My D also known as My v. Mjd

FCMC 15796 / 2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 15796 OF 2014

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J U D G M E N T
(Mediation, privilege, maintenance pending suit, and interim maintenance)

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Introduction

1.This is an application by a Petitioner wife for maintenance pending suit pursuant to s 3 Matrimonial Proceedings and Property Ordinance Cap 192 (MPPO) and interim maintenance for the only child of the family, a girl who I will refer to as C and who is now 16 years of age, pursuant to s 5 of the same ordinance.

2.In addition this case has thrown up some related issues with respect to the mediation process and its treatment where there has been no concluded agreement. It is the husband’s case that the wife has waived privilege because he maintains that she has repeatedly and selectively referred to certain aspects of the without prejudice mediation process. He has therefore referred to an agreement in principle in his affidavit, even though there was no concluded agreement. The wife for her part denies that she has selectively referred to without prejudice discussions and/or settlement offers and maintains that the negotiations between the parties during mediation must remain confidential. She asks that I now, in retrospect and after reading the documents in dispute, disregard all such references to the mediation process and place no weight on such material or related assertions.

3.The wife is seeking an order as follows:

1. The Respondent do pay the Petitioner maintenance pending suit in the sum of HK$73,000 per month, in addition to payments in paragraphs 2 and 3 herein, or any other sum as this Honourable Court thinks fit;

2. The Respondent do pay for all expenses arising from or in relation to the parties’ former matrimonial home situated at XXX, Santa Clarita, CA 91354, US, including but not limit to the C Mortgage XXX;

3. The Respondent do pay for the rental expenses with respect of the residence of the Petitioner in Hong Kong situated at XXX, Discovery Bay;

4. Such other directions as the Court sees fit;

5. Time for service of this Summons be abridged; and

6. The Respondent do pay the Petitioner’s costs of and occasioned by this application.

Thus the wife is seeking a total of HK$137,000 per month in total (maintenance of HK$73,000 + US property related expenses of HK$39,000 + rent of HK$25,000). In addition she asks for the payment of the outstanding mortgage and property tax for the US property for the month of December.

4.The husband for his part has offered to pay HK$40,000 per month plus he has said that he will undertake to pay for all of C’s direct expenses including her school fees and extracurricular activities. It is the wife’s case that the husband has on occasions failed to reimburse her for these sorts of expenses in the past.   

The central issue

5.Consequently the central issue remains how much the husband should now pay to the wife as maintenance pending suit for herself and interim maintenance for C?

Background

6.The parties married on the XX June 1995 and finally separated in February 2013. Both parties were born in the United States and they married in Massachusetts. C was also born in the States. In January 2005 the husband relocated to Hong Kong followed by the wife and C in August of the same year.   

7.On the 26 November 2014 the wife issued divorce proceedings based on the husband’s unreasonable behaviour. It seems that the marriage had been in difficulty for some time and that the husband had formed a relationship with a third party with whom he now has a further child. The husband’s new partner lives in the Philippines and the husband splits his time between Hong Kong and the Philippines. He also travels extensively for work. It is said that the wife is also in a new relationship.

8.The husband works in a form of transportation known as the “Non-Vessel Owning Carrier Industry”. He previously earned a sizeable salary working for an organisation in this field. He has recently become involved in a “start up” and it is his case that he has no income at present. The wife is a full time housewife and mother and she has not worked since C was born. There is some dispute about the wife’s earning capacity and this is something that will need to be looked at in more detail in the final ancillary relief proceedings. However in so far as this application is concerned, I am approaching it on the premise that the wife has no immediate ability to earn an income.   

9.On the 1 June 2015 an order was made by consent whereby it was agreed that the parties would have joint custody of C with care and control to the wife and defined access to the husband.

