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Tcwf v Lkks

Judgment Cited authorities 30 Cited in Precedent Map Related
Vincent
Judgment Date10 January 2014
Year2014
Citation[2014] 1 HKLRD 896
Judgement NumberCACV154/2012
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV154B/2012 TCWF v. LKKS

CACV 154/2012 &

CACV 166/2012

(Heard together)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 154 AND 166 OF 2012

(ON APPEAL FROM HCMC NO. 5 OF 2008)

_______________________

BETWEEN

TCWF Petitioner
AND
LKKS Respondent
AND
STL 2ndIntervener
OIL 3rd Intervener

______________________
Before: Hon Lam VP, Kwan and Barma JJA in Court
Dates of Hearing: 21 to 25 October 2013
Date of Judgment: 10 January 2014

______________________

J U D G M E N T

______________________

Hon Lam VP, Kwan JA and Barma JA:

A. INTRODUCTION

1. This is a joint judgment to which each member of this court has contributed. For convenience, we will refer to the petitioner as the wife, the respondent as the husband and the 2nd intervener, who is the husband’s father, as the father.

A.1 Main Judgment and Barrell Judgment

2. On 1 December 2011, Saunders J handed down judgment (“the Main Judgment”) in the proceedings for ancillary relief under the Matrimonial Proceedings and Property Ordinance, Cap 192 (“the MPPO”) in HCMC No 5 of 2008, after a trial of 23 days from 10 October 2011 to 11 November 2011. The Main Judgment was not published, but a summary of the main findings was made public on 1 December 2011.

3. Thereafter, the parties issued a number of summonses relating to matters arising out of the Main Judgment. Both the husband and the father invoked the jurisdiction in In re Barrell Enterprises [1973] 1 WLR 19 and sought amendments to various parts of the Main Judgment. They sought reversal of certain findings of forgery and perjury against them concerning a convertible loan agreement between them dated 9 February 2006 (“the 2006 CLA”), consequential redaction of the relevant parts of the Main Judgment, rescission of a direction that the Registrar should forward a copy of the Main Judgment to the Director of Public Prosecutions (“the DPP”), and directions that the Main Judgment should remain private until further order. The husband also sought to correct various factual and arithmetical errors in the Main Judgment.

4. The judge, who had by then retired and was sitting as a Deputy High Court Judge, heard the summonses on three days in June 2012 and gave reasons for his decision on 6 July 2012. This came to be referred to as “the Barrell Judgment”. He refused to reverse his findings of forgery and perjury concerning the 2006 CLA or his decision to refer the matter to the DPP. He made some corrections to the Main Judgment, increasing the net worth of the husband. Pursuant to the Barrell Judgment, the Main Judgment was re-issued on 6 July 2012 incorporating the corrections he made. The judge ordered the publication of the Main Judgment as amended and with parts redacted to protect the commercial confidentiality of those matters which were heard in private, but stayed the publication pending appeal by the husband and the father.

5. By the order made in the Main Judgment, as corrected in the Barrell Judgment, the judge ordered the husband to pay the wife a lump sum of HK$1,470.4 million, of which HK$1,410.4 million was 20% of the total assets available for division as found by the judge, and the balance of HK$60 million was a fighting fund to enable the wife to resist litigation that may be brought by the father in future. Of the lump sum of HK$1,470.4 million, HK$202 million was to be paid forthwith, HK$1,208.4 million was to be paid on or before 30 September 2012, and the fighting fund of HK$60 million was also to be paid on or before 30 September 2012[1]. The father and the husband were ordered to pay the wife’s costs jointly and severally on a party and party basis.

6. The father and the husband brought separate appeals against the Main Judgment and the Barrell Judgment, being CACV Nos 154 and 166 of 2012. The wife cross appealed. She sought to increase the lump sum award to 50% or a higher percentage than 20% of the total assets.

7. The father appeared in the appeal by Mr Michael Thomas, SC and Mr Richard Todd, QC[2]. The husband appeared by Mr Martin Pointer, QC and Mr Russell Coleman, SC[3], and the wife was represented by Mr Charles Howard, QC[4].

A.2 The background

8. The background matters as found by the judge or which are non-controversial may be stated as follows.

9. The father is a property developer and an extremely wealthy man. The husband, who was born in 1973, is one of his children. The wife was born in 1974. They met in London in 1995, when the wife was studying law. They soon formed a relationship and became engaged on 7 April 1999. They were married in Hong Kong on 8 January 2000.

