Mgb Aka Mag v. Gcb
Read the full judgment text of FCMC 5376/2015 on BabelCite. This Family Court judgment was delivered on 19 June 2017 before HH Judge Bruno Chan.
Matrimonial Proceedings and Property Ordinance – Ancillary Relief – Equal Division – Add Back – Clean Break – Costs – Health Issues – Matrimonial Assets – HK$65.8 million – Lump Sum – Capitalised Maintenance – No Order as to Costs – Wife's Health Conditions – Litigation Conduct – Extra-marital Expenses – Loans to Friends. The Court determined the total matrimonial assets at HK$65.8 million and ordered equal division. Extra-marital expenses of HK$704,565 were added back, but loans to friends were not added back, with 50% payable if recovered. A clean break was ordered despite the Wife's health conditions, as her assets were sufficient. No order as to costs was made due to the Wife's trauma affecting her litigation conduct. Husband to pay Wife HK$7.8 million lump sum and HK$4,560,000 capitalised maintenance.
Legal issues: Add Back of Matrimonial Assets · Clean Break vs Nominal Maintenance · Costs and Litigation Conduct
Outcome: Equal division of matrimonial assets ordered. Clean break granted. No order as to costs.
Cites 3 cases
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FCMC No. 5376/2015 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 5376 OF 2015 ----------------------------
---------------------------- Before: HH Judge Bruno Chan in Chambers. Date of Hearing: 1 – 3, 8 November, 2016, 21 – 22 February & 5 May 2017. Date of Decision : 19 June 2017. ------------------------ JUDGEMENT ------------------------ 1.This is the application for ancillary relief by the Petitioner Wife, now aged 58, against the Respondent Husband, aged 55, upon the dissolution of their 26-year marriage, essentially for equal division of their matrimonial assets, and for initially substantive periodical payment but by the close of the trial she had come down to only nominal maintenance during their joint lives as a safe guard due to her health conditions. 2.Whilst it is common ground of the parties that the equal sharing principle shall apply to division of their matrimonial assets, there is apparently significant difference between them as to what they claim to be their total value, with the Wife putting it at just over HK$77 million while the Husband’s figure is significantly less at about HK$65 million, hence a difference of some HK$12 million separating the parties. 3.This difference can essentially be explained by the Wife’s case that by reason of the Husband’s marital and financial conducts during the marriage with deliberate or reckless dissipation or waste of marital assets, that his such marital conduct has adversely affected her earning capacity and increased her needs in particularly her medical expenses, and that his litigation conduct in failing to comply with court orders or to provide proper disclosure all of which justify substantial “add back” to the matrimonial assets for equal division. 4.The Husband of course denies that he has been guilty of any such conducts, insisting that many of the so-called dissipations were either unsuccessful investments or loans made to his friends in needs, and that whilst some may not be recoverable, he proposes to pay the Wife 50% of those that are as and when they are paid back, which is however not acceptable to her or unless they could be secured against his assets. 5.As for the Wife’s claim for nominal maintenance, the Husband insists that there should be a clean break instead as he is terrified by the prospect of recurrence of their litigation given what he claims to be the Wife’s unreasonable stance and vexatious litigation conduct in these proceedings, hence for both parties the issue of conduct, be it marital, financial or litigation, is clearly at the heart of their disputes, and the fact that their combined legal costs are in excess of HK$10 million, a staggering sum by any standard and disproportionate to either assets or issues but which is sadly fast becoming the norm in family litigations, which speaks volume of the parties’ uncompromising and difficult stance in the proceedings, or at least of one according to the other. 6.There is fortunately no children issue as their son is now almost 25 and working while staying with the Wife in Hong Kong, while their daughter, aged almost 22 is in university in UK and wholly supported by the Husband. Background 7.The Wife was born in the USA and raised in Massachusetts/Rhode Island area with her extended family still living there. After graduating from university with a degree in economics, she went on to business school in London for MBA where she met the Husband, a British and a fellow student. 8.In 1980 the parties married in UK and later also held a Catholic ceremony in the US with the Wife’s family. After the marriage both worked in the finance industry in London until about 1991 when the Wife moved with the Husband’s job in Baring Securities to Tokyo where their elder child A, a son was born in the following year in 1992 with the Wife then became a full-time housewife and mother save for some summer part-time jobs editing English translated documents for some Japanese companies. 9.In 1995 Baring Securities ceased trading and the Husband moved his team of research people to another company eventually taken over by Merrill Lynch when the Husband then moved to Schroders. In the same year their daughter C was born also in Tokyo. 