Ayesha Vardag and Catherine Maguire, Vardags
On 6 April 2017, Bodey J handed down judgment in the financial proceedings in the case of
Chai v Khoo, over 4 years since the wife, Ms Chai, filed her divorce petition in the English courts, seeking to bring the parties’ 43-year marriage to an end.
Hard-fought litigation ensued, with the husband, Malaysian business tycoon Dr Khoo, filing competing Malaysian proceedings and disputing the jurisdiction of the English courts in respect of the divorce. Nearly 2 years, and several further petitions (in England and Malaysia) down the line, Bodey J determined in
a final jurisdiction hearing in October 2014 that the English courts had jurisdiction in respect of the divorce. The husband unsuccessfully appealed this finding to the Court of Appeal, who in December 2015 dismissed his appeal unanimously, leaving the wife free to pursue a financial award in the English courts.
Background
The parties were both by origin Malaysian. The husband remained of Malaysian domicile and citizenship, whereas the wife had Australian and Canadian citizenship. Following their marriage in 1970 in Malaysia, the wife moved into the husband’s property, which he had bought before the marriage. They lived there together for the next 10 years, during which time the elder two of their five (all now adult) children were born.
The wife subsequently moved to Australia with the two eldest children in 1980, while the husband continued to live and work in Malaysia. The parties’ three younger children were born after the move. The wife brought the five children up with visits from time to time by or to see the husband. Thereafter, in 1989, the wife and five children moved to Canada. The husband continued working out of Kuala Lumpur.
In 1995, a house was purchased in the UK. The husband subsequently became a director of Laura Ashley Holdings PLC in 1999. The following year, a 1,000-acre estate in Hertfordshire, the Rossway Estate, was purchased for £6.75 million by a BVI company, Central Point Group.
On 5 December 2001, Central Point transferred the main house at Rossway to another company, Dunross Properties Limited, thereby separating the main house from the commercial part of the estate. Those two companies between them remain today the legal owners of the Rossway Estate.
A major issue between the parties was whether or not the beneficial interest in the estate was held by the husband. Both companies are incorporated in the BVI and are owned 100% by a Hong Kong company (Norcross), itself owned 50% each by two Malaysian companies (KKP and Soo Lay) ultimately owned 99.98% and 99.99% respectively by the husband. Effectively, therefore, the husband owns the companies that own the Rossway Estate. Norcross, Central Point and Dunross were joined as respondents in these proceedings.
The assets
The assets comprised:
- Property totalling £26.8 million, including the Rossway Estate;
- Funds of £24.7 million;
- The husband’s pensions of £970,000; and
- The husband’s business interests, held within a variety of inter-related companies incorporated in Malaysia, Hong Kong, BVI, and Great Britain.
The husband’s case was that the values of these businesses was £66.4 million
– a value obtained by taking the SJE’s valuation of the ‘empire’ (i) on the basis of the net asset value in the accounts at historical cost and (ii) on the basis that the husband does not own Noble Faith Foundation Inc.
The wife’s case was that the true value of the husband’s business empire was £153.3 million. She relied upon two different bases of the SJE valuation to the husband: (i) that the valuations of at least some of the underlying company assets should be updated from their historical cost value in the company accounts to an estimate of their 2017 value; and (ii) that the husband owns Noble Faith.
The relevance of the position under Malaysian law
It was the husband’s case that the wife was a dishonest 'forum-shopper' who had fraudulently obtained the October 2014 jurisdiction finding. He argued that she should therefore be awarded no more than that which she would have received in Malaysia.
The wife argued that this amounted to a collateral attack on the jurisdiction finding. This matter had already been considered by the Court of Appeal, who had approved Bodey J’s jurisdiction finding. The issue was therefore either res judicata or else the subject of an issue estoppel.
