V v. V

CACV000200/1980

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

Civil Appeal No. 200 of 1980

(On Appeal from V.D.J. Action No. 1399 of 1980)

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Coram: Leonard J.A., Silke and Barker JJ.

Date of Judgment: 10th June 1981

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JUDGMENT

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[Hand down 29th day of June 1981]

Silke J.

1. The parties were married in New York in 1967. The husband was still a student and qualified to practise Law in 1971. The couple came to Hong Kong in 1974, the husband then being employed in an American law firm, Coudert Brothers, where he earned US$40,000 per month at the time of his departure from that firm. In 1977 he accepted employment from a Mr. Darmadi in the hopes of bettering his capital base at the expense of immediate income. His salary was HK$11,750 per month but he was provided with a luxurious flat in "Altadena", the use of various cars and a driver and also with a interests in development projects of his employer. Further when he travelled, as he did frequently, he lived on an expense account.

2. Differences arose as between them and the parties ceased to cohabit in March 1980.

3. On the 26th July 1980 the wife petitioned for a decree of Judicial Separation. On the 29th July 1980 the solicitors for the wife filed and served a Notice of Intention to Proceed with Application for Ancillary Relief. This required the filing by the husband of an affidavit of means and this was done on the 16th August 1980.

4. Meanwhile the husband had left for Singapore to work there in February 1980. Next, proceedings were begun to remove the wife from the matrimonial home, the registered owner of which was Maroula Properties & Management Ltd. a company of Mr. Darmadi. There was a further application by the wife seeking to retain her residence in that home.

5. On the 26th August 1980, upon the wife undertaking to vacate the "Altadena" premises on or before the 31st October 1980, those proceedings were compromised and the wife's application was dismissed. The husband paid the sum of $23,000 as removal expenses and also two months' deposit and the first month's rent at the rate of $2,600 per month in respect of a new flat in Caine Road to which the wife moved.

6. The application for Ancillary Relief - specifically Maintenance Pending Suit - was dealt with by the Registrar on the 29th August 1980. An order for the payment of $5,000 per month was made. There was a further order that the husband do within 28 days from the date of the order file a further affidavit of means "dealing with his present income".

7. The wife was directed to file an affidavit showing the accounts of Asia Art Gallery Ltd., a company in which she had an interest and in which she worked, together with an explanation as to where the capital to start the business came from.

8. The Registrar, having been asked to record his reasons in writing for his decision, did so on the 18th September 1980.

9. The wife then appealed against the Registrar's order and served notice to cross-examine the husband upon the hearing of that Appeal.

10. That Appeal was heard before a Judge of the District Court on the 12th November 1980 and a reserved judgment was delivered on the 8th December 1980. Prior to the hearing of the Appeal, the husband had filed a further affidavit on the 16th September 1980 pursuant to the order of the Registrar stating his present employers to be Northwest Continental Holdings Ltd. and the nature of his employment to be as a "business and tax consultant". He further averred that his financial position had not changed as the result of his change of employment.

11. The wife filed, on the 23rd September 1980, her affidavit concerning Asia Art Gallery as directed by the Registrar.

12. On the 15th September 1980 one George W. Dougherty, the father of the wife and with an address in New York, filed an affidavit.

13. On the 12th November 1980 the husband filed a further affidavit explaining his means and making that which might be termed "submissions" in relation to matters likely to be raised in the Appeal.

14. The Judge varied the order of the Registrar and increased the Maintenance Pending Suit to a sum of $12,500 per month and the payment to be from the 1st October 1980.

15. The husband now appeals to this Court against the Judge's order. Three further affidavits were before us, one from Mr. Glynn and two from the husband.

16. Mr. Mills-Owens, with him Miss Remedios, instructed by Hampton, Winter & Glynn, appeared for the Appellant/Respondent - whom we shall continue to call "the husband" - Mr. Ching, with him Mr. Sakrani, instructed by Helen A. Lo & Co., appeared for the Respondent/Petitioner - whom we shall continue to call "the wife".

17. Mr. Mills-Owens made ten main points:

18. The picture that emerged from the affidavits and the cross-examination of the husband was that of an affluent family who lived their lives on a high standard. There is no doubt that had the husband remained with his first Hong Kong employer his salary would be very much higher than it is today. But he was prepared to accept a comparatively low salary in the expectation of future capital benefit on what he hoped would be a large scale. He commenced work, as we have said, in Singapore in February 1980 - a move which was always possible after he accepted employment with Mr. Darmadi - to further this ambition.

