Sjh v. Cyhc

FCMC No. 4264 of 2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 4264 OF 2012

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JUDGMENT
(Ancillary Relief & Third Party’s Charging Order)

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1.This is the parties’ ancillary relief application upon the dissolution of their 11-years marriage, essentially over how the sale proceeds of their only joint asset in Hong Kong, a workshop held by a company owned by the parties as equal shareholders and sold in October 2012 with the net proceeds of some HK$3.5 million paid into court pursuant to an order made on 30^th April 2012 pending the final determination of their ancillary relief application.

2.The Petitioner Husband however left Hong Kong for Thailand in about late 2014 before the ancillary relief application was heard and is believed to have since not returned to Hong Kong to take any further steps in these proceedings including attending the trial of the application save for some letters sent to court requesting for his share of the sale proceeds.

3.There is a further twist to the case in that his former solicitors M/S Hampton Winter & Glenn (“HWG”) have since his departure obtained a charging order against his share or interest in those sale proceeds in court for his unpaid legal costs in the total sum of just over HK$461,000 plus interests, and as a result HWG were granted leave to intervene in the ancillary relief application but limited only to making closing submissions in respect of their Charging Order.

4.The case of the Respondent Wife is simple in that the entire sum of HK$3.5 million should go to her for her fair share of the marital assets of the parties and for the future needs and expenses of their only child of the family, a son now aged 15 ½ with some hearing disability and whose sole custody care and control has earlier been granted to her, as well as to cover the arrears in maintenance under an earlier maintenance pending suit order due and owing from the Husband which have according to her accumulated to HK$400,000 in arrears and counting.      

Background

5.The Wife, now aged 55, was born and raised in Hong Kong. She became acquainted with the Husband, a German national now aged almost 53, when he came to Hong Kong in 1997 on business. In September 1999 a company known as FIC Ltd (“FIC”) was incorporated with the parties as directors and equal shareholders for exporting and distributing disco stage lighting.

6.After 2 years of courtship the parties were married on 19^th June 2000 in Hong Kong, and on 25^th August of the same year the Wife gave birth to their son. Initially the parties were able to run their lighting business quite successfully with their own workshop in Kwun Tong and a manufacturing factory in Mainland China, and rented a spacious garden house at Hong Lok Yuen, Yuen Long for their matrimonial home.

7.Sadly in about 2007 their business ran into financial difficulties caused by certain disputes with their suppliers in China, and as a result the factory had to be shut down and FIC suffered substantial losses. At about the same time the parties also started to experience marital problems which eventually led to the Husband moving out of the former matrimonial home in about February 2011 and the Wife resigning from FIC to form her own lighting business through a company known as LFT Ltd (“LFT”), while FIC subsequently ceased operation but the Husband retained its goodwill and assets essentially manufacturing mouldings which he brought to his new company known as STN Ltd (“STN”) to carry on the same lighting business as before.

8.Shortly thereafter the Husband in June 2011 filed for divorce against the Wife based on her unreasonable behaviour. After some initial legal maneuvers in that proceedings where both were legally represented, the parties were eventually able to reach agreement both as to their divorce and future arrangements of their son, and as a result the Husband issued a new divorce petition in March 2012 in these proceedings and obtained a consensus divorce based on the parties’ separation for one year with the Wife’s consent when the decree nisi was granted to him on 5^th June 2012, with the custody care and control of their son also granted to the Wife as agreed.

9.The remaining outstanding issues were inevitably over the division of the parties’ marital assets and the financial provision for their son, but as revealed by their initial Form E of September 2011, the so-called marital pot had become quite modest by then, comprising essentially of their respective lighting business the value of which the Wife put at HK$1 million for hers while the Husband’s was put even less at HK$500,000, and with little savings and no landed properties other than the said workshop in Kwun Tong estimated then at under HK$4 million, and with respective monthly income of HK$22,000 for her and HK$54,000 for him.

10.Unfortunately for the next several years the parties expanded what seems to me a disproportionate amount of their time and resources, not to mention those of the court, by becoming embroiled on various interlocutory issues on disclosure and discovery, such as whether the Husband had concealed his interest in a property in Thailand, or whether the Wife had misappropriated funds from FIC when she resigned from the company.

11.Meanwhile on 25^th April 2012 the Wife applied and obtained, by consent, an order for the Husband to pay her interim maintenance of HK$20,000 per month essentially for their son to commence from 1^st May 2012 until further order, and shortly thereafter the parties also agreed to sell their workshop and to pay its sale proceeds into court pending the final resolution of their financial disputes under the order of Her Honour Judge B. Chu, as she then was, made on 30^th April 2012, and in pursuance thereof the net sale proceeds of the workshop of HK$3,505,955.78 were paid into court on 26^th October 2012, which is the subject matter of the application now before me.

12.By late 2013 after an unsuccessful FDR hearing and in preparation for the inevitable trial, the parties updated their Form E, and in his filed on 7^th October 2013 [P4/699], the Husband disclosed details of a property which he purchased in Thailand in February 2012 for Thai Baht THB 9.194 million or the equivalence of about HK$2.3 million, but which he claimed to have since dropped in market value to HK$1.9 million. In the same Form E he also disclosed a slightly improved income of HK$60,000 per month from his new company STN, and in addition he was also entitled to have his monthly rental and entertainment expenses paid directly by his company up to the extent of HK$35,000 and HK$10,000 respectively, but he also claimed to have substantial debts and liabilities of some HK$5.8 million allegedly owed to former creditors of FIC.

13.As for the Wife’s updated Form E, she disclosed just about the same financial situation as before, namely a slightly improved monthly income of HK$28,750 from her business, some HK$290,000 in bank savings but also quite a substantial amount of debts close to HK$2.4 million, and with a monthly expenditure of just over HK$90,000 for herself and the son.            

14.As expected, following these Form Es came further rounds of questionnaires from solicitors of both sides, and eventually the ancillary relief application was set down for trial before Deputy Judge Own on 28^th May 2014 with 3 days reserved.

15.However, shortly before the trial the Husband issued a summons on 9^th May 2014 seeking to vacate the trial dates and for the court’s endorsement of what he claimed to be terms of settlement reached with the Wife [P6/1372]. In his supportive 8^th Affirmation he alleged that following the last PTR hearing there were discussions between the parties which led to a settlement agreement on the terms as set out in the exhibited draft consent summons but from which the Wife now allegedly tried to renege and refused to sign [P6/1375, 1382-1385].

16.The Husband’s case essentially was that, as set out in his draft consent summons, of the said sale proceeds of HK$3.5 million in court, HK$500,000 were to be paid to the Wife in recognition of her share of the goodwill of FIC, and a further sum of HK$2 million to enable her to duplicate and/or replicate those mouldings retained by him from FIC for her own lighting business, with the remaining balance of about HK$1 million to be equally shared between them and for each of them to retain their own personal assets and their own business as a clean break between them, while the Husband was to pay HK$10,000 per month being his half share of their son’s maintenance until he reaches the age of 18 or completes full time education [P6/1382].

17.The Wife however disputed that there was any concluding settlement agreement between them, and asked for time to file her affirmation in opposition as she believed that there were other assets of the Husband which should have been included in their marital pot for division. As a result the Husband’s summons was adjourned to 12^th August 2014 for argument and the trial scheduled for 28^th May 2014 was postponed.

18.At the adjourned hearing of his summons on 12^th August 2014, the Husband however capitulated and agreed to withdraw his summons and to pay HK$53,400 in costs to the Wife, apparently conceding that the parties were indeed then still negotiating on “Without Prejudice” basis, but as he had exhibited those correspondence between solicitors to his said affirmation which had already been read by Deputy Judge Own, the Learned Judge decided to recuse himself from the ancillary relief trial, which was as a result transferred to this court.

19.After that hearing the Husband ceased all his instructions to HWG apparently without settling their bills, and left Hong Kong sometime in late 2014 for Thailand without leaving behind any forwarding address or taking any further steps in these proceedings, which led HWG to apply and obtain a judgment in fault against him for his unpaid bills in the District Court Civil Action DCCJ 3722 of 2014 for the sum of HK$461,314.90 plus interests and costs, and on 4^th March 2015 HWG obtained a Charging Order Nisi against his interest in the said funds in court.

20.At the returned hearing on 2^nd April 2015 before the Registrar of the District Court for the Charging Order Nisi to be made Absolute, the Wife however appeared to raise her opposition, and as a result the hearing was adjourned to 28^th July 2015 for argument, but shortly thereafter the Wife withdrew her opposition and the Charging Order Nisi was subsequently made Absolute on 4^th August 2015.

