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Ownership disputes in ancillary relief proceedings: The Court of Appeal breaks new ground

19 Aug 2019

In LLC v LMWA [2019] HKCA 347, the Court of Appeal broke new ground when it comes to determining ownership disputes in ancillary relief proceedings.

In that case, the petitioner-wife argued that certain properties ostensibly in the name of the father of the husband actually belonged to the husband, such that they should be included in the matrimonial pool.  The family court judge decided to determine this issue by way of a trial of preliminary issues, before the parties proceeded to FDR.

As a result, significant costs were incurred on both sides.

TL v ML should not be slavishly followed

Traditionally, following TL v ML [2006] 1 FLR 1263, such a dispute relating to the ownership of properties would indeed, be resolved by way of a trial of preliminary issues.

However, the Court of Appeal in this case broke new ground by observing that (§§21-23):-

“However, we have reservations [about] 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.

One must not lose sight [of the fact] that the dispute on ownership in these cases often arises 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.

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.”

In view of the Court of Appeal’s observation, the TL v ML procedure should not be followed slavishly.

New FDR procedure

Further, in view of the facts in this case, the Court of Appeal suggested a new FDR procedure, namely the “FDR cum mediation” procedure (at §68):-

“The husband and the wife had previously attempted mediation without success.  At the hearing, this Court suggested that the effectiveness of the process could be enhanced if a FDR can be held with the assistance of a mediator.  There can be matters on which a FDR judge can give useful views and steer the parties to explore at greater length with a mediator.  With such steering, a mediator can work more effectively with the parties separately in a way which a FDR judge cannot.  The mediator can also refer some issues which divided the parties to the FDR judge for an authoritative opinion.  With synergy between the FDR judge and the mediator, it is also more likely in cases where parties reach agreement on some but not all the issues, a more costs effective way to resolve the outstanding issues could be worked out.”

This new procedure, if effective, may pave the way for further reform in this area of law.

Douglas Lam SC and Jacqueline Law acted for the wife in the trial of preliminary issues. Jacqueline Law dealt with the issue of costs before the Family Court, and Catrina Lam and Tom Ng acted for the wife before the Court of Appeal in the costs appeal.