19. In Singapore he lives in a three bedroom flat provided by his employers and is paid a salary of US$2,500 per month (HK$12,500 approximately). He now travels with all expenses paid for all but ninety days of the year. He pays tax on his salary and has a permanent monthly outgoing of HK$800 per month in respect of a child not of the family.

20. He has realised the sum of US$52,000 from one of his "capital assets" - Bentex Corporation - the balance of which, some having been used for tax payments, in a sum of US$50,036.09 was on deposit at a rate of 14% interest. That sum has now been reduced, as the result of further tax payments, the payments made under the Judge's order to the wife, the moving expenses of the wife and the payment of a sum of $25,000 on account of the husband's legal fees, to an amount of US$20,365.39.

21. Of the rest of his capital assets he has an 8% share of RHC Dallas Corporation valued at approximately US$188,000; 8% of Presland Corporation thought to be of little present value; 8% of Norac Corporation again thought to be of little present value; 5% of Ross Hall Texas Corporation, a Management Service Company, from which he presently receives medical, disability and term life insurance cover and eight shares out of 709 of Megistos S.A., a Panama Corporation, having a present value of US$2,831.00. And his and their prospects. We are told that none of these are realisable at this time.

22. Mr. Ching in a robust way has levied strong attack upon the conduct of the husband in requiring his wife to live in Hong Kong on $5,000 per month while he enjoys a high standard of living with increasingly attractive prospects. The Judge, in considering the respective earning capacities of the parties, disregarded completely the earning capacity of the wife. She has qualifications as a bank employee and as a store supervisor and she does participate in the running of the Asia Art Gallery, albeit a company without a profit. If he were to compare earning capacities, these are factors, not of great significance, but ones nevertheless that should be taken into account.

23. This raises one of the main issues of this Appeal: what, if any, part at the stage of Maintenance Pending Suit does the earning capacity of the parties play? Mr. Ching has submitted that, in assessing an award, the provisions of section 7 of the Matrimonial Proceedings and Property Ordinance, which enjoin a Court to have regard to certain matter set out therein, applies. With respect to him we do not think these provisions do apply in the sense he would have it. Section 7(1) specifically makes reference to the Court's acting under the provisions of sections 4 and 6 of the Ordinance and makes no reference to section 3 - the provisions in respect of Maintenance Pending Suit - which state that such should be "reasonable". It is of course clear that, if a Respondent voids himself of all income investing everything in capital assets for the purpose of showing no income and thereby defeating a claim such as this, no Court would allow such a Respondent to sit back and say in effect "no income therefore there can be no award of maintenance pending suit."

24. But here there is an income. The paramount consideration is the needs of the parties and while the principles to be applied in respect of final orders are largely applicable it is not necessary for us to take a long term view. We would wish to emphasise that nothing which we may say here is intended to or should affect the eventual order to be made in this case. We are considering the immediate needs of the wife on what is intended to be a short term basis pending that final determination. When that comes to pass we envisage both the earning capacity of the husband and his capital gain prospects to play a much larger part and possibly to require further elucidation.

25. That is not to say we agree with the Judge's finding that there was not full and frank disclosure. We do not go as far as the Registrar in thinking that the husband has "dealt expeditiously with the large number of demands by the Petitioner" nor that the husband's offer was a "generous" one. The wife was entitled to ask for details and she did not in our view make any unwarranted demands.

26. The husband was criticised for not having dealt with that which Mr. Dougherty had to say in his affidavit and also criticised for his failure to deal with the allegation, inherent in paragraph 3 of the wife's affidavit of the 25th August filed immediately before the Registrar's hearing, of outside work resulting in an income. That is the "T.P. Liem" allegation. These failures are a matter for comment and, while we agree with Mr. Ching that there is a duty upon a Respondent to make full and frank disclosure, he was the subject of cross-examination and, further, he has stated on oath that which he says are his means. Discovery could have been asked for and the provisions of Rule 77 of the Matrimonial Causes Rules brought into play. This can still be done.

