Introduction

In the recent case NLT v LYKJ [2020] HKFC 75, the Family Court provides guidance on how the parties should proceed the case, where there are parallel proceedings in the High Court concerning the same properties in dispute in the ancillary relief proceedings in the Family Court.

Background

There are two sets of proceedings concerning the same properties in dispute, an ancillary relief proceedings in the Family Court and three High Court actions.

In the Family Court case, it was the wife’s case that all of the properties in dispute were matrimonial properties and they should prima facie be included in the matrimonial pot for distribution. The High Court actions were in effect little more than a sham designed to remove these properties from that matrimonial pot and to put them beyond her reach by “pretending” that they belonged to the husband’s recently deceased’s mother.

On the other side, the husband contended that his mother was indeed the legal and beneficial owner of all of the properties in issue, that these were held by his mother using different legal vehicles and that he did not defend the High Court actions because he knew that he “did not own any beneficial interest in the properties”.

The Family Court has previously granted the wife leave to be released from her implied undertaking and be permitted to use or disclose information, documents and/or materials from the matrimonial proceedings in three High Court actions. The husband’s appeal against that decision was dismissed by the Court of Appeal which reiterated “it would be plainly wrong for these matters to be litigated in different courts”.

Currently, there are two applications before the Family Court Judge:

1.        the wife’s application for joining three companies to the ancillary relief proceedings for the purposes of determining the preliminary issue of the beneficial owner of several properties (the “Joinder Application”); and

2.        the husband’s application for transferring the ancillary relief proceedings up to the High Court (the “Transfer Up Application”).

The Joinder Application

In considering whether the three companies should be joined to the ancillary relief proceedings, the Court cited the approach recently approved in LLC v LMWA [2019] 2 HKLRD 529 that generally 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 particular, there is a difference between cases where the third party is the legal owner 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.

In this case, although the application falls more into the second category of cases identified above, the Court held that it would be prudent to join the three companies to these ancillary relief proceedings, so that all interested parties may be given an opportunity to participate in the family litigation process. It is noted that the husband understood that one of the companies might choose not to participate in the matrimonial litigation. The Family Court held that if they chose not to participate, they would still be bound by the outcome of the proceedings.

Further, the Court held that the matter should be dealt with by one court and this should be the Family Court. It was not accepted that it would be unfair to the husband or it would be more convenient and cost effective for matters to proceed in the High Court actions, in which the pleadings were not yet closed.

As such, the Court granted leave to join the three companies as 2^nd to 4^th Respondents to the ancillary relief proceedings as per the wife’s application.

Transfer Up Application

The general position is that the Family Court has an unfettered discretion to order a transfer up of any application to the High Court and that such an unfettered discretion also extends to deciding when such an order should be made. 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 Court of First Instance.

In H v H FCMC 7173/2000 dated the 1 February 2002 (unreported), it was held that there must be cogent reasons for a case to be transferred up to the High Court. The reason of very large sums of money is involved 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.

In this case, the Court decided not to transfer the matter up to the High Court as the Court was unpersuaded by the arguments advanced by the husband.

The Court considered that the assets of HK$50.155 million do not place this case in the very big money category, which was also rarely a sufficient reason on its own to justify a transfer up in any event.  The Court also noted that it would be costlier to proceed in the High Court in comparison with the Family Court.

As such, the husband’s Transfer Up Application was dismissed.

Conclusion

This case serves as a useful guidance to parties in matrimonial cases on how they should proceed their cases, in particular, where there are parallel proceedings in the High Court concerning the same properties in dispute in the ancillary relief proceedings in the Family Court. The Court may allow the interested parties to join the ancillary relief proceedings and participate in the family litigation process. Parties in matrimonial cases should also note the rules in relation to transferring the matter up to the High Court before making such application.