10.In 1996 the family moved with the Husband’s job in Schroders to Hong Kong which he then lost in the 1997 Asian Financial Crisis. In 1998 he joined Dresdner Kleinwort Benson until 2000 when he changed to working for HSBC as Chief Asia Economist. It was around this time when the Wife started a book club business teaching their daughter and her friends. 11.In 2004 the Husband left HSBC to join BIA where he ran certain hedge fund but for the next 3 years he had no income and the parties had had to cut down on their expenses. In 2008 his hedge fund rose substantially and as a result the Husband earned US$8 million in that year and consolidated his reputation as a successful fund manager. For the next several years the Husband was able to earn a yearly income in excess of US$1 million and that the family enjoyed a high standard of living including luxurious apartments and expensive overseas holidays, while their children attended boarding schools. 12.In the following year in 2009 the parties purchased a 5-bedrooms property in the Wife’s home town of Rhode Island at Rumstick Road, Barrington (“Rumstick House”) for US$1.875 million which came also with a separate guest cottage and a large garden as a family home, and for which the parties also paid US$43,000 for the audio and video equipment existed in the property, and US$17,500 for the nearby Rhode Island Country Club membership. 13.During about the same period the Wife came down with severe bladder pain and has since been diagnosed with Interstitial Cystitis, or painful bladder syndrome with chronic bladder and pelvic pain, which has since necessitated constant medical attentions and treatments including high dosages of pain killers, and as a result also reduced her intimacy with the Husband which by late 2010 had ceased altogether and led to the parties attending marriage counselling. 14.In 2013 the Husband left BIA to set up his own company GCB as the sole director and shareholder by injecting US$1 million from his savings into the company as a shareholder’s loan to provide the initial working capital and from which he was to draw a salary of HK$175,050 per month to meet his family’s expenses. 15.On 2nd December 2013 GCB entered into a joint venture agreement with CFIC (Hong Kong) Ltd (“CFIC”), an institution in asset management registered with the Securities & Future Commission (“SFC”), to provide consultancy service, under which the Husband was made a non-remunerated director of CFIC together with 4 other directors, and in March 2014 GCB launched a new hedge fund known as CP Fund and paid HK$145,600 per month for a new apartment for the Husband and his family at La Hacienda on the Peak. 16.In February 2015 the parties and their daughter spent 3 days in what the Wife claims to be an unusually lavish holiday in Venice where the Husband was said to have spent HK$67,000 during their stay at the luxurious Hotel Gritti Palace, but afterwards he went to London where he spent a weekend with a woman whom the Wife later discovered and suspected to be his mistress and on whom she believes he had spent more than HK$68,000 on that weekend which eventually led to the breakdown of the marriage. 17.By April 2015 the Wife had become so suspicious of the Husband’s activities that she hired a private investigator to look into his affairs, and when she received reports of his extra-marital activities including with prostitutes which may have gone on for several years, she confronted him with the same and demanded that he left their matrimonial home at La Hacienda, which he subsequently did and eventually moved to his present apartment in August 2015 on Stubbs Road at a rental cost of HK$55,000 per month. 18.On 5th May 2015 the Wife instituted these proceedings by issuing a petition for divorce based on what seems to me a fairly mild version of the Husband’s unreasonable behaviour and for general ancillary relief. On 8th May 2015 the Husband returned his Form 4 through his former solicitors indicating that he would not contest the petition, and as a result the decree nisi was granted to the Wife on 26th August 2015. 19.Meanwhile the parties had exchanged their Form E in June 2015, where the Husband disclosed total net assets in excess of HK$86 million, with an income of more than HK$4.1 million for the year which averaged out to about HK$350,000 per month, but had a monthly expenditure of more than HK$510,000 including rent for his new apartment and interim maintenance of HK$269,600 for the Wife. It is note-worthy that he had also disclosed being owed HK$2,360,000 in loans which he had earlier made to two of his friends namely BB and MH, and that he would be seeking the court to make a clean break settlement with the Wife [B2(1)/1-36]. 20.The Wife as expected disclosed in her Form E much less income at HK$20,000 per month and assets worth no more than HK$7.7 million made up essentially of her interest in Rumstick House and her savings, but claimed to have an expenditure of more than HK$448,000 per month [B2(1)/37-64]. 