10.It does not appear to be in dispute that the parties have been in negotiations with each other, in one form or another since early 2012 until June 2015. Following the issue of the divorce petition the parties also entered into mediation. Unfortunately the mediation failed. It seems that in part this is because the wife instructed private investigators to look into the husband’s affairs in the Philippines. This led to a report being filed called the “Z Report”. This report states that the husband has a number of undisclosed assets. It is the husband’s case that this is an entirely fictitious document and he has issued both criminal and civil proceedings in the Philippines in order to rectify the situation. The wife has not as yet withdrawn that report. In a letter from her solicitors dated the 18 December 2015 she stated her position as follows:

At this stage, our client is not prepared to withdraw the report.  However, in the circumstances and in an effort to move matters forward, for now, she is prepared to proceed and negotiate on the basis that your client does not have any accounts in the Philippines.  She does, however, reserve her right to later rely on the report should Z produce evidence confirming the veracity of it.

11.In any event the wife maintains that the husband has not made full and frank disclosure of his means. This is strongly rejected by the husband. It seems that the main issue relates to the whereabouts of very large sums of money received by the husband following his redundancy and prior to the establishment of his new company. There are also large ATM withdrawals in the Philippines; he has also transferred other funds to his mother. In addition there are some very large credit card expenses. There are also loans which require further clarification. Although the husband says that he has answered all of these queries, it is fair to say that there are ongoing concerns about these matters, which in all likelihood will require further clarification. The wife’s belief is that the husband may have undisclosed assets located outside of the jurisdiction.

12.In April 2015 the husband stopped paying for the mortgage and other outgoings on the parties’ property in the United States. In July 2015 he stopped paying maintenance to the wife of HK$40,000 per month. However it is not disputed that in June 2015 the husband also transferred the sum of HK$1 million to the wife. This was acknowledged by the wife in an e-mail to the husband dated the 17 June 2015 when she stated quite unequivocally that:

On a different note, I wanted to let you know that I transferred half of the money from the Standard Chartered joint account into my HSBC account for “safe keeping’.  This in no way means that I am accepting the previous proposal since an overall agreement has not yet been finalised as I had mentioned to you in my other email.

Mediation, confidentiality and privilege

13.There is no dispute between the parties that mediation is a confidential process. The point taken by the husband is a more subtle one. It is the husband’s case that

3. As was pointed out in R’s Note and in R’s oral submissions, R’s position is that P has clearly through her conduct, in repeatedly, and selectively, when it suits her, referring to certain without prejudice terms in her affidavit evidence, waived privilege.  In this regard, R refers to and repeats §§34-35 of R’s Note, including §§7.39-7.40 of The Law of Privilege (2^nd Ed) referred to therein, which state as follows:

D. Waiver of Privilege

The without prejudice privilege belongs to both parties.  Without prejudice communications therefore cannot be shown to the court without the consent of both parties.  However, by analogy with the principles applicable to waiver of legal professional privilege, if party A does deploy without prejudice material at trial, party B is entitled to rely on the other without prejudice material which came into existence as part of the same without prejudice process, irrespective of any objection by Party A.  If the without prejudice material is deployed by Party A to advance its case on the merits at an interlocutory application, party B will also be entitled to refer to the contents of the without prejudice communications of which that material forms a part to advance its own case on the merits, at the interlocutory application or subsequently in the proceedings.

If, to party B’s knowledge, party A deploys or seeks to deploy without prejudice material before the court in the above circumstances, party B can therefore either object and seek to prevent the material being deployed before the court, or can consent to the deployment of the material and can deploy in support of its case all without prejudice material which came into existence as part of the same without prejudice material process.

4. It is respectfully submitted that P is not able to now object to the evidence relied upon by R regarding the agreement in principle, when she must clearly be taken by her conduct, in selectively referring to and relying on certain of the terms of the agreement in principle, to have waived privilege.