21.Meanwhile at the PTR Hearing of the Ancillary relief Application on 24^th July 2015 when only the Wife appeared before me in person, she expressed serious financial difficulties in the absence of any financial assistance from the Husband since his departure including his maintenance pending suit payment since January 2014, and therefore wished to apply on urgent basis for release of part of the funds in court to meet her needs pending trial. As there was then no supportive affirmation from her, I adjourned the matter to 16^th September 2015 for her to do so.

22.This the Wife did on 11^th September 2015 with her 9^th Affirmation which was essentially to be her main narrative affirmation for ancillary relief, and upon hearing her submission and for the reasons which will be apparent later in this judgment, I allowed her request for the release of HK$2.9 million to her as interim financial provisions for her and the son pending the final trial of the ancillary relief application scheduled for 3^rd December 2015.

23.It was then when the Husband suddenly re-surfaced in the proceedings when he faxed a letter dated 12^th October 2015 from Thailand giving notice of change of his address with contact details in Thailand and requesting change of the interim maintenance allegedly due to failure of his business that he had to leave Hong Kong in end of 2014 and hence he had since been unable to pay any maintenance to the Wife. As a result the Husband was informed by both the Registry and the Wife at my direction of the scheduled for 3^rd December 2015.       

24.On that day however the Husband failed to attend, and I decided that the hearing should be adjourned for a month to 19^th January 2016 to give him one final chance to make out his case, and for the Wife to give him a warning that should he fail to attend again, she would still proceed with her claims and to seek an order to dismiss his.

25.The Husband responded by a letter dated 7^th January 2016 stating that he would not be able to attend the hearing as he could not afford the costs of travelling and staying in Hong Kong for the trial, and again requested for his half share in the funds in court with certain proposals for the son’s maintenance.

26.A week later the Husband sent another letter which was undated but faxed on 15^th January 2016 to the court making similar proposal as before, followed by further proposals by his letters dated 22^nd March 2016 and 25^th April 2016, but other than that, as noted he never attended the trial nor submitted any further affidavit evidence or closing submission. Hence the trial proceeded only with the Wife’s evidence and, as noted above, with written submissions from HWG.

27.While the parties have never formally submitted any open proposal prior to the trial in pursuant to the Practice Direction for FDR, it is clear that both did in some of their earlier affirmations openly refer to various proposals, and in the case of the Husband also in some of his said letters sent from Thailand, of which I shall endeavour to set them out here.

The Wife’s Proposal

28.As indicated at the beginning the Wife’s proposal is simple and as set out in her 9^th Affirmation [P6/1470, 1482]: that the entire proceeds of HK$3.5 million should be given to her being her fair share in the marital assets and for the future maintenance of the son in view of the Husband’s default of his interim maintenance since January 2014, and now that he has left Hong Kong and claims to have settled in Thailand, the likelihood of any financial assistance that may come his way in future is quite remote, hence whatever his share in those HK$3.5 million is all he has within the jurisdiction and which she can get to secure her son’s future including his university education.

29.As for HWG’s Charging Order, she of course rejects its enforcement against any of the funds in court as being unfair as both her interest and those of the son in the marital assets should be secured and protected from such claim of the Husband’s own creditor which he himself has gone overseas to avoid and tried to dump on her laps.

The Husband’s Proposal

30.The Husband had as noted above made various proposals which can be summarised as follows in chronological order.

31.Firstly, in his 6^th Affirmation filed on 20^th February 2014 intended for the trial of the 1^st ancillary trial scheduled before Deputy Judge Own, he made an open offer in §39 that essentially all the funds in court were to be utilized to meet the parties’ joint debts and liabilities arose from their failed business of FID, that each party was to retain their own assets, and that he was to pay HK$9,500 per month towards half of what he assessed to be the son’s reasonable expenses at HK$19,000 per month [P5/1212].

32.This offer was then presumably superseded by that alleged settlement agreement of May 2014 exhibited to his 8^th Affirmation and referred to in Paragraph 16 above, in which he again proposed that all assets then in the parties’ respective possession or registered in their sole name were to be retained by each of them respectively, that their respective liabilities incurred up to then were to be borne by them respectively, that from the funds in court HK$2.5 million were to be given to the Wife, with the balance of about HK$1 million to be divided equally between them in full and final settlement of their claims against each other, and that he was to pay HK$10,000 per month being his half-share for the son’s maintenance until he reaches 18 or completes full time education [P6/1382-1385].

33.That was of course before his left Hong Kong, since then and in his first letter to court dated 12^th October 2015, he proposed that the funds in court be instead simply divided with the Wife equally, but otherwise made no proposal as to any maintenance for the son.

34.3 months later in his letter dated 7^th January 2016, whilst he maintained the same position as to equal division of the funds in court with the Wife, he also proposed to pay a lump sum for the son representing what he believed to be reasonable maintenance at HK$7,000 per month until his age of 18 from his half-share of the funds with the balance to be sent to him. As the son was then 15 years and 4 months, and with 2 years and 8 months to go before reaching 18, and at HK$7,000 per month the lump sum would amount to HK$224,000 (HK$7,000 x 32 months = HK$224,000).

35.About one week later the Husband faxed another letter to court which was undated but marked received by the court on 15^th January 2016, in which he proposed to increase his maintenance for the son to HK$8,000 per month and hence the total sum up to the son’s age of 18 to be paid from his half-share of the funds in court would amount to HK$256,000 (HK$8,000 x 32 months).

36.By his letter dated 25^th April 2016, the Husband made what was his final proposal, which I quote as follows:

“Orders sought

1.   Son should be allowed to visit me, according to the court order.

2.   Money in court should be divided 50/50 from total sum received.

3.   From my 50% the lawyer should be paid. I am sorry that I am not in position to balance that and I hope that HWG will get the funds from this.

4.   Son’s expenses per month are now totally different, lower, from what R is claiming. A school fee of monthly 2600,-HK$ and a much lower rent in Tung Chung, plus the true expenses will amount to a maximum of HK$15,000,-HK per month. R agreed to share 50%. That means my share would be 7500HK$ a month since Sept 2015. Based on these numbers the maintenance should be fixed and calculated. This should as well only count until son finishes the school education at the age of 18.

5.   After HWG is paid and reasonable maintenance calculated for son until age of 18 the balance should be transferred to me.”

37.These proposals were all rejected by the Wife and hence the matter proceeded to trial and as noted above in the absence of the Husband despite having received notice thereof from both the Wife and the court. Before proceeding to consider the application including the parties’ proposal and their evidence before the court as well as HWG’s Charging Order, it would be necessary to first set out the applicable legal principles given that both parties are unrepresented.               

Applicable Principles

38.In deciding on the question of ancillary relief claims between the parties to the marriage, the court is required by s 7(1) of Matrimonial Proceedings and Ordinance (“MPPO”), Cap 192 to have regard to their conduct and all the circumstances of the case including the following matters:

(a)   the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;

(b)   the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c)   the standard of living enjoyed by the family before the breakdown of the marriage;

(d)   the age of each party to the marriage and the duration of the marriage;

(e)   any physical or mental disability of either of the parties to the marriage;

(f)   the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;

(g)   in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

39.Furthermore, where there is an application in relation to a child of the family, s 7(2) of MPPO requires the court to also have regard to the following matters concerning that child:

(a)   the financial needs of the child;

(b)   the income, earning capacity (if any), property and other financial resources of the child;

(c)   any physical or mental disability of the child;

(d)   the standard of living enjoyed by the family before the breakdown of the marriage;

(e)   the manner in which he was being and in which the parties to the marriage expected him to be educated; and so to exercise those powers as to place the child, so far as it is practicable and, having regard to the considerations mentioned in relation to the parties to the marriage in paragraphs (a) and (b) of subsection (1), just to do so, in the financial position in which the child would have been if the marriage had not broken down and each of those parties had properly discharged his or her financial obligations and responsibilities towards him.

40.How this so-called section 7 discretionary exercise should be undertaken by the court is guided by the 4 principles laid down by the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537 namely:

-   Objective of fairness

-   Rejection of Discrimination

-   Yardstick of Equal Division

-   Rejection of Minute Retrospective Investigation

41.I do not propose to go into the reasoning behind these principles enunciated in that judgment other than that they are to be borne in mind when embarking on the section 7 exercise, but rather the following steps set out therein which I believe are particularly apt to the present case:

“E.2 Step 1: Identification of the assets

71. The first step in the exercise is to ascertain the financial resources of each of the parties calculated as at the date of the hearing. In particular, under section 7(1)(a), the court must have regard to “the income, earning capacity, property and other financial resources” which each of the parties “has or is likely to have in the foreseeable future”. The object will of course be to compute the net financial resources, taking account of all material liabilities. At this stage, the court need not attempt to distinguish between matrimonial and non-matrimonial property, that being an exercise best undertaken (if necessary) when considering distribution of the assets.