27. The Judge in coming to his finding that the husband had not made full and frank disclosure, having considered the contents of Mr. Dougherty's affidavit and the evidence concerning the considerable drop in actual salary which the husband accepted on his move from Coudert Brother to Mr. Darmadi, found that "when he started working for Mr. Darmadi his earnings did not come down from US$46,000 to $30,000 per annum as he claims, but that they increased substantially in excess of US$46,000".

28. He based this finding on an inference he drew from the evidence before him that there was such a substantial increase and thought the husband's earning capacity and the standard of living of the parties "certainly suggest that his real earnings were much higher than his disclosed income".

29. Having made the finding he went on "It therefore follows that I consider that he has not made a full and frank disclosure and that his existing earnings are much larger than his current salary or his present disclosed net income. This is consistent with the view that he is a '$600,000 a year man".

30. We do not think him justified in drawing such inference from the evidence, or rather lack of it, before him. We accept that the husband's earning capacity is greater than his actual income and that his future potential earnings, if one views his prospective capital accretions in the light of earnings, are substantial. But a large proportion of that which makes up the mystic "$600,000 a year man" is that which, in modern terms, is called expense account living. And undoubtedly generous at that in this instance. That however does not permit its recipient to treat it as actual earnings not to make payments such as the one required here out of it. It may be, and again we are not to be considered as expressing any decided opinion on this, that in the end result the husband may be forced to realise his earning capacity in order to fulfil his duty to provide for his wife but we leave that to another occasion.

31. The effect of course of living largely on expenses is to allow a much greater part of his actual income to be available to make the payments needed here than would otherwise be the case.

32. It has been submitted that the signing of a new contract of employment on the 31st July 1980 - a few days after the filing of the petition was intended first to drive the wife out of "Altadena" and second to have evidence available of a low income. We do not think this to be the case. On the evidence as it stands we view this simply as reducing to writing the existing status of the husband vis a vis his employer.

33. We do note however that paragraph 3 of that agreement requires that the husband "shall devote his whole time and attention during normal working hours to his duties" under the contract and that the document makes no reference to accommodation. But both of these matters could well be the subject of section 7 interrogatories and there is no clear evidence to show that outside normal business hours the husband does earn further income. Indeed if most of his working life is spent in travel around the region we find it difficult to see how he could.

34. In the event, having born in mind that which has been submitted to us by both Mr. Mills-Owens and Mr. Ching and the criteria of "reasonableness" set out in section 3 of the Ordinance, we came to the conclusion that an order to pay the whole of his income by way of Maintenance Pending Suit was excessive. As stated at the conclusion of the hearing, we reduced the payments from $12,500 to $8,000 per month and said that we would later give our reasons for so doing. We have now done so and think this sum in all the circumstances to be a reasonable one.

35. We also ordered that that sum be paid as from the 1st October 1980 though we are aware of the moving expenses and rent payments made in that month. We thought however that, as the husband has a duty to maintain his wife and as her lack of accommodation resulted from her having to leave that which was the matrimonial home, while taking those payments into account nevertheless maintenance should commence on that date and not, as Mr. Mills-Owens suggested, either the 1st November or the 1st December 1980.

36. One point should be referred to and that is the pronouncing of a decree of Judicial Separation on the 4th April 1981. This Appeal began on the 31st March 1981 being set down for one day. When that day ended this Court did not have further time available to it to immediately continue the hearing, nor were Counsel free. It was agreed at the hearing of the Petition that the husband should pay interim maintenance at the rate of $12,500 per month pending the decision of this Court but that, if the Appeal should succeed as to quantum, then the interim maintenance be paid at the rate adjudged by this Court. If the amount was altered there would be repayments due to the husband. Therefore, while there was in reality no pending suit, we continued the hearing with the consent of the parties and dealt with the matter as if the suit had not terminated.

37. In the event the order was that maintenance pending suit was to be paid in the sum of $8,000 per month as from the 1st October 1980. Repayments of such paid in excess of this Order to be made to the husband.

38. There be liberty to apply as to costs if such are not agreed between the parties.

Representation:

Mr. Mills-Owens Q.C. & Miss Remedios (Hampton, Wintee & Glynn) for appellant/Respondent.

Mr. Charles Ching Q.C. & Mr. Sakhrani (Helen A. Lo & Co.) for respondent/Petitioner.