21.Shortly thereafter the parties were able to enter into a mediation agreement on 11th July 2015 whereby the Husband agreed to pay the Wife US$500,000 as an advance distribution of their capital asset to be set off against her final award and to transfer Rumstick House to her, as well as a monthly sum of HK$80,000 for her interim maintenance and to continue to pay for the rent of the former matrimonial home up to 15th November 2015 when the Wife was to move to a new accommodation for which he was to contribute HK$90,000 per month towards her rental expenses for the new apartment pending the final resolution of their financial dispute. These terms of the mediation agreement were subsequently made an order of the court on 3rd August 2015 [B1(1)/4]. 22.However, eight months later in February 2016 the Husband updated his Form E to reveal a serious drop in his income to only HK$55,000 per month as he claimed to have been forced to cut his salary due to serious losses incurred by GCB and to avoid having to re-capitalize his company, whilst the net total value of his assets also came down significantly to HK$55.8 million, partly because he had since transferred some such as his interest in the Rumstick House to the Wife, and partly due to the ongoing substantial legal costs incurred in the proceedings. 23.It was also at this stage when the Husband’s answers to the Wife’s several questionnaires revealed his many more loans made to his friends without her prior knowledge or consent, and in particularly that his extra-marital activities had in fact started as early as 2012 during the marriage that the Wife claims to have been so traumatised emotionally and so exacerbated her health problems that have indeed further deepened their entrenchment. 24.So it was no surprise when the parties came away without any settlement at their FDR hearing before Deputy Judge Ching on 1st March 2016, and as a result the ancillary relief matter therefore came before me on 27th May 2016 for PTR when the parties were directed to file their narrative affidavit setting out respectively their case only on the issues for trial which were as noted above essentially over the quantum of their matrimonial assets for equal division and whether or not there should be a clean break between the parties or that there should be periodical payment/nominal maintenance in favour of the Wife after the divorce. In other words, issues which were fairly limited and straight forward. 25.Or so it seemed, until when one came to read the parties’ narrative affidavit, especially that of the Wife known as her 4th affidavit filed on 18th August 2016 [2(1)/196] which turned out to be a massive 88 pages 268 paragraphs plus a further 120 pages of exhibits of what appears to be her autobiography with staggering amount of retrospective information and material of her family background and history dating back to her ‘great-great-great grandfather’ with details of her upbringing and schooling as well as her early professional career, followed by how she came to meet the Husband whilst still in a serious relationship with a boyfriend, and then every minutiae of her 26 years marriage, with some 70 paragraphs devoted to what she claimed to be the Husband’s marital conduct which led to the eventual breakdown of their marriage, and a further 100 paragraphs of his litigation misconduct in these divorce proceedings, many of which in particularly her historical background are either irrelevant or unhelpful to the determination and resolution of the few and fairly straightforward issues referred to above, and are clearly within the contexts of which the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537 has taken pain to warn that the court should not countenance any attempt to engage in costly and futile retrospective investigations which tend to deplete the parties’ resources and to increase their antagonism. 26.This was so despite my direction given to the parties at the PTR hearing specifically warning against such improper indulgences in their narrative affidavit, in particularly in view of the impact of the litigation apparently already on the Wife’s health problems and the substantial legal costs already incurred by both parties, and when such warning was clearly at the forefront of the parties’ mind and those representing them when their affidavit was being prepared, as evidenced at the beginning of their affidavit of both parties, starting with the Wife’s in paragraph 3 [2(1)/197]:
27.Likewise in paragraph 3 of the Husband’s affidavit of 18th August 2016 [2(1)/154]:
28.It appears that the Husband did try to do just that but his affidavit still came in 42 pages and 119 paragraphs albeit less than half in length of the Wife’s and did focus as he so claimed mainly on the issues over the extent of the matrimonial assets and his financial situation including his various investments and loans involving his friends. It is however clear from their affidavit that both parties had intended to raise the issue of the litigation conduct of the other as the basis for their claim for costs of the ancillary relief proceedings in the event that their Open Proposal was not acceptable to the other, and the way they presented their narrative affidavit will no doubt be a factor to be taken into consideration when I come to deal with their litigation conduct and/or costs later in this judgment, but meanwhile it would be relevant to first go to their Open Proposal. 29.To which the parties have each also attached a Schedule of Assets [1(1)/120-121, 152-159], and as noted above it is apparent that there was then a significant difference between them as to the size and quantum of the matrimonial assets of between HK$13 million – 16 million, depending on whose Schedule one is looking at, but it is clear that the major issue centres around what, if any, assets or value should be added back into the matrimonial pot for division between the parties, and therefore before setting out their respective proposal and to have a proper understanding thereof, it would be useful to first look at their respective Schedule of Assets which I have combined together and summarised as follows so as to identify their major differences:
30.As noted above, it is essentially the last item of the Husband’s Assets as assessed by the Wife at about HK$13.5 million being monies owed to him from various loans made to his friends and other unsuccessful investments and spending of his which the Wife argues as losses from the marital asset pool which would otherwise have been available for division but for his ‘reckless and cavalier financial misconduct’ contrary to her objections or without her knowledge or consent, and for which she has sought to add back to the marital pool for division in her following Open Proposal. The Wife’s Open Proposal 31.The Wife’s Open Proposal was set out in her solicitors’ letter dated 30th September 2016 [C4/2653] on the basis of equal sharing of the matrimonial assets which she put at about HK$77 million including all the add backs on the following terms:
32.Essentially the Wife was seeking a lump sum and transfer of assets totalling HK$17 million to bring her half share of the total matrimonial assets to HK$39 million plus substantive ongoing maintenance of HK$76,000 per month for life. The Husband’s Open Proposal 33.The Husband responded to the Wife’s offer through his solicitors’ letter dated 14th October 2016 [B4(12)/2800 in which he pointed out what he claims to be errors in the Wife’s calculation of the assets and on the basis of his own calculation of the assets at about HK$66.4 million, his Open Proposal was to effect a clean break settlement on a 50/50 division of the assets which would give the Wife about HK$33.2 million plus capitalized maintenance for 5 years and 50% of his loans as and when they are repaid, which can be summarised as follows:
34.This offer of the Husband was as expected rejected by the Wife but has remained his Open Offer for trial. Agreed Terms 35.Notwithstanding the apparent significant gulf between the parties essentially over the quantum of the lump sum payable to the Wife and that whether there should be a clean break between them, the parties have nevertheless been able to agree on the transfer of Rumpsticks House and other less controversial items as follows:
36.As the matter inevitably proceeded to trial, with Mr. David Pilbrow SC and Mr. Robin Egerton representing the Wife, and Ms Mairéad Rattigan representing the Husband, which was originally scheduled for 4 days in early November 2016 but had to be broken off on the 4th day on 8th November 2016 when the Wife was unable to continue with her evidence due to a physical and emotional relapse, specifically a panic attack during cross-examination according to the medical reports subsequently produced [C4(13)/3214, 3216], and the second part of the trial had to be rescheduled for additional days in February 2017. 37.It was after this episode that the Wife revised her Open Offer as set out in Mr Pilbrow’s Closing Submission dated 13th April 2017, and it would be in my view relevant to cite in full as follows:
38.Whilst the Wife has accordingly adjusted her position, and if I may add not insignificantly, it is clear that the remaining issues were still too entrenched between the parties that the trial had to run its full course, with those remaining issues specifically set out in the Wife’s Opening Submission for the court’s determination as follows:
39.Whilst the Husband has not so specifically stated in his Opening Submission, he did in his narrative affidavit set out what he believed to be the key issues for the trial [2(1)/155-157] which are essentially the same as those of the Wife, except that he insists that there be a clean break between them upon her receipt of her half share of their marital assets, and that he also intends to raise the issue of excessive legal costs due to the Wife’s litigation conduct in the proceedings. Hence it would be helpful for me to first set out the relevant principles to be applied towards those issues for determination. Applicable Legal Principles 40.In deciding on ancillary relief application the court is required by section 7(1) of Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) to have regard to the conduct of the parties and all the circumstances of the case including the following matters:
41.As to how the court should undertake this section 7 discretionary exercise, the Court of Final Appeal in LKW v DD supra laid down comprehensive guidance including the 4 underpinning principles which are by now well known to all but worth repeating here as they are always to be borne well in mind when embarking on the exercise:
42.It is not necessary for me to go into the reasoning articulated by Ribeiro PJ in his judgment for the court behind all four of these principles, since there seems to be no controversy between the parties in respect of the first three of them, but given the fact that the Wife has raised various issues of conduct against the Husband who also seeks to argue litigation conduct against her in the way she has prosecuted her claims in the proceedings, I find it relevant to remind myself again of what His Lordship said about the fourth principle:
43.His Lordship then referred to a statement made by Thorpe LJ in Parra v Parra [2003] 1 FLR 942 at para 22 as illuminating and reflecting the essence of the fourth principle:
44.It is therefore with these principles in mind that I shall now proceed to undertake the first step of the process in identifying the matrimonial assets and their value for the purpose of division between the parties which they have agreed to be in equal share. Identification of Assets 45.Given the parties’ wealth it is inevitable that their matrimonial assets comprise of quite a long list including real property, companies, bank savings and investments as well as personal belongings and chattels either in joint names or sole name between the parties, and while there is no real controversy with some of them either in terms of what they are or of their value, and as noted above those disputed items have since the trial dwindled down to a handful, what remain at issue are still quite substantial in terms of their value as will be apparent below, which for easy reference I propose to set them out under the name or possession of the Wife and the Husband separately but with their differences which I am able to identify between them in a summary form, starting with the Wife’s list of her assets. Wife’s Disputed Assets 46.In leaving aside those loans owed to the Husband which the Wife argues should be added back which I propose to discuss separately under the item of “Add Back” below, what remain still at issue over the value of the Wife’s assets are quite straight forward, such as her jewellery and household chattels of which and in the absence of any formal SJE valuation, l propose to adopt a broad brush approach by accepting the Husband’s suggestion to use the average of their respective figures as follows:
47.As for the value of her Harbourside Inn Timeshare, I accept the Husband’s explanation that when he first put its value at $15,000, he meant for it to be in US Dollar instead of HK Dollar, which should therefore be converted to HK$116,250 for the present purpose. 48.For the Husband’s value for the Rhode Island Country Club at HK$135,625, it was simply based on his purchase price of US$17,500 then in 2009 but again in the absence of any formal valuation, I propose to accept it as more realistic rather than the Wife’s suggested no value as there is simply no evidence to indicate that it is now worth nothing and if so why. 49.I also accept the Husband’s value for the Wife’s bank account balance at HK$11,733,056 after taken into account of the funds transferred from 50% redemption of the Panab, Bonsai and Akamatsu funds. 50.The remaining difference in valuation over the Rumstick House appears to me is simply due to the different exchange rate adopted by each party, as both have accepted its formal valuation of US$1.25 million, and since it has already been by agreement transferred to the Wife as part of her award, I therefore propose to adopt her figure of HK$9,750,000 for the present purpose. 51.As for the last of her disputed item, which is her rental expenses at La Hacienda up to December 2017 which she claims should be included as part of her liabilities in assessing the total value of her assets, I agree with the Husband that it is in principle wrong to do so for that purpose, as otherwise he should also be allowed to include his. I would therefore exclude it from her net assets for the purpose of division. 52.In the premises and in exerting these valuation as I have found into the Wife’s list of assets, I have arrived at a total net value at HK$25,130,977 for her assets which is only about HK$800,000 short of the Husband’s suggested figure. Husband’s Disputed Assets 53.As for the disputed items of the Husband’s list of assets, they are essentially as follows:
54.For the value of the Macau Golf Club and the Husband’s personal items and chattels, I propose to similarly adopt a broad brush and use their average figure at HK$1.5 million and HK$760,000 respectively. 55.As for his various investment funds and insurance which could otherwise have been easily verified by their statements, I believe the relatively insignificant difference between the parties probably lies at the different timing the figures were picked from the statements and also due to various dealings made by the Husband with his accounts, and hence he should probably be more accurate with their correct value. In any event the differences between the parties appear to be insignificant, and I therefore propose to adopt the Husband’s figures for these 2 items at HK$4,925,459 and HK$451,085 respectively. 56.Regarding the value of SR Capital, I also accept the Husband’s evidence that it has been folded and is not his asset, hence leaving only his various loans and unsuccessful investments which remain at the heart of the parties’ dispute and the subjects of the Wife argument for ‘Add Back” and which I shall now turn to. Add Back 57.As noted at the beginning of the judgment, it is the Wife’s case that she has been deeply upset by the Husband’s conduct in relation to:
58.For the last item which is the Husband’s litigation misconduct, Mr Pilbrow submits that in view of the Court of Appeal’s guidance given in LSY v THE [2013] HKLRD 1233 that it is best sanctioned by an order of costs, it would accordingly be more appropriately dealt with when this court considers the question of costs of the ancillary relief proceedings between the parties. 59.As for the Husband’s marital and financial conduct in support of her argument for the add backs to the matrimonial pot for division, it is the Wife‘s case that in the three years prior to her divorce petition, the Husband behaved recklessly and irresponsibly, first and foremost financially, significantly dissipating the matrimonial pool which according to the parties’ First Form E was about HK$90 million, but more than HK$16 million vanished to investments, both equity and loans made to relatives, friends and colleagues within 3 years prior to the petition, both behind the Wife’s back and/or despite her objections, and in 2 cases despite her own strongly worded objections. Theses ‘investments’, she argues, were made without the due diligence or investment discipline which the husband had applied in decisions for his own hedge fund or other funds he invested in their marital assets. 60.Regarding the 8 personal loans that were granted by the Husband, the Wife argues that only 3 were declared in his two Form E and only 2 had any documentation, whilst all 8 loans, totalling HK$6.6 million, were made without interest, or security, and without repayment terms, and in fact most are very unlikely to ever be repaid, and that all equity investments are now worthless save one which remains at initial investment value. 61.In addition, the Wife argues that the Husband’s company GCB & Partners which was established in 2013 in connection with his new hedge fund CP Fund, was funded with US$1 million of their marital assets, but GCB was wound down in 2016 with the entire sum of US$1 million written off, which was according to her entirely avoidable given the Husband’s managerial skills, but was exacerbated by its travel and entertainment expenditure which she believes was way out of line at the time. 62.Furthermore, she argues that at the time of her divorce petition, she was unaware of the 3 years of the Husband’s adultery which dated back to June 2012, and while she had already been suffering ill health prior to the 3 years of extra-marital activity, it was the revelation of the extent, variety and duration of his adultery that so severely affected her ability to cope that the court should have regard of such conduct of the Husband and its impact on the Wife when considering her financial claims. 63.As noted above, by the close of evidence the Wife has come down substantially from her original position and in her Closing Submission she seeks the add back of only the following 5 personal loans made by the Husband as well as his extra-marital activities:
64.Mr Pilbrow submits on her behalf that there are two ways which the court may approach these loans of the Husband and his spending in his extra-marital activities either by departing from equal division of the marital assets in the Wife’s favour, as per ARAV v VP [2011] 3 HKLRD 759, Mimi Kar Kee Wong Hung v Raymond Kin Sang Hung [2014] 17 HKCFFAR 585; or by adding back these sums to the matrimonial pot for distribution as per Norris v Norris [2003] 1 FLR 1142, Vaughan v Vaughan [2008] 1 FLR 1108. 65.Whatever is the right approach, it is however for the Wife to show that those loans and spending are the result of such conduct of the Husband that the court shall have regard under section 7 of MPPO, but only if the conduct is such that it is inequitable to disregard, as held by the Court of Final Appeal in LKW supra, where Ribeiro PJ first examined the rationale behind why costly and time-wasting investigations regarding conduct in ancillary relief proceedings should be avoided and the case law developed over the years of its relevancy to such proceedings:
66.His Lordship then concluded as to what conduct is to be regarded as material or relevant at §104:
67.Whilst it is clearly the Wife’s case that her psychological distress after the breakdown of the marriage was exacerbated by the extent of the Husband’s infidelity with prostitutes over a 3-year period, in respect of which the Husband has admitted spending more than HK$700,000 including HK$400,000 sent to his mistress in London, Mr Pilbrow accepts that infidelity may not usually be considered as gross and obvious conduct in a marriage, but he argues that the extent of the infidelity in this case was particularly distressing to the Wife, as the Husband knew full well that she was a devout Catholic, as was himself an active Christian for most of the marriage, and the fact that the parties underwent a second Catholic wedding ceremony in 1990 in England and celebrated a 20th anniversary party in 2009 when vows were renewed and the husband presented the Wife with a diamond eternity ring in front of guests that she was traumatised when she learnt of his chronic infidelity of which she was unaware until it only became apparent from his answers to her questionnaires. 68.Mr Pilbrow submits that the Wife only came to learn that whilst the Husband had been talking about reconciliation and a future together and was ostensibly working with the Wife in an effort to improve their marriage, in reality he was spending substantial time and funds on his infidelity and was committed elsewhere. 