72. The court should, as Sir Mark Potter P stated, [76] carry out this first stage exercise “with whatever degree is apt to the case”. In White v White, [77] reflecting the fourth principle discussed above, [78] Lord Nicholls cautioned against turning the clock back to the pre-1970 position when the courts “often had to attempt to unravel years of matrimonial finances and reach firm conclusions on who owned precisely what and in what shares.” No such attempt is called for and generally, a broad brush approach will be all that is required.

73. The parties have an important duty to ensure that the court has sufficient information regarding their assets. They must make full and frank disclosure and a party who fails to do so runs the risk of the court drawing adverse inferences and robustly attributing assets to him or her, or making adverse costs orders. [79]

E.3 Step 2: Assessing the parties’ financial needs

74. The next step is for the court to assess the parties’ financial needs. As has been noted, [80] the section 7 exercise often stops at this point since the total resources may be insufficient to go beyond or even to meet both parties’ needs. If so, no room is left for the application of any sharing principle. Addressing the needs of say, the wife and children may immediately absorb more than half of the total assets. If so, “needs” are, for want of any alternative, determinative. Where the assets are meagre, a “clean break” may not be possible and it may be necessary to have recourse to an order for periodical payments. [81]

75. The position is neatly summarised by Sir Mark Potter P in Charman v Charman (No 4) [82] as follows:

“ ... when the result suggested by the needs principle is an award of property greater than the result suggested by the sharing principle, the former result should in principle prevail: per Baroness Hale in Miller at [142] and [144].... it is also clear that, when the result suggested by the needs principle is an award of property less than the result suggested by the sharing principle, the latter result should in principle prevail: per lord Nicholls in Miller at [28] and [29] and Baroness Hale at [139].”

76. This is an approach which should dispel the fear expressed in Figgins v Figgins, [83] that “rule equality” is likely to work injustice where the asset are meagre. [84]

77. As section 7(1)(b) indicates, the process of evaluating “needs” involves assessing the financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future in the light of present and foreseeable resources. The matters referred to section 7(1)(c) to (e), that is, standard of living, age [85] and disability, will often be relevant. As Lord Nicholls put it in White:

“Financial needs are relative. Standards of living vary. In assessing financial needs, a court will have regard to a person’s age, health and accustomed standard of living.”[86]

78. And in Miller/McFarlane his Lordship stated in respect of “needs”:

“When the marriage ends fairness requires that the assets of the parties should be divided primarily so as to make provision for the parties’ housing and financial needs, taking into account a wide range of matters such as the parties’ ages, their future earning capacity, the family’s standard of living, and any disability of either party. Most of these needs will have been generated by the marriage, but not all of them. Needs arising from age or disability are instances of the matter.” [87]

79. Baroness Hale stressed that the parties’ needs should be “generously interpreted”. [88] Accordingly, in trying to ensure that each party and their children have enough to supply their needs set at a level that equates, in so far as resources allow, to the standard of living they enjoyed during the marriage, those needs should not be assessed according to some perceived lowest common denominator, but with flexibility in the light of all the relevant circumstances.[89]”

42.It is therefore with these principles and guidance in mind that I shall now embark on the section 7 exercise, starting with the parties’ financial resources and needs and those of their son, as well as their respective obligations toward him, which are essentially the only relevant matters in this case.

Wife’s Financial Situation

43.The Wife is the sole director and shareholder of LFL, the company formed by her after she left FIC to carry on similar lighting business, and according to her 9^th Affirmation [P6/1470] she is still earning about the same income as before at about HK$25,000 per month, but she has also received a bonus of HK$60,000 for the previous year which would bring her average income somewhat higher at HK$30,000 per month.

44.Save for her interests in LFL and the HK$3.5 million in court, the Wife also discloses some life insurance policies with a current value of some HK$700,000 and a MPF for about HK$310,000. As for her nominal 2% shareholding in another company FG Ltd, she claims to have received no income or benefits for the past 5 years and that her shares are of no significant value. Other than that she claims to have no other income or assets.

45.The Husband however appeared to have taken issue with the profitability of LFL or the amount of the Wife’s income derived from her company in his earlier 7^th Affirmation filed on 4^th April 2014 before he departed Hong Kong in which he said at §26 [P6/1301]:

“ ... I strongly believe that LFL is doing much better than my company STL. I would simply point out that according to the disclosed Audited Reports of LFL for the year ended 31 March 2013, the total income for the period from incorporation to 31 March 2013 is approximately HK$2.8 million. I further note that the director’s remuneration was recorded at HK$308,000. It is undisputed that the respondent is the sole director of LFL. It is my contention that the Respondent’s income is substantially higher than she has asserted [P5/1124-1140].”

46.The audited report of LFL referred to by the Husband, which can be found in [P5/1125 – 1140], did reveal a total income of HK$2.8 million, but it was clearly for the year ended 31 March 2012 and not 2013 as alleged by him. In fact, for the year ended 31 March 2013 the total income had dropped to HK$2,035,344, and that both years recorded accumulated net losses of HK$408,951 and HK$609,736 respectively after deducting for administrative and other expenses [P5/1130]. Hence I find that statement of the Husband misleading.

47.As for the Wife’s income at that time, it is true that according to the audited report she did receive salaries and bonuses for 2013 in the total sum of HK$308,000 which averaged out to HK$25,666 per month which is just about what she had disclosed in her Form E, although the report also revealed that the company also paid for her accommodation expenses in the total sum of HK$201,600 for the year which corresponds with her then disclosed rental of HK$16,800 per month.

48.In the premises and in the absence of any formal or serious challenge by the Husband at the trial which he did not attend, I see no reason to doubt the Wife’s evidence as to her income or assets. This may perhaps also explain why the Husband would all along be willing to allow the Wife to share equally the HK$3.5 million in court, as otherwise if he truly suspected that she had concealed either substantial income or assets, he would not have made that proposal.

49.As a matter of fact, as noted in paragraph 16 above when the Husband in his 8^th Affirmation alleged that he had reached overall financial settlement with the Wife and attached a draft consent summons as to how the HK$3.5 million in court should be divided, from which the Wife was to first draw HK$2 million for duplicating and replicating various manufacturing moulding for her own lighting business, it is clear that at the time of her audited report she did not yet have that HK$2 million which may explain why her then income was much lower than what the Husband had expected.            

50.He did however also take issue with her stated expenses especially those of their son. In her 9^th Affirmation aforesaid, the Wife set out her monthly expenditure as follows [P6/1475-1476]:

General and Personal Expenses	HK$
Rent	19,250
Utilities	2,000
Food	2,000
Household Expenses	1,200
Car expenses	2,800
Domestic helper/Cleaner	1,500
Meals out of home	1,200
Transport	500
Clothing/Shoes	800
Personal Grooming	600
Entertainment	600
Holiday	2,000
Medical/Dental	500
Tax	1,500
Insurance	2,700
Contribution to parents	4,000
	Sub-total: 43,150
Child’s Expenses
School Fees	12,500
Extra Tuition Fees	1,800
School books and stationery	500
Transport to school	1,830
Medical/Dental	500
Extracurricular Activities	4,305
Entertainment/Presents	4,800
Holidays	6,800
Clothing/Shoes	1,200
Lunches and Pocket Money	1,100
Other Transport	1,000
Uniform	200
Others - Pet($300), Hearing aid accessories ($1,000), Computer + Accessories ($2,000) & Camping Equipment ($500)	3,800
	Sub-total: $40,385
	Total: $83,535

51.At this level of expenditure for herself and her son and with an income of only HK$30,000 per month, even assuming that her company would pay for her rental expenses as before, in the absence of any financial assistance from the Husband, it is clear that the Wife would end up with a deficit of as much as HK$35,000 per month. In order to reduce such a deficit, the Wife explained in her 10^th Affirmation filed some 6 months later on 8^th March 2016 that she decided to change school for the son from his international school to a much cheaper local school in Tung Chung, Lantau Island in October 2015 and has since also moved into the same neighbourhood, but without clarifying the amount of the new school fees, or for that matter her new rent.

