2021

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JUDGMENT

(Joinder)

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Introduction

1.  This is an application taken out by the petitioner (“the wife”) by way of a summons filed on 18 November 2021 for an order pursuant to section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“the MPPO”) to set aside transfer of funds and transfer of shares in a company by the respondent (“the husband”) to his parents. In the summons, the wife seeks an order to join the husband’s mother (“H’s mother”) and his father (“H’s father”) as the 2^nd respondent and 3^rd respondent. The application here only deals with joinder of parties.

2.  The husband opposed and is seeking an order to dismiss the said summons.

Background

3.  The husband and wife were married in 2017 with one son now aged two. On 11 June 2021, the wife petitioned for a divorce on ground of unreasonable behaviour. The marriage is a relatively short one. Decree nisi was granted on 5 July 2022. Joint custody was granted to parties with care and control to the wife. As far as ancillary relief issues are concerned, the parties have not yet reach FDR stage.

4.  Prior to the petition, the family had lived in a flat, sized around 2,000 square feet, wholly owned by the husband’s parents. In or about 2020, when the wife was pregnant, the husband’s parents suggested the family to live in another flat also wholly owned by them in the same tower. This was meant to be their new matrimonial home. Unfortunately, as the relationship between the husband and wife deteriorated, the husband moved out to a rented apartment in the vicinity leaving the wife and the child staying in the new matrimonial home. However, in June 2021, the wife moved out with the child to a rented apartment.

5.  During marriage, the wife had worked as a sales director in the husband’s company earning HK$28,000 per month. She ceased to work after moving out with the child.

6.  Without going into details, the wife gave a brief account of the well-off lifestyle of the husband whom has been well supported financially by his parents, including but not limiting to, providing the husband with funds to start a restaurant, supporting him financially to start his own business, and transfering handsome amount of funds to his account in millions dollars as gift.

7.  To the contrary, the husband claimed to have earned HK18,000 per month as a merchant only and with a negative net value of asset and liabilities of - HK$4.054 million[1].

8.  On 8 April 2022, Deputy District Judge R. Chow granted an order (by paper disposal) that the husband do pay the wife maintenance pending suit and child maintenance in sum of HK$41,000 and HK$38,000 respectively on a monthly basis. Apparently, the husband defaulted in paying such sums since the date of order, his act rendered the wife to apply for leave to issue judgment summons. On 13 July 2022, the court granted leave to the wife but as at date of this judgment, as at the date of handing down this judgment, no judgment summons has been issued.

The dispositions

9.  It could not be disputable the husband was a shareholder of his company (“G Co. Ltd”) at all material times. The 1^st disposition in question primarily concern the wife when transfer of 2 shares of G Co. Ltd to H’s father had come to her attention. The transfer was effected on 20 May 2021, on a date shortly prior to the wife moving out the matrimonial home. After the transfer, the husband only remains as a director of G Co. Ltd. The transfer was significant because G Co. Ltd owns a landed property, namely a warehouse in Macau worth some HK$25,000,000. The husband said it was his father who had borrowed him HK$25,000,000 for purchase of the said warehouse with a view to develop his liquor and tobacco business. As he was unable to repay his father half of the purchase price as agreed, i.e. HK$12.5 million, he thus transferred the said two shares to his father.

10.  The 2^nd and 3^rd dispositions related to transfer of HK$500,000 twice, totaling HK$1 million, by the husband to his mother on 21 and 22 July 2021. These transfers had happened in some time approximately one month after the wife moving out from the matrimonial home.

11.  For the 1^st transfer of HK$500,000 to the H’s mother, the husband explained the wife has taken a family private vehicle purchased by his parents for her own use after moving out from the matrimonial home, the husband has to “pay for” the price of the vehicle to his parents which caused him to make such transfer. The wife said otherwise that the said transfer was unrelated to the vehicle but for defeating her ancillary claim.

12.  For the 2^nd transfer of HK$500,000 to H’s mother, the husband explained it was meant to be repayment of a loan advanced by his mother to ease his cash flow problem in November 2020. The wife rebutted by displaying the husband’s bank accounts with a balance over million dollars and deduced he has a high liquidity without the need to seek assistance. On the other hand, the husband argued that the wife failed to take into account the liquor & tobacco business got traction due to Covid-19 pandemic and that he has anticipated a relatively high liability.

13.  These transactions resulted the wife to apply for a section 17 application for orders to set aside them. This forms the basis of joining the husband’s mother and father here.

14.  The wife is also seeking in the alternative, in relation to the husband’s mother’s transaction, adding back HK$1 million to the matrimonial pot and treated it as being with the husband.

The husband’s opposition

15.  The husband opposed by saying (i) the section 17 application is unnecessary since an order on notional add back can be given; (ii) it is unjust and inconvenient to have caused delay and an increase of costs of the proceedings; and (iii) the section 17 claim is bound to fail.

The legal principles

16.  Order 15 rule 6(2)(b) of the Rules of High Court states the requirement of a joinder application:

“Misjoinder and nonjoinder of parties (O. 15, r. 6)

…..

(2) Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application—

(a) order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b) order any of the following persons to be added as a party, namely—

(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 relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.”