The judge was not persuaded by the husband’s claims that the wife had lied to the UK Border Agency to secure her entry into the UK (disclosure from the agency having contained no such evidence). Likewise, the husband’s argument that the wife had dishonestly 'stockpiled' MPS funds with their daughter D, was demonstrated to be unsustainable. The money had either been spent by way of payments by D on behalf of the wife and for the wife's benefit or else otherwise explained. Nor was the judge persuaded by the husband’s claims that the fact that the wife had spent substantial time visiting their disabled son in Canada evidenced that she was a 'forum-shopper'.
Bodey J concluded that he was not persuaded that it would be right to re-open that which was judicially determined in October 2014 (and, again, by the Court of Appeal in December 2015).
As regards the 'sideways glance' he had been asked to take at the position under Malaysian law, Bodey J noted that the current position under English law is, per Lord Phillips in
Radmacher v. Granatino [2010] 2 FLR 1900: 'In England, when the court exercises its jurisdiction to make an order for financial relief, … it will normally apply English law, irrespective of the domicile of the parties, or any foreign connection'.
Bodey J concluded that the word 'normally' in
Radmacher may admit of the possibility of some very exceptional case, where the connections with this jurisdiction (although sufficient to found jurisdiction) are otherwise very much weaker than both parties' connections with another jurisdiction. In that situation a 'sideways look' might be appropriate, as part of 'all the circumstances' of the case, although he noted that even then the correlation of two potentially inconsistent regimes could prove highly problematic. Here, however, the point did not arise, because the wife had no subsisting meaningful connections with Malaysia at all, Therefore the Malaysian legal position should not be taken into consideration.
The parties' respective positions
The wife sought, on a ‘sharing’ basis, 50% of the total 'kitty', which she stated to be £205.8m. The husband had made an open offer of £15 million on the basis of his position that this was a ‘needs’ case.
Special contribution
In considering the husband’s claim that he had made a special contribution to the marriage justifying a departure from equality, the judge noted that the judgment in
Gray v Work on special contribution in the Court of Appeal was pending (and has since been delivered: [2017] EWCA Civ 270), but that he had been asked not to delay judgment to await this. Bodey J recognised that, in capitalising on Malaysia’s changing and burgeoning economy in the early days of the marriage, the husband was in the right place at the right time and astutely made the most of it through his business acumen and hard work. In cross-examination he had, however, accepted that he had never described himself as a 'genius'. He agreed that he had not come up with any particular invention, nor done anything particularly innovative in the commercial sphere.
The judge also noted that the wife had shouldered the burden of bringing up five children in a separate continent to her husband, and two of these children had additional needs, which meant that they continued to rely on the wife into adulthood. A specialist who had previously advised the court did not think that E would ever be able to obtain non-sheltered employment in the outside world, nor live independently.
He concluded that, setting the husband's substantial contribution as breadwinner against the wife's substantial contribution in the home and in caring for the children, there was no room for a departure from equality based on any differential between the parties' respective contributions.
Pre-marriage wealth
The husband sought to argue that his pre-acquired wealth meant that a departure from equality was appropriate, notwithstanding the length of the 43-year marriage. His argument relied on the fact that he had owned the Malaysian property (which later became a family home) prior to the marriage as well as some land in Malaysia and some shares in MUI. The judge found that the general approach that the matrimonial home usually becomes so much a part of the shared family economy as to be swallowed up in the concept of 'matrimonial property' applied in this case, and that the remainder of the husband's pre-marriage wealth was unquantified, with no evidence having been adduced as to what became of it. It was a sensible assumption that it had been mingled with the general family finances, particularly given that it was 'a drop in the ocean when compared with the assets now available'. The judge was therefore not persuaded that it should be taken into account as a basis for a departure from equality.
Non-disclosure on the part of the husband: Fresh Approach?
It was the wife’s position that the husband has been guilty of multiple episodes of non-disclosure, and that he had secreted assets over many years. In the interests of reducing the issues and allowing the hearing to proceed within the time estimate (given the risks she faced if the husband died domiciled in Malaysia before a financial order had been achieved), she had agreed not to pursue many of the allegedly undisclosed entities. She did, however, continue to pursue the argument that a BVI company, Fresh Approach, either belonged to, or was at least indirectly controlled by, the husband. The husband denied this.