52.Some of the Husband’s said letters may however shed some light at least on the school fees of the local school, when he claimed in the one sent to court on 15^th January 2016 that it was HK$31,000 for the whole year according to the school’s website, which was repeated in his letter dated 22^nd March 2016 at HK$31,000 for the whole year or HK$2,584 per month. While this allegation of the Husband, as I have already noted, has never been properly verified by him under oath, neither has it been rebutted by the Wife, and I am prepared to accept that as a result of the change of school, the school fees for the son has since come down from HK$12,550 to HK$2,584 per month.          

53.However, on the basis of the rest of her stated expenses and at her disclosed income, and even assuming that her current rent is paid for by LFL as before, she would still have a deficits of some HK$24,000 per month, which may explain why she had found it necessary to apply for and was granted, by consent, the maintenance pending suit of HK$20,000 per month in the first place. That payment has on the Wife’s evidence ceased since January 2014, and as conceded by the Husband that he should be responsible for half of the son’s expenses which should now and that it should be paid out of his share in the funds in court.

54.This is in fact what the Wife has been proposing, but the matter is of course not as simple as it seems, since the Husband not only takes issue with the quantum of the son’s reasonable needs but also for how long the son should be maintained by his parents, as his case is that it should be up to the son reaching 18 when he would have finished secondary school but may not want to go on to university, while the Wife insists that provisions should be made up to when he completes full-time education which means including university which will of course take his maintenance well beyond the age of 18 to probably 22 instead.

55.As noted above the Wife originally put the son’s monthly expenses at just over HK$40,000, which sum should now have come down to about HK$30,000 in view of his now much lower school fees, and while the Husband has made different assessments of the son’s expenses in his various proposals ranging from HK$15,000 to HK$20,000 per month, he has not been able to be more specific about the rest of the son’s expenses that he takes issue with, save for the school bus fares of HK$1,830 which he is probably correct to say that it is no longer necessary now that the son lives close to his school.

56.For a teenager in secondary school and from a middle class family, many of his stated expenses such as HK$1,800 for private tuition, HK$500 for books and stationery, HK$1,200 for clothing and shoes, and HK$1,100 for lunches and pocket money, just to cite a few examples, appear to me quite ordinary or reasonable, but others such as HK$4,800 for entertainment/presents, HK$6,800 for holidays which I assume overseas trips, and HK$4,300 for extracurricular activities without any specifics seem to me somewhat excessive given the Wife’s stated financial limitation since the divorce, while HK$2,000 for computer accessories or HK$500 for camping equipments on a monthly basis certainly appear to me quite out of the ordinary.

57.By adopting a practical and broad brush approach to bring these expenses down to a more realistic level at about half of their stated figure would bring the son’s monthly expenditure to a more sensible amount of about HK$20,000 per month, which would in fact align more with the Husband’s assessments, but to which it must be included the son’s half share of the Wife’s general and household expenses such as utilities, food and household as well as domestic helper of about HK$HK$3,400, thus bringing his total reasonable needs to about HK$23,400 of which I propose to wind up to HK$24,000 per month, generously interpreted.      

58.The son is now in Form 4 and will be 16 in August 2016 when he enters Form 5. In other words, he should complete secondary education by the time when he reaches 18 when it will be decided whether he shall go on to university. The Wife expects him to do so and therefore insists that further provisions should be catered up to his finishing university by the age of 22, instead of as suggested by the Husband for the son to decide when he reaches 18 in his last letter of 25^th April 2016 referred to above.

59.This is as noted not acceptable to the Wife as she believes that the Husband’s attitude of wait-and-see is wholly unreasonable and irresponsible, and argues that even if the son is to attend a local university after finishing secondary school instead of going abroad for the much more expensive ones, it would still cost something like HK$200,000 for 4 years of university fees and expenses, not to mention his living and other expenses, all of which she argues must be provided for now and secured against what remains of the Husband’s interest in the funds in court.

60.Her argument is simple and convincing, as it is clear from the Husband’s letters that he has no plan or intention to return to Hong Kong as he has well settled in Thailand, hence any future claims on behalf of the son for financial provisions or assistance against the Husband in person should it become necessary are likely to be futile or hopeless, and that the only asset that she knows he has within the jurisdiction is his share of the funds in court, and which she argues as insufficient to meet both the needs of her and their son, not to mention the competing claim of HWG.

61.By adding the son’s reasonable needs and expenses retrospectively to January 2014 when the Husband ceased his contribution and up to his completion of university education by June 2022, and on the basis of my assessment above, the Husband’s proposal to pay for half of those expenses of his son from his share in the funds in court would come close to HK$1.5 million as follows, and this is without taking into account of inflation or any additional needs which may arise as the son grows and develops:

(a) from January 2014 to September 2015 in International School at HK$20,000 per month x 21 months	= HK$420,000
(b) from October 2015 to August 2018 in local school until university at HK$12,000 x 35 months	= HK$420,000
(c) from September 2018 to June 2022 at HK$12,000 x 46 months plus half of 4 years of university fees of about HK$200,000	= HK$652,000
	Total: HK$1,492,000

62.Taking into account of the fact that Husband had earlier agreed to allow the Wife to have the first HK$2.5 million from the funds in court before sharing equally with her of the remaining balance as not only fair but also necessary in recognising her share of the goodwill of their earlier business FIC, but that they were also necessary to enable her to set up her own business to become financially independent of him, which would then put the total amount of her claims for herself and the son at HK$4 million, exceeding the funds in court by some HK$500,000, not to mention the claim of HWG or any balance left to the Husband, whose actual financial situation I shall next consider.        

Husband’s Financial Situation

63.The Husband’s current financial situation is not clear as he has since late 2014 not filed any further evidence to update his means, other than the fact that he now lives in Thailand and his bare allegations in his various letters starting with his said first one dated 16^th October 2015 when he stated: “Due to the failure of my business I had to leave Hong Kong in end of 2014 and have now settled in Thailand ... For maintenance I am in no position since Sep 2014 to pay any funds. I lost all income and company needed to close, due to high divorce cost for 4 years and business change. I am living now at a friend’s place, which supports me”.

64.In his undated letter but faxed to court on 15^th January 2016 the Husband again said this about his present financial situation: “I am broke and have no assets and no income. I live on my families and friends’ support”.  

65.These bare allegations that he no longer has any assets or income and has had to rely on his family and friends without any details or particulars came so suddenly and without any warning as to his departure from Hong Kong that it is not surprising the Wife does not accept that there is any truth in them, and I can see why.

66.It was barely 6 months ago before he so suddenly left Hong Kong when he filed his narrative affirmation on 19^th February 2014 for the purpose of the ancillary relief trial before Deputy Judge Own, when the Husband updated his income to about HK$60,000 per month including commission from his company STN, and also attached a Schedule of Assets and Liabilities of both himself and of the Wife [P5/1243 – 1247] in which he stated, apart from his joint interest with the Wife in the HK$3.5 million in court, his total personal assets at HK$2.4 million including his bank savings, his MPF and the said Thailand Property which he valued then at HK$1.985 million.

67.While it is the Husband’s case that his Thailand property was purchased only after separation and with his own funds and personal loans without any contribution from the Wife, and hence not a matrimonial asset for distribution in their divorce proceedings, but which was disputed by the Wife given that it was purchased so soon after their separation that its funding may very well have come from their marital assets, and that in any event there can be no question that the property must form part of the Husband’s financial resources to cater for the son’s needs and expenses, albeit out of the jurisdiction but clearly contradicts his assertion that he has no assets.

68.That was 2 years ago and if it is indeed the Husband’s case that he no longer owns his Thailand Property, surely it is his duty to make full and frank disclosure of such change to his assets situation and to provide proper details and documentary evidence thereof with a full account of its sale proceeds, but he has done neither.

69.The same can be said about his business. While he may have said to have taken out loans to set up his new company STN after closing down FIC, the total outstanding amount of which were according to his said narrative affirmation relatively insignificant at no more than HK$350,000 [P5/1201], and although he also mentioned about much more substantial debts due and owing to FIC’s creditors in excess of HK$5 million, as FIC was a limited company and in the absence of further evidence, I fail to see why they would be relevant or render the Husband personally liable but not the Wife who was also an equal shareholder. Furthermore, If he is indeed in such heavy debts and financial difficulty, it begs the obvious question of why would he agree to the Wife taking what appears to me the lion share of the HK$3.5 million in court under his said draft consent summons which he earlier tried to seek the court’s endorsement?