10. The wife became pregnant in July 2007. The husband was genuinely reluctant to have children. When the conception became known, he presented her with the ultimatum that she must have an abortion or the marriage would end. The wife was not willing to abort the child. From that time their relationship became strained. Their daughter was born in February 2008. The husband made it plain he does not wish to participate in her life. The father wishes to have contact with his granddaughter and is willing to assist in the financial support of the child.

11. The judge found that the marriage effectively ended in January 2008, following an email of the wife that she awaited the divorce papers from the husband’s lawyers. She eventually presented a petition for divorce on 27 May 2008. A decree nisi was pronounced on 25 August 2008 and it was made absolute on 5 April 2013. The marriage was of eight years duration.

12. In the 1990s, the husband became a director of a number of property companies operated by the father. In 1996, the husband travelled to Japan to investigate opportunities for real estate investment in that country. The investigations continued in 1997 and 1998. On a number of occasions, the wife, who was then his girl friend, accompanied him to Japan. She was admitted as a solicitor in England in September 1998 and as a solicitor in Hong Kong in February 1999.

13. On 27 February 1998, Veloqx City Investment Ltd (“VCIL”) was incorporated in the British Virgin Islands and was intended to be a vehicle by which real estate investment would be made in Japan by the husband. With the assistance of the father both financially and through his business expertise, the husband accumulated a portfolio of high-quality real estate in Tokyo. The purchase of the first building, subsequently known as the V28 building, was completed on 19 March 1999. Between the acquisition of the first building and 2008, partly with the assistance of loans from the father’s business enterprises and utilising funds released by way of refinancing from buildings that had been acquired and redeveloped, 13 iconic buildings have been acquired in a high-end retail area in Tokyo. This portfolio of properties was referred to in the proceedings as “the Japanese business”.

14. The judge found that the wife took a fully active role in the Japanese business, devoting the whole of her time to the husband and the business until she became pregnant. Until 7 November 2008, she was a director of 15 companies and the company secretary for a number of the BVI companies. She was effectively the in-house legal counsel for the structure. She was deeply involved in drafting various documents for the business, and was involved in the financing and refinancing of the business, including reviewing loan documentation.

15. The funds for the purchase of the V28 building came from a gift by the father to the husband in the sum of J¥3.6 billion odd (equivalent to about US$47.3 million at the time of the Main Judgment). The advance of the J¥3.6 billion was subject to an agreement between the father and the husband dated 29 June 1999. It was entitled “Agreement for the Grant of Call Options over Shares in Veloqx City Investment Ltd and Daiwa Fudosan Corporation (relating to business in Tokyo)”, and was known in these proceedings as “the Framework Agreement”. The recitals of the Framework Agreement recorded that the father had made or caused to be made a gift to the husband of J¥3.5 billion on 19 March 1999, that the husband had subscribed or would subscribe for the same amount of J¥3.5 billion for bearer shares in Daiwa Fudosan Corporation (“Daiwa”, a company incorporated in the British Virgin Islands), that Daiwa had subscribed or would subscribe for the same amount of J¥3.5 billion for registered shares in VCIL, that VCIL acquired the V28 building on 19 March 1999 for J¥3.5 billion, and that the husband agreed to grant or procure the grant to the father of call options over the entire issued share capitals of Daiwa and VCIL on the terms and conditions in the Framework Agreement.

16. Attached to the Framework Agreement are the required forms of the Daiwa Call Option Agreement and the Veloqx Call Option Agreement (collectively “the COAs”). Although the COAs were not executed, it is not in dispute that pursuant to the Framework Agreement the father had the right to call upon the husband to execute the COAs in his favour upon payment of US$1 and thereby sell the husband’s shares in those companies to the father.

17. Pursuant to the Framework Agreement, special articles (“the Special Articles”) in the form set out in Schedule 6 to the agreement were duly incorporated into the articles of association of VCIL and of Daiwa. By the Special Articles, the prior written consent of the father is required for various actions by those companies as stipulated and the companies are precluded from disposing of all or a substantial part of their business or assets. There are restrictions on the power to borrow and to make loans. The effect of the Special Articles, as described by Mr Todd and accepted by the judge, is to give...

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