14.The difficulty is that having read the affidavits and the parties Form E’s plus the Answers to various Questionnaires I am not sure where the error on the part of the wife allegedly lies. She does make reference to some past promises, for example in her first affirmation dated the 25 November 2015 she states inter alia as follows:  

22. After the Respondent and I separated, the Respondent promised in September 2014 that he would pay me HK$30,000 a month for my and C’s expenses, and another HK$29,000 for the rent of our previous apartment directly to the landlord.  He also mentioned that he would pay HK$39,000 to cover our US expenses.  However, the Respondent has never honoured this promise and, for the period of September to November 2014, I had to cover our living expenses using the Respondent’s credit cards.  Unfortunately, the Respondent cancelled my subsidiary cards by the end of November 2014.

27. Although the Respondent promised to pay a monthly maintenance of HK$59,000 in September 2014, this promise was never honoured.  He further withdrew much of our joint funds and removed my name from all the credit cards because I refused to let him withdraw all of the balance of C’s college fund account with Capital 360.

15.However I can find no reference to anything that allegedly took place within the mediation process. It is also not clear whether these so called promises were made within that mediation process.   Thus it seems

to me that even if I were to accept the husband’s stance on this point, the wife does not appear to have inappropriately disclosed anything that took place within the mediation process that would give rise to the husband being able to successfully argue that privilege should be waived in any event.

16.Thus, in so far as I am able, I will disregard the references made by the husband to the contents of the mediation and in particular the references made in paragraphs 4,6,716,24,25,30,39, 40 and exhibit MJD-3 of his Reply affidavit. This document will need to be redacted in due course to reflect this amendment.

17.I should add that this is a very unsatisfactory state of affairs. It seems to me that the appropriate way to proceed would have been for the point to have been taken by the husband and for the matter to have been dealt with in a separate hearing prior to the maintenance pending suit hearing. In the event that I had decided in favour of the wife then the husband’s affidavit could have been properly redacted prior to the maintenance pending suit hearing. If not then the affidavit could have been allowed in as originally drafted. As things stand I have now read the offending paragraphs, which in turn I am being asked to disregard - which is never an easy task. Reference has also been made to them in the husbands counsel’s submissions. 

18.For the avoidance of doubt therefore I am approaching this matter on the premise that there has not been a concluded mediated agreement. An agreement in principle is not sufficient and should not have been referred to in any open communication, including counsel’s written submissions pending resolution of any outstanding issue in relation to the same. I am therefore attaching no weight to the so called agreement in principle.     

The law

Maintenance pending suit

19.The Matrimonial Proceedings and Property Ordinance states that the only governing principle is that the court shall make such order, as it considers reasonable.  (See s 3 Matrimonial Proceedings and Property Ordinance Cap 192).  Consequently applications such as these are approached on a broad-brush basis.  Section 5 applications are similarly approached on the same basis. Therefore it follows that a detailed examination of the parties’ means may be looked at, at a later date if there is no agreement in the meantime. It is accepted that:

what really matters is the immediate and reasonable requirements of the wife balanced against the ability of the husband to pay for them, assessed using a broad-brush approach. (See also paragraphs 16.17 of Rayden, 18^th edition).

Further

In practice, as oral evidence is rarely given, it will be unusual for the court on an application for maintenance pending suit to be in a position to make findings of fact on issues in dispute sufficient, for example, to deal with conduct or allegations of non disclosure.  However, if it is demonstrated that the paying party has not performed his duty to make full and frank disclosure of his financial resources, then the court can take a broad and robust view of his means, and it does not have to accept and proceed on the basis of the assertions of the paying party as to his means and an inability to pay.  The court can look at the reality of the situation …… Any under provision or over provision in the order for maintenance pending suit can always be corrected when the account comes to be taken at the substantive hearing when there are every opportunity to do fairness by set off ……”

(Ref paragraphs 16.18 of Rayden, 18^th edition).