70.It would in fact be relevant to look at the terms of that draft consent summons in more details which was prepared by the Husband’s then solicitors HWG on his instructions and exhibited to his said 8^th Affirmation [P6/1382-1388], starting with the various undertaking of his, and the Wife as well, under Recital B and C:

“B. AND UPON the Petitioner and the respondent acknowledging and undertaking to each other and to the Court that save as provided herein:-

(i) all assets now in their respective possession or registered in their respective sole name or jointly with other parties shall be retained absolutely by each of them respectively; and

(ii) their respective liabilities incurred prior to the date hereof and hereafter shall be borne by them respectively; and

C. AND UPON the Petitioner undertaking and acknowledging to the Court and to the respondent that:-

(i) he will provide access to all moulds so as to allow the Respondent to cause a complete set of manufacturing mouldings to be duplicated or replicated from those manufacturing mouldings currently or previously (as the case may be) owned by FIC; a full list of such moulds is attached hereto marked “A”;

(ii) the respondent’s right to employ such duplicated or replicated mouldings shall not be subject to any copyright or other form of intellectual property restriction;’

(iii)the cost of such duplication or replication shall be met from the sum paid into court from the sale of Workshop Q and the respondent shall be paid from the sum paid into court a sum of no more than HK$2,000,000 for the said purpose of duplicating or replicating the set of mouldings; and

(iv)from the balance of the sum paid into court from the sale of Workshop Q, the sum of HK$500,000 shall then be paid to the respondent in recognition of her share of the goodwill of the business of FIC and which he benefited from through the assumption of such business by STN.”                

71.It is essentially against these terms that the Husband alleged that the parties had reached agreement as to how the HK$3.5 million paid into court were to be divided between them under Paragraph 1 of the draft consent summons as follows:

“1. The monies paid into court in the sum of HK$3,505,955.78 on 26^th October 2012, be paid to the Parties through their respective solicitors’ firms as follows:-

i. the sum of no more than HK$2,000,000 be paid to the respondent, pursuant to Recital C (iii); and

ii. the sum of HK$500,000 be used to the Respondent pursuant to Recital C (iv); and

iii. the remaining balance of the payment into court shall be paid to the Petitioner and the Respondent in equal shares.”

72.To complete the picture, under Paragraph 2 of the draft consent summons the Husband was to pay HK$10,000 per month for the maintenance of the son to commence from 1^st May 2014, and relevantly, until he attains the age of 18 years or until he ceases full time education, whichever is the later or until further order of the Court, and in Paragraphs 3 and 4 the parties’ respective claims for ancillary relief against each other were to be dismissed.

73.It seems therefore clear to me that firstly, under these terms of the draft consent summons and as proposed by the Husband at that time in May 2014, from the monies in court of HK$3,505,955.78, the Wife was to receive HK$2,000,000 + HK$500,000 + HK$1,005,955.78 ÷ 2 = HK$3,002,977.89, which is about 85% of the total sum, while the Husband was to receive the remaining 15% at HK$502,977.89. If this were supposed to represent a fair and equal division of the marital assets between the parties, it would be valid or proper to assume that because the Husband knew that he was to retain more assets in his name or possession than those of the Wife, hence the much bigger share of the funds in court to her to make up her fair and equal share.

74.Secondly, there were clearly the stated additional reasons for allowing the Wife to draw HK$2.5 million first from the monies in court so as to enable her to duplicate manufacturing moulding for her own business because the Husband was allowed to keep all the original mouldings of FIC which he subsequently brought to his new company STN, and which not only show that they were valuable assets of the Husband, but also casts serious doubt over his allegation to have to shoulder up sole responsibility for the debts of FIC, as these mouldings would have otherwise been used to pay off such debts when FIC ceased business instead of being allowed to be brought into his new company STN, if indeed such debts did exist.

75.Which brings me to back to the Husband’s assertion in his recent letters that he no longer has any assets or income, which if true then the legitimate questions of what has happened to his business STN or these mouldings, or for that matter his Thailand Property? Surely they could not have just vanished without any reason over a little more than a year between August 2014 when he left Hong Kong and October 2015 when he first claimed to have no assets or income, especially with STN when it was apparently still very much an on-going concern earning him obviously good enough income to cause him to agree to those terms under his draft consent summons in the first place. The Husband has simply not provided any explanation or information, in which case the court is certainly entitled to draw its own conclusion.

76.While I have set out the applicable principles above and referred to the parties’ duty to ensure that the court has sufficient information regarding their assets, the importance of that duty cannot be overemphasised as it implicitly underlines the first step to be taken by the court in its section 7 exercise referred to by the Court of Final Appeal in LKW above, and of which it would be relevant to also refer to the following passage in Rayden and Jackson on Divorce and Family Matters, 18^th edition at Chap 17.28:

“The importance of the duty of both husband and wife to make disclosure of their assets which is full, frank and clear cannot be over emphasised. Unless a court is provided with correct, complete and up-to-date information on the matters to which, under s 25 of the MCA 1973, it is required to have regard, it cannot lawfully or properly exercise its discretion in the matter ordained by that section. The duty of each party is absolute, and it must be discharged regardless of whether the application for ancillary relief is adjudicated upon by the court after full evidence has been heard, or settled after an exchange of financial information between the parties leading to a consent order. The duty is also a continuing one; a party must not mislead the other party and the court into assuming that his financial situation is unchanged if it in fact has changed. Any material changes in the financial situation of either party occurring between the filing of their Form Es and the final dispatch of the claims by the court must be brought to the notice of the other party at the earliest opportunity. A party who seeks to negotiate and secure a settlement without informing the other party about a material change in his or her financial circumstances runs the risk that, if a settlement is reached and a consent order is made, the consent order will be set aside by the failure to provide full, frank and timely disclosure. Shortcoming in disclosure will be visited by orders for costs against the offending party, often on indemnity basis. Furthermore, deviation from the standard of disclosure required may be visited by the court drawing adverse inference against the party in default.” (Emphasisadded)

77.In the present case where the Husband has clearly failed to provide the necessary information or disclosure of what has actually happened to his business or property since late 2014, and as a result that any unfairness occasioned by the court’s imprecise assessment of the extent of his present financial resources should fall on him as the defaulting party, as Sach J said in J-P C v J-A F [1955] P215, [1955] 2 All ER 617, CA at p227:

“In cases of this kind, where the duty of disclosure comes to lie on a husband; where a husband has – and his wife has not – detailed knowledge of his complex affairs; where a husband is fully capable of explaining and has had opportunity to explain those affairs, and where he seeks to minimize the wife’s claim, that husband can hardly complain if, when he leaves gaps in the court’s knowledge, the court does not draw inference in his favour. On the contrary, when he leaves a gap in such a state that two alternative inferences may be drawn, the court will normally draw the less favourable inference – especially where it seems likely that his able legal advisers would have hastened to put forward affirmatively any facts, had they existed, establishing the more favourable alternative.”

78.In the case of F v F [1994] 1 FLR 359, where the husband had presented his financial position in a fraudulent manner and had deliberately failed to disclose assets including those located abroad, in holding that his explanation of his financial position as fundamentally implausible and ordering him to pay a substantial lump sum to the wife, Thorpe J, as he then was, explained at 367C:

“So if he has conducted his affairs throughout the marriage in such a covert fashion as to relieve him of the ordinary obligations of citizenship to support the state through tax contribution, if he has conducted these proceedings in a vain endeavour to maintain that camouflage, if in consequence the obscurity of my final vision results in an order that is unfair to him it is better that than that I should be drawn into making an order that is unfair to the wife. If at the end of this case he feels that the lump sum that I order is unfair in reflection of his present retrenchment then he should remember that he has brought that consequence upon himself by the fashion in which he has chosen to arrange his affairs over the course of the last decade, coupled with the fashion in which he has chosen to conduct these proceedings.”

79.Henceforth on the evidence before me, and I stress again that those bare allegations of the Husband in his various letters that he no longer has any assets or income are not proper evidence and which I am not prepared to allow them to be admitted as such, I do not accept what he has said about his current financial situation, and I agree with the Wife that he should still have his business and of course his manufacturing mouldings with income at least as before, as well as his own retained assets including his Thailand Property worth on his own estimation close to HK$2 million.

80.However, whatever doubts one may have over the Husband’s alleged business debts and liabilities, or their impact on him now that he is out of the jurisdiction, there can be no argument over his outstanding legal costs due to HWG under the Charging Order, but whether they should be allowed to be enforced against his share in the monies in court, which Ms Brown for HWG argues that they should, of which I shall now come to consider. 