69.As regard her dispute over the remaining 5 loans and/or failed investments made by the Husband, it is the Wife’s argument that none of those loans were made with interest, security or any repayment terms, and most in fact are unlikely to ever be repaid, while all the equity investments are now worthless save for one which remains at initial value. 70.Furthermore, the Wife argues that the Husband’s company GCB established in 2013 in connection with his new hedge fund CP and was funded with US$1 million of the marital assets was wound down in 2016 with the injected capital of US$1 million had to be written off entirely, but it is her view that the failure of GCB was avoidable given the Husband’s managerial skills, while its travel and entertainment expenditure was way out of line with what a fledging company should have been spending on those items. 71.Whilst the Wife does not dispute that she knew about those loans and investments as contended by the Husband, she argues that if she had known about his infidelity, she would have filed for divorce 3 years prior to them being made and would have been entitled to 50% of all the matrimonial assets before any unauthorized expenditure of any nature had been made, and that although the Husband did discuss those loans and investments with her, he either went ahead and made them despite her objections and/or mentioned them to her only after they had been made, thereby depriving her of any input into the use of the asset pool. 72.The Wife therefore submits that such recklessness and dishonesty of the Husband, who was carrying on a double life for at least three years, is relevant to the issue of financial misconduct, of which she argues also includes his own high spending in all realms, be it personal, family, extra-marital, or business travel or entertainment which contradicts his expressed concern about the family expenditure. 73.The Husband disputes that there were any elements of recklessness or dishonesty in any of those loans made to his friends or in his investments, and that he, and for that matter the Wife as well, have been generous to their families and friends in view of their own financial success, as he illustrated in his narrative affidavit [2(1)/163]:
74.As to his failed investment in GCB, the Husband also gave detailed explanation in his narrative affidavit [2(1)/164-167] after having produced all the relevant financial documents and information in his answers to the Wife’s earlier questionnaires, all of which have also been examined and reviewed by the SJE in the valuation of the company. 75.None of these were challenged or disputed by the Wife at the trial, and as noted above it has always been the Husband’s case that the Wife shall receive her half-share of those loans as when they are repaid, whereas for his extra-marital expenses he has agreed to be added back in full into the marital pool for equal division with the Wife. Is there then still justification for the Wife in the circumstances to insist that the Husband had been reckless with those loans and investments and that they should all be added back for division for the present purpose regardless whether they are recoverable? 76.Ms Rattigan argues that these loans were made by the Husband because he is a kind and generous man and that there is a pattern of his generosity to family members and lending money to help others throughout the marriage, which was in fact known to the Wife who herself comments on his kindness as being a reason she was attracted to him. 77.Ms Rattigan further submits that the loan made to AL, the Husband’s long term secretary was to help her when she was in severe financial difficulty and facing possible bankruptcy, and the money was given to her when the Husband had just earned a huge sum of money, of which he also explained in his evidence that this loan will not be recovered as he does not believe that AL has the means to do so. 78.In relation to the other debts, Ms Rattigan submits that it would not be fair or equitable for the Husband to have to pay the Wife regardless of whether they are in fact recovered, as the loans made to BB were part and parcel of the investment into his business that the Husband thought would do well, which also applies to the money advanced to JM who is the Wife’s friend and university alumni, and since it was the parties’ agreement that they would diversify their investments, it would not be fair that the Wife should only stand to gain any profit, which she did in some of their investments, but not the losses, hence Ms Rattigan submits that the Husband’s decisions to make those loans and investments cannot be said to be reckless or financial misconduct as those referred in ARAV v VP supra, and that his proposal for the Wife to have 50% of any repayment if and when they are recovered. 79.In the case of ARAV v VP where the parties set up a family business known as BT of which they were equal shareholder, drawing a monthly salary and sharing the declared dividends during their marriage, but unbeknownst to the wife the husband formed another company known as FC and when their family business collapsed, the wife alleged that was because the husband had secretly transferred HK$32.5 million in loans, trade debts and outstanding commissions from BT to