20.In addition, in the context of this case, reference has been made to the Hong Kong Court of Appeal case HJFG v KCY [2012] 1 HKLRD 95.  This states inter alia that the court

(a) applies the sole criterion of “reasonableness” which is synonymous with “fairness”;

(b) has an unfettered discretion to award a reasonable sum;

(c) should be guided by the standard enjoyed by the parties during the marriage;

(d) should adopt the standard of this family and not any other families.  What appears to be reasonable for an ultra-rich family, is perhaps very generous or extravagant for an ordinary family;

(e) should consider the actual needs of the parties;

(f) is not engaged upon findings of facts and will adopt a broad brush rather than a fine sabre;

(g) is empowered to draw adverse inferences against the party who has failed to make full and frank disclosure and is not bound by the assertions of the parties;

(h) should still examine the monthly budget;

(i) bears in mind that adjustment can be made at the final ancillary relief.

(j) Where the affidavit or Form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such a situation, the court should err in favour of the payee.

Discussion

Treatment of the HK$1 million

21.There is no dispute that the wife retained the sum of HK$1 million in June 2015 and thereafter the husband stopped paying her any form of maintenance, including some school fees and related expenses for C and the monies required for the US property. Ms Kwan for the wife provides a high level breakdown of how that money has been spent in her written submission as follows:

US related expenses (mortgage, utilities, insurance, car, miscellaneous)	269,525.64
Rent (August-November)	125,000 *
C related (uniform, books extra-curricular)	17,424.17*
Household expenses	38,865.73*
ATM withdrawal	90,700*
Others	27,775.50*
Legal Fees	354,968.60
Previous liabilities (insurance)	3,672.96*
TOTAL:	927,932.60

22.The husband’s position appears to be that the wife has “dissipated” the HK$1 million in a very short period of time. He had been paying the wife HK$40,000 per month – which means that arguably the HK$1 million should have lasted 25 months – at that rate (HK$1,000,000 divided by HK$40,000 = 25 months). If the wife was spending at a slightly higher rate of HK$50,000 per month then it should have lasted 20 months (HK$1,000,000 divided by HK$50,000 = 20 months).

23.The difficulty with the husband’s stance however is that he has made no allowance for the US expenses or for the wife’s legal fees. If one puts those two items aside, then on the wife’s own calculation she has spent just over HK$300,000 (see paragraph 22 above and those items marked with an *). In the wife’s affidavit of the 31 December 2015 she explains the situation thus:

8. As of 29 December 2015, my savings at HSBC XXX-XXXXX-XXX, which mainly represent the lump sum of HK$1 million I transferred from our joint Standard Chartered account, have dropped to HK$72,064.19 only.  As I have detailed below, because the Respondent has completely cut me off financially and refused to cover the significant outgoings he was previously meeting, I have had no choice but to spend that money just to “keep my head above water”, but the small amount of remaining savings I have left will not last long at all…. 

24.It is not entirely clear over what period of time the wife spent the HK$300,000 – but given that the husband stopped paying maintenance in July and this affidavit is dated the end of December 2015, it seems that a period of six months would be a fairly accurate assumption – notwithstanding the reference to rent for four months only. Thus in broad terms the wife appears to have spent approximately HK$50,000 per month on her own expenditure and that of C. This does not appear to me to have been at all excessive. Indeed it seems to be in keeping with the husband’s original proposal that he pay her HK$40,000 per month. It is of note that the wife maintains that this amount was never agreed to by her in any event and that she has always required more than HK$40,000 per month.  

Legal fees and the US property

25.The husband complains bitterly that the wife has spent money on legal fees and on the US property. It is though difficult to see what else she could have done. Legal fees are required to be paid and presumably the husband is making some sort of provision for his own legal costs. I have noted from the wife’s Form E that she has other fees outstanding. I have not had sight of the husband’s Form E. Given that there had been no final agreement in relation to the US property, the wife was within her rights to pay those sums. Whether that was a wise thing to do in the circumstances is another issue. In any event the parties have now agreed to put the property on the market, which seems eminently sensible in the circumstances.

How much should the husband now pay to the wife as maintenance pending suit for herself and interim maintenance for the child of the family C?

26.The wife said in her Form E that she had the following outgoings:

Part 4  Current Monthly Expenses

4.1   General

Item (HONG KONG HOUSEHOLD)	Amount
Rent	HK$25,000
Mortgage instalments	HK$ 0
Utilities (electricity, gas, rates, telephone & water)	HK$ 5,000
Management fees	HK$ 0
Food	HK$ 11,500
Household expenses	HK$ 3,500
Car expenses	HK$ 0
Insurance premia	HK$ 1,100
Domestic helper(s)	HK$ 0
Other (specify):	HK$
Total monthly HONG KONG household expenses	HK$ 46,100

Attach copies of the latest rental receipt.

4.2   Personal

Item		Amount
Meals out of home		HK$ 5,000
Transport		HK$ 3,000
Clothing / Shoes		HK$ 1,500
Personal grooming (including haircut and cosmetics)		HK$ 3,000
Entertainment / presents		HK$ 3,500
Holidays		HK$ 5,000
Medical / Dental		HK$ 4,000
Tax		HK$ 0
Insurance premia		HK$ 2,500
Interim maintenance		HK$ 0
Contribution to parents		HK$ 800
Dependent family members		HK$ 0
Other (specify): RESIDENCE CLUB MEMBERSHIP		HK$ 600
Total monthly personal expenses		HK$ 28,900

4.3   Children

Item	Amount
School fees	HK$ 12,100
Extra tuition fees (sports tournaments & class trips)	HK$ 2,800
School books and stationery	HK$ 250
Transport to school (including school bus)	HK$ 500
Medical / Dental	HK$ 1,000
Extra Curricular Activities	HK$ 5,000
Entertainment / presents	HK$ 500
Holidays	HK$ 5,000
Clothing / Shoes	HK$ 1,500
Insurance premia (if staying under Father’s medical plan)	HK$ 1,300
Lunches and pocket money	HK$ 2,000
Other Transport	HK$ 500
Child-minding fees	HK$ 0
Uniform	HK$ 500
Others (specify):	HK$ 0
Total monthly expenses for children	HK$ 32,950

Total Monthly Expenses (4.1 + 4.2 + 4.3)

HK$  107,950

I do not accept that the whole sum of approximately HK$33,000 should be deducted from the equation on the premise that the husband will pay for everything as suggested by his counsel – as this is clearly not practical. 

27.In so far as the general expenses are concerned I will allow HK$40,000 per month. It seems to me that even without further economizing on the rent the wife should be able to cut down on her budget for food and household expenses. I will allow a further HK$10,000 per month for the wife’s personal expenses and HK$10,000 per month for C’s additional expenses.

28.The wife asks that the maintenance be backdated to July 2015. I will not make that order as it is hard to see on the face of the documents, notwithstanding the wife’s concerns about non disclosure, how the husband could pay that sum. She has also had the HK$1 million which she has utilized in the meantime.

29.On the premise that the husband will continue to undertake to pay for C’s school fees, extra tuition fees – including sports tournaments and class trips and extracurricular activities directly I will therefore make an order that the husband do pay HK$60,000 per month – i.e. HK$30, 000 per month for the wife and HK$30,000 per month for C with effect from the 1 March 2016. The wife asks in addition that the husband pay the outstanding costs plus any ongoing expenses related to the US property until it is sold. It seems to me that this would be sensible – but I will not make an order to this effect.

The husband’s ability to pay

30.Notwithstanding the husband’s stance it seems to me that he should have the ability to pay the sum of HK$60,000 per month plus C’s other expenses. In coming to that view I have taken into account some of the wife’s concerns with respect to the husband’s finances and the very large amounts of money that appear to have either been spent or possibly placed elsewhere. In any event proper provision needs to be made for the wife and C pending final resolution of this matter.    

Costs

31.Costs shall be reserved for argument.  

Ms T Kwan instructed by Withers for the Petitioner

Mr S Hughes instructed by Oldham, Li & Nie for the Respondent