HWG’s Charging Order

81.The judgment obtained by HMG against the Husband in DCCJ 3722 of 2014 was entered on 17^th November 2014 in default of defence for HK$461,314.90, plus interest at 1% on the said sum up to 29^th September 2014 for HK$24,783, further interest at judgment rate of 8% from 30^th September 2014 to date of judgment and thereafter until payment, and fixed costs at HK$6,630. It is not in dispute that this judgment sum has remained outstanding, hence its accumulated amount including interests should have by now well exceeded HK$500,000. As a result it is essentially competing with the Wife’s ancillary relief claims against what is believed to be the only asset of the Husband in Hong Kong of his interest in what remains of the funds in court now stands at some HK$605,955.78.  

82.Ms Brown for HWG submits that as s 7(1)(b) of MPPO as noted above requires the court to have regard not just to the parties’ financial resources but also their needs obligations and responsibilities which would include debts and liabilities in particularly as the Husband’s liability to HWG under the Charging Order which is genuine and legitimate, and as a result he has a legitimate interest in the balance of the funds in Court in order to meet his liability to HWG, and if HWG were still on the record, the Court would accept that this liability serves to reduce the matrimonial pot and hence the sum of the assets available for division between the parties.  

83.It then follows, Ms Brown submits, that in deciding on the Wife’s ancillary relief claim against the Husband’s share in the funds in court, the court should strike a balance between her interests and those of his judgment creditors such as HWG, as it was held in the case of Harman v Glencross [1986] 1 All ER 545, [1986] Fam 81 where a wife presented a petition for divorce in January 1981 and sought a transfer of property order relating to the husband’s interest in their former matrimonial home. In May 1981 the husband’s creditor and former partner issued a writ in the civil court against the husband claiming contribution towards partnership debts. Judgment was entered against the husband for £9,251.83. The creditor was then granted a charging order nisi against the husband’s interest in the property and that order was made absolute on 7^th September 1981. The wife who had received no notice of the proceedings against the husband sought to vary the charging order absolute. On the wife’s undertaking to transfer the divorce proceedings to the Family Division, the application for variation of the charging order was transferred to the family Division and both sets of proceedings were ordered to be heard together. The registrar varied the charging order by providing that it should be subject to any order made by the court in the wife’s application for ancillary relief, and thereafter he made an order transferring the husband’s interest to the wife. On the creditor’s appeal, the judge held (1) that the wife had a locus standi, under section 3(5) of the Charging Order Act 1979, to seek a variation of the charging order, and (2) that the registrar had properly postponed the charging order to any order made on the wife’s application in the divorce proceedings.

84.On the creditor’s appeal, and dismissing the appeal, the Court of Appeal held, (1) that since the wife might have lost her right of occupation in the matrimonial home if a sale had been ordered pursuant to the charging order, and since in the matrimonial proceedings the wife had claimed the husband’s interest in the property, she was interested in the property to which the charging order related within the meaning of section 3(5) of the Charging Orders Act 1979 and that , accordingly, she had a locus standi to apply for a discharge or variation of the charging order ... (2) that in exercising its discretion whether or not to make a charging order the court was required by section 1 (5) of the Act of 1979 to consider all the circumstances of the case, and since the wife had had no opportunity to be heard on the application for the charging order, the court had to consider any of the wife’s circumstances as were relevant to her application to discharge or vary the order; that, accordingly, in postponing the charging order to any order made in favour of the wife on her application for a property adjustment order the judge was entitled to take into account the wife’s as well as the creditor’s interest; and that, therefore, there was no ground for interfering with the exercise of the judge’s discretion.         

85.In dismissing the creditor’s appeal, Lord Justice Balcombe in giving his leading judgment for the Court of Appeal considered at some length what weight the court should give to the interests of the wife and those of any minor child of the family as compared with those of the judgment creditor at p. 92G:

“ ... in considering “all the circumstances” under section 1(5) of the Act of 1979, is the court entitled to take into account the interests of the wife, and, if so, what weight should it give to those interests as compared with those of the judgment creditor? I start with the proposition:

“a judgment creditor is in general entitled to enforce a money judgment which he has lawfully obtained against a judgment debtor by all or any of the means of execution prescribed by the relevant rules of court”:

see Robert Petroleum Ltd v Bernard Kenny Ltd [1983] 2 A.C. 192, 207E. However, this proposition is not absolute; it may be qualified where, as in the Roberts Petroleum case itself, the judgment creditor finds himself in competition with other creditors of the judgment debtor. Nevertheless, as Sir Denys Buckley said in the Hegerty case, at p. 866:

“a judgment creditor, although not entitled to such an order as of right, is justified in expecting that such an order will be made in his favour ...”

In the Roberts Petroleum case in this court [1982] 1 W.L.R. 301, 307, Lord Brandon of Oakbrook, giving the leading judgment, set out under seven headings the principles which should be applied in deciding whether a charging order nisi should be made absolute. That statement was approved by the House of Lords in that case, although they disagreed with the application of the principles to the facts of the case. However, while it is correct to say, as Stephenson LJ did in the Hegerty case, at p.867:

“circumstances of the kind present in this case, namely an interest of the wife of a judgment debtor in the subject matter of the execution and hardship to her or to their children if the principle” – i.e. that quoted at the beginning of this paragraph –“ is applied, are not among those set out or considered in Lord Brandon’s statement of the principles ...”

It is hardly surprising, since Lord Brandon was not considering this question. It is also correct that a wife’s interest is not mentioned specifically in the Act of 1979, but there is no reason why it should not be, since the court is required to consider “all the circumstances of the case.”

...

Before leaving the consideration of the judgment creditor’s position, there is one further point I should make. Not all judgment creditors are faceless corporations; indeed in the present case the judgment creditor is an individual. He, for reasons which doubtless appeared good to him and his advisers, chose to put in no evidence before the registrar orb the judge as to his means, but relied on what he asserted was his right to a charging order, not postponed to any claim of the wife, ex debito justitiae. If the court is entitled, under the Act of 1979 or otherwise, to weigh the competing interests of the judgment creditor and the wife, then I can see no reason why, in proper case, the judgment creditor should not be entitled to put in evidence of the hardship he would suffer if he were denied a charging order, or if its enforcement were unduly postponed.

In considering the wife’s position it is necessary to give separate attention to her rights of occupation and to her claim to have the husband’s equitable share transferred to her. In almost every case concerning a matrimonial home the wife will have a right of occupation; either, as here, because of her joint legal ownership, or under the matrimonial Homes Act 1983. Further, parliament has looked with particular favour upon a spouse’s right to occupy the matrimonial home and has given it the status of an equitable interest (section 2(1) of the Act of 1983) with consequential priority over subsequent equitable interests created by the other spouse, e.g., a charging order (section 3(4) of the Act of 1979), provided that the owner of the subsequent interest has notice, and notice is given by registration of a Class F land charge or the equivalent notice on the title in the case of registered land. Thus, in the case of a matrimonial home which is owned solely by the husband, the wife has the ability to protect her rights of occupation and to acquire priority over a charging order obtained by a judgment creditor of the husband. It would be peculiar if Parliament had intended that a wife who has a proprietary interest in the matrimonial home should have any less priority.

A spouse’s rights of occupation under the Matrimonial Homes Act 1983 are brought to an end by the death of the other spouse, or the termination (otherwise than by death) of the marriage; section 2(4). However, even after the termination of the marriage Parliament has shown a continued concern for the welfare of the minor children of the family, since the new section 25 of the Matrimonial Causes Act 1973, introduced by the matrimonial and family Proceedings Act 1984, admittedly since the hearing at first instance in the present case, provides that it shall be the duty of the court in deciding whether to exercise its powers under, inter alia, section 23 (financial provision orders), 24 (property adjustment orders) and 24A (orders for sale of property) and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare (while a minor) of any child of the family who has not attained the age of 18. If the minor children are (as here) living with the wife, the loss of her right to occupy the matrimonial home could well be detrimental to their welfare, particularly if the funds available were inadequate to provide another home in its place.”

86.Having stressed the court’s duty to have first consideration to the welfare of any minor child of the family when considering all the circumstances of the case, His Lordship then went on to consider how the wife’s right to occupy the matrimonial home can be protected as against the rights of the judgment creditor including to enforce the charging order at 94F:

“Accepting as I do that the court is properly concerned to protect the wife’s right to occupy the matrimonial home, the next question is how that right can be protected. In the Hegerty case at first instance Bingham J held [1985] Q.B. 850, 856D, that the wife’s right of occupation was adequately protected by the provisions of section 30 of the Law of Property Act 1925, since he accepted that the wife’s possession of the house could not be disturbed until there had been an application under section 30 and a full hearing at which the wife’s personal and family position could be investigated...