17.  While it is understood that the test of joining a party is whether there is a bona fide claim and a proper question to be tried between the wife and the intended respondent(s), the joinder must be necessary or just and convenient for the resolution between then as well as the wife and the husband. HHJ Melloy in NLT v. LYKJ (FCMC 8680/2012; [2020] HKFC 75) in light of a Court of Appeal case, LLC v. LMWA [2019] 2 HKLRD 529 as follows:

“8. In addition, it is accepted by both sides that the correct approach to matters of this nature was originally set out by Mostyn J in Fisher Meredith v JH and PH (Financial Remedy: Appeal: Wasted Costs) [2010] 2 FLR 536. This approach has also been recently approved by our own Court of Appeal in LLC v LMWA [2019] 2 HKLRD 529, where Lam J said that generally speaking it was not necessary to join a third party unless there was a request for a particular order to be made against him or her. In that judgment Lam J stated inter alia as follows:

[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.

My view

Generally

18.  The crucial question here is whether the wife has a bona fide claim on the family asset so that both the H’s mother and H’s father should be joined as a party to this proceeding.

19.  For convenience, I shall deal with the issue on adding back first. I am aware setting aside the dispositions are a matter of discretion of court, if there are other assets available, the court may direct to add back the amount the wife is asking for. Though stated in the summons but not insisted by the wife in her written submissions, I do not see this is a viable option because the husband himself has stated in his Form E that his monthly earnings is only HK$18,000 with a net value of his asset and liabilities is –HK$4.054 million. I leave it to the wife to consider whether to amend her summons in this regard.

20.  I then turn to the joinder application. To start with, without repeating the requirements of Order 15 rule 6, it is clear from the legal principles that the burden is on the wife to show there is a bona fide claim that the dispositions of HK$1 million and transfer of shares are capable to be set aside aiming to avoid defeating the ancillary claim. It is also incumbent on the wife to demonstrate a request for a particular order to be made against both the H’s mother and the H’s father specifically.

21.  From the prima facie facts that the wife has presented, it is clear that she has an arguable case that the funds / shares transferred may be considered as matrimonial assets. The reason being, in respect of the husband’s disposition of 2 shares of G Co. Ltd to H’s father, a value up to HK$25,000,000 of the matrimonial asset may have been depleted. Similarly, the sum HK$1 million transferred to the H’s mother might have been deducted from the entire matrimonial pot. Although it is premature to say so, the transactions above have a bearing on the negative asset that the husband is now facing with.

22.  I pay attention to the husband’s relationship with his parents. Both of the husband’s parents are generous enough to provide accommodation to the husband, the wife and their grandchild. Not only this, the H’s father has provided the husband financial assistance in developing his own business. As a result, it is not surprising that money dealings between them have intermeddled.

23.  Even if the husband and his parents argued otherwise, I would say both have defence in resisting an order to set aside both dispositions. The major factual disputes on the background and reasons of transfers can only be resolved at trial of the wife’s section 17 application after evidence be elicited from witnesses. It is therefore too early to conclude the wife’s section 17 application is bound to fail.

24.  The joinder of parties is also justified because both the H’s mother and the H’s father have competing claims to the funds / shares in question.

25.  The husband once argued it is not just and convenient for joining his parents to this proceeding because it might occur in delay of proceedings. In light of expediting the proceedings, this issue can be solved by both parties applying for directions from Court that both the section 17 application and the ancillary relief trial can be heard one after the other. I believe this question can be canvassed at a later stage in further first appointment hearings.

26.  I agree with the wife that the wishes of both the H’s mother and the H’s father to join as a party to this proceeding is irrelevant.

27.  In this instance, I find the wife has a bona fide claim for an order to set aside (i) the 2 company shares of G Co. Ltd transferred to his father and (ii) transfer of HK$500,000 twice, totaling HK$1 million, transferred to his mother.

28.  As a result, both the H’s father and H’s mother shall be joined as parties, namely the 2^nd & 3^rd respondents in this proceedings.

29.  The wife succeeded in her summons for an order of joinder. The general principle is that costs should follow the event. I make an order nisi that the husband do pay the wife’s costs of her summons filed on 18 November 2021, with certificate for counsel, to be taxed if not agreed.

Orders

30.  With reasons of the foregoing, I make the following orders:

(i)  The husband (the respondent) be renamed as the 1^st respondent in this proceedings.

(ii)  The H’s mother be joined as the 2^nd respondent in this proceedings.

(iii)  The H’s father be joined as 3^rd respondent in this proceedings.

(iv)  No orders be made to paragraph 2 to paragraph 11 of the wife’s (the petitioner’s summons) filed on 18 November 2021.

(v)  Paragraph 2 – paragraph 11 of the wife’s (the petitioner’s) summons filed on 18 November 2021 shall be adjourned to the forthcoming first appointment hearing on 9 March at 2:30 pm in Court 42 for directions.

(vi)  There be a costs order nisi that the husband (the respondent) do pay the wife costs of paragraph 1 of the wife’s (the petitioner’s) summons filed on 18 November 2021, with certificate for counsel, to be taxed if not agreed. The order nisi be made absolute in absence of application to vary by summons within 28 days from date of this judgment.

(vii)  The wife’s (the petitioner’s) own costs be taxed in accordance with the Legal Aid Regulations.