...

If, however, the wife’s position is considered by the Family Division pursuant to her application for ancillary relief under the matrimonial Causes Act 1973, then there are a number of ways in which her right to occupy the matrimonial home can be protected. First, the house can be settled on trust for sale (if it is not already so held) and the sale postponed until the youngest child attains the age of 17 or cease full time education, so as to enable the wife to provide a home for herself and the children until they are grown up. The proceeds of sale can then be divided in whatever proportions the court considers appropriate. This is the well-known Mesher order (see Mesher v Mesher and Hall (Note) [1980] 1 All ER 126) to which Ewbank J [1985] Fam. 49, 57F – G referred. The Mesher type of order has fallen out of favour of late, since its result is to throw the wife on to the housing market at a time of her life when she is unlikely to be able to secure adequate accommodation for herself, and the modern practice is to make an order to postpone the sale of the house until her death, remarriage, voluntary removal from the premises, or becoming dependent upon another man, although sometimes requiring her to pay an occupation rent after the youngest child has attained the age of 18: see, e.g., Harvey v Harvey [1982] Fam. 83.

Although a Mesher order, or one of its variants, preserves the husband’s interest in the matrimonial home and thus leaves something on which the judgment creditor’s charging order can ultimately bite, the sale is likely to be so long postponed that, for practical purposes, the charging order will be of little value to the judgment creditor, whose natural wish is to recover his debt promptly. From the wife’s point of view, a Mesher-type order, or one of its variants, has its disadvantages. It leaves her linked financially with her husband, even though the modern practice, now enshrined in section 25A(1) of the Matrimonial Causes Act 1973, is to favour the “clean break” wherever possible: see Minton v Minton [1979] A.C. 593. Of greater importance, when considering the balance between the wife’s rights and claims and those of the judgment creditor, an order which merely postpones the sale of the matrimonial home can leave her “locked in” to the particular house which was the matrimonial home at the date of the break-up of the marriage, and although family circumstances may render it desirable for her to be able to sell the house and move to a smaller house, or to a different district, she will be unable to do so if the result of a sale of the existing house, and the consequent division of the proceeds of sale, will leave her with insufficient funds to buy a new house.

It is for reasons such as these that an outright transfer of the husband’s interest in the matrimonial home may be the appropriate way to protect fully the wife’s right to have a roof over the heads of herself and the children, and it was, of course, such an order that the registrar made (and the judge affirmed) in the present case. Indeed, one of the points made in support of the wife’s case, and accepted by the judge, at p.59F, was that if the charging order absolute stood, and was followed by a sale, she would not have enough money left to rehouse herself and the children. However, unless the transfer of the husband’s share in the house to the wife is necessary to give her adequate protection so that she may have a home for herself and the children, it is difficult to see why the judgment creditor’s undoubted rights should not take preference to the wife’s claim to a transfer of property order.”       

87.His Lordship then proceeded to lay down the principal guidance as to how the court should deal with the similar problems in different circumstances at p. 99A:

“(1) Where a judgment creditor has obtained a charging order nisi on the husband’s share in the matrimonial home and his application to have that order made absolute is heard before the wife has started divorce proceedings, there is, of course no other court to which the application for the charging order absolute can be transferred, the wife having no competing claim to the husband’s share. In those circumstances it is difficult to see why the court should refuse to make the charging order absolute, and the wife’s right of occupation should be adequately protected under section 30 of the Law of Property Act 1925: see the analysis of the law by Goff LJ in In re Holliday [1981] Ch. 405.

(2) Where the charging order nisi has been made after the wife’s petition, then on the application for a charging order absolute the court should consider whether circumstances are such that it is proper to make the charging order absolute, even before the wife’s application for ancillary relief has been heard by the family Division. There will, of course, cases (such as Llewellin v Llewellin (unreported), 30 October 1985, Court of Appeal (Civil Division) Transcript No. 640 of 1985, which we heard immediately after this appeal) where the figures are such that even if the charging order is made absolute, and then the charge is realised by a sale of the house, the resultant proceeds of sale (including any balance of the husband’s share after the judgment debt has been paid) will be clearly sufficient to provide adequate alternative accommodation for the wife and children.

(3) Unless it appears to the court hearing the application for the charging order absolute that the circumstances are so clear that it is proper to make the order there and then, the usual practice should be to transfer the application to the family Division so that it may come on with the wife’s application for ancillary relief, and one court can then be in a position to consider all the circumstances of the case. When considering the circumstances, the approach of the court should be to recall the statement of Sir Denys Buckley in the Hegerty case [1985] Q.B. 850, 866, that a judgment creditor is justified in expecting that a charging order over the husband’s beneficial interest in the matrimonial home will be made in his favour. The court should first consider whether the value of the equity in the house is sufficient to enable the charging order to be made absolute and realised at once, as in Llewellin v Llwellin (unreported), even though that may result in the wife and children housed at a lower standard than they might reasonably have expected had only the husband’s interests been taken into account against them. Failing that, the court should make only such order as may be necessary to protect the wife’s right to occupy (with the children where appropriate) the matrimonial home. The normal course should then be to postpone the sale of the house for such period only as may be requisite to protect the right of occupation – a Mesher type of order – again bearing in mind that the court is holding the balance, not between the wife and the husband, but between the wife and the judgement creditor. If the judgment creditor asks, even in the alternative to his claim to an immediate order, for a Mesher type of order, then it seems to me that it would require exceptional circumstances before the court should make an order for the outright transfer of the husband’s share in the house to the wife, thereby leaving nothing on which the judgment creditor‘s charging order can bite, even in the future. Finally, the court should consider whether there is any point in denying the judgment creditor his charging order, if the wife’s right of occupation could in any event be defeated by the judgment creditor making the husband bankrupt.

(4) Once the charging order absolute has been made, it would normally require some special circumstances – e.g., where (as here) the wife had no proper opportunity to put her case before the court – for the court to set the charging order aside under section 3(5) of the Charging Order Act 1979, and thereby deprive the judgment creditor of his vested right.”

88.These passages were recently revisited and approved by the Court of Appeal in the case of Kremen v Agrest [2013] EWCA Civ 41 when Lord Justice Moore-Bick, in dismissing the appeal of the judgment creditor over the lower court’s decision refusing his charging order absolute against a property of the husband, stated in his judgment at paragraph 13:

“These passages support the conclusion that when striking a balance between the interests of the judgment creditor and those of the wife, the interests of the judgment creditor should be respected, save to the extent that it is necessary to override them in order to make appropriate provision for the wife and any minor children. In some cases that can be achieved by an order postponing the sale of the property (usually known as a Mesher order – see Mesher v Mesher and Hall [1980] 1 All ER 126), or in a more extreme case by withholding a charging order altogether and transferring the husband’s interest to the wife free of any encumbrances. However, each case depends on its own facts. As Waite J observed in Austin-Fell v Austin-Fell [1990] Fam. 172, there can never be automatic predominance for any claim; each case depends upon striking a fair balance between the normal expectations of the judgment creditor and the hardship to the wife and children if a charging order is made. In some cases justice to the creditor will demand that the wife accept a degree of provision that in other circumstances would have been regarded as inadequate.

89.While relying on the above statement that “it would require exceptional circumstances before the court should make an order ... to the wife, thereby leaving nothing on which the judgment creditor’s charging order can bite...” Ms Brown submits for HWG that there are 4 important distinguishing features in the present case:

(a)   the joint property previously held equally by the parties to which the subject funds in court relate, is a non-domestic unit and unlike in those cases cited above, not a matrimonial home;

(b)   the remaining balance of the funds in court is the only assets of the Husband in Hong Kong available to HWG for the enforcement of its charging order;

(c)   HWG’s charging order absolute was made without the Wife’s objection;

(d)   The Wife has already received HK$2.9 million which represents 83% of the funds in court, hence a fair balance would be to accept that this sum is sufficient to meet her reasonable needs and those of the son who is now 15 years old whilst respecting the interest of the judgment creditor.  

90.I accept that Ms Brown is factually correct about all these 4 points which are part of all the circumstances that the court shall have regard to, and that unlike those other cases referred to above, here there is clearly no issue over the Wife’s right to occupy any matrimonial home. Similarly I do not question the entitlement of HWG as a bona fide creditor not to be denied of their judgment against the Husband, but it is also true that they obtained the Charging Order Absolute on 4^th August 2015 only after the Wife had for whatever reason withdrawn her opposition, and notwithstanding that and with due respect, it is my view that it would have been more appropriate for the Registrar to instead postpone and transfer that application to the Family Court to be dealt with together with the Wife’s ancillary relief application, and had the Wife not withdrawn her opposition, I believe that would have happened.

91.Furthermore, and more significantly in my view in terms of priority and of HWG’s knowledge, that the Wife’s claim against the very subject matter of the Charging Order was made much earlier when she filed her Form 4 indicating her financial claims on 20^th April 2012, or even earlier when she first set out such claims in her Notice of Application for Ancillary Relief and her 1^st Form E both of September 2011 in the Husband’s 1^st divorce proceedings and later transferred to the present one on 23^rd April 2012, and of course that consent order of Chu J made a week later on 30^th April 2012 for the sale of the workshop jointly owned by the parties and for its sale proceeds to be paid into court which subsequently became the subject of HWG’s Charging Order only some 3 years later, and as HWG had acted for the Husband from September 2013 until he left Hong Kong in late 2014, HWG all along must have been fully aware of the purpose of why the sales proceeds were paid into court and of the Wife’s claim against the Husband’s interest in those funds in court.

92.The very fact that the parties had agreed for the sale proceeds to be paid into court pending determination of the claim of the Wife, and for that matter of the Husband as well, the purpose must be for the funds to be secured from any other claims including those from any creditors of either party, which include the Husband’s debts due to HWG in his legal costs which were not incurred until more than 2 years later in late 2014 and that the resultant Charging Order Absolute even later in August 2015.  Hence as far as priority of enforcement of claim is concerned, that of HWG cannot and should not take precedence or preference over that of the Wife.              

93.While it is true that claim of the Wife does not involve any right to accommodation, in striking a balance between the interests of HWG as judgment creditor and those of the Wife and her minor child, of which it cannot be just about their accommodation needs but essentially their wider financial needs, as pointed out by Lord Justice Moore-Bick in the Kremen case:

“15. In weighing up all the circumstances in this case, it is important to identify the essential needs of Ms Kremen and her children. Mr Feehan submitted, as he had to the judge, that the court should be concerned only with the need for reasonable accommodation, and not necessarily accommodation of the standard to which they had previously been accustomed. The argument was based on a passage in the judgment of Balcombe LJ in Harman v Glencross ... Mr Feehan submitted that the court should be concerned only with the provision of accommodation and not with wider financial needs. He argued that Ms Kremen did not require the whole of the equity in South Lodge in addition to the sum in court in order to obtain adequate accommodation, even if that accommodation was of a standard lower than that to which they had been accustomed.

The judge did not accept that submission and neither do I. The issue raised by Mr Feehan was not directly before the court in Harman v Glencross. It was not necessary for Balcombe LJ to deal with it and there is nothing to suggest that he intended to do so. In any event, once it is accepted, as it was, that the court must have regard to all the circumstances of the case when exercising its discretion, it is difficult to see how it could properly ignore the wider financial needs of the wife and children, or, as the judge put it, the needs to pay their daily bread. For similar reasons I would reject Mr Feehan’s submission that the wife is entitled to protection only in relation to her occupation of the former matrimonial home and that since South Lodge was never the matrimonial home (having been bought by Mr Agrest as an investment) the approach adopted in Harman v Glencross had no application in this case.”

94.This being a 11-year marriage during which the Wife, and I am sure the Husband too, had made her proper contribution not just toward the welfare of the family and caring for the child of the family, but also to their joint business and matrimonial assets, but has since the breakdown of the marriage for reasons noted above been solely responsible for their son without any prospect of any contribution, financially or otherwise, from the Husband save for his interest in the funds in court, hence it is my firm view that not only is it fair in the circumstances but also necessary for the Wife to be first given HK$2.5 million to keep her business ongoing so that she can continue to bring up their son, and having accepted her evidence that the Husband owed her HK$400,000 in total arrears of interim maintenance which led to my earlier decision to allow her to withdraw the total sum of HK$2.9 million from the funds in court, the reality is that there is now just HK$600,000 left which is accepted by Ms Brown sufficient to satisfy HWG’s claim but clearly not the Wife’s needs for herself and above all for the son, and in assessing what is fair in that situation and between these competing claims, the court must have first regard to the child’s welfare or interest, in which case the comparative needs of the son and HWG are in my view hardly commensurate, as Lord Justice Thorpe sitting in the same court with Lord Justice Moore-Bick in the Kremen caseput it when he stated:

“27. S.1(5) of the Charging Orders Act 1979 provides:

“(5) In deciding whether to make a charging order the court shall consider all the circumstances of the case and, in particular, any evidence before it as to –

(a) the personal circumstances of the debtor, and

(b)   whether any order creditor of the debtor would be likely to be unduly prejudiced by the making of the order.”

28. Clearly the affect of that sub-section is to confer upon the judge a general discretion neither governed nor limited by any statutory language. However, the decision of this court in the case of Harman v Glencross [1986] Fam 81, provided judicial guidance as to how the discretion should be exercised.

29. This court there addressed the typical situation in which a judgment creditor sought to enforce a judgment obtained against the husband by a charging order designed to result in an order for sale against the wife remaining in occupation of the matrimonial home.

30. In such a paradigm case this court naturally stressed the strength of the entitlement of a bona fide creditor without other involvement in the marital dispute.

31. Mr Feehan QC submits that the judgment of Balcombe LJ and Fox LJ established the principal that the just entitlement of the creditor is not to be denied save and in so far as some element of that entitlement has to be allocated to provide a roof for the wife to a minimum standard.

32. There is no clear statement to that effect within the judgment. I can see no rational reason to distinguish between the wife’s bare needs whether for housing, lump sum or maintenance; particularly maintenance for children, for in assessing what is fair the court has to have first regard to the welfare of the children.

‘’’

36. Additionally the comparative needs of the appellant and the wife were hardly commensurate. Whilst the wife needed every penny that she could get to meet her needs and the needs of the children the appellant is a significantly rich man seeking to extricate himself from a bad deal which he had chosen to strike with full knowledge of the risks that he ran and without any additional consideration to justify the risks.

37. All these cases are facts specific and in all the circumstances of this case the judge was, in my opinion, fully entitled to exercise his discretion as he did. Indeed I would go so far as to say that there was no other discretionary conclusion that he could reasonably have reached.”

95.I do not of course try to equate the situation of HWG with that of the judgment creditor in Kremen where the court had made a number of findings to his discredit which is certainly not the case here, but the simple truth is that, and as I have found, the Wife has a much greater need for the remaining funds in court as she will clearly need every cent that she can get to maintain and support her son for several more years to come in the absence of other financial assistance from the Husband, while for HWG it is a case of a highly successful law firm seeking to recover what seems to me a relatively insignificant sum which they had chosen not to have secured from their former client with sufficient funds or security on account of costs when they decided to represent him in these proceedings, and with full knowledge that the funds paid into court were for the sole purpose for the court’s determination of the future needs of the parties and their child. In my view the comparative needs of HWG and the Wife are simply incapable of commensurate. 

Conclusion

96.For these reasons and having considered all the circumstances of the case, I am of the firm view that it is only fair and in the best interest of the child of the family that the entire funds in court of some HK$3.5 million being the sale proceeds of the parties’ only joint asset in Hong Kong be awarded to the Wife on the following terms:

(a)   HK$2.5 million for her fair share of the parties’ marital assets;

(b)   HK$400,000 being the arrears in maintenance pending suit owed by the Husband at HK$20,000 per month from January 2014 to August 2015 (total 20 months);

(c)   The remaining balance of the funds in court of about HK$600,000 plus any accrued interest as a lump sum for the Husband’s share of the son’s maintenance from September 2015 until he reaches 18 or completes full time education, of which as I have assessed above would barely cover all his needs up to completion of secondary school without much reserve for university when all such expenses of his will realistically be all shouldered up by the Wife. This is henceforth to be paid out to the Wife in its entirety at the expiration of 28 days of this order.

(d)   The above terms shall be in full and final settlement of the financial claims between the Husband and Wife in these proceedings which claims shall be dismissed.

97.I therefore order accordingly and with liberty to apply. In the premises I refuse the enforcement of HWG’s Charging Order Absolute against the funds in court, which is without prejudice to their enforcement against any other assets of the Husband,

98.Lastly, on the question of costs, given that both parties are unrepresented and with the Husband out of the jurisdiction, I make no order as to costs which is an order nisi to be made absolute at the expiration of 14 days.

The Petitioner was absent throughout the trial.

The Respondent appeared in person.

Ms Jain Brown of M/S Hampton Winter & Glynn appeared for HWG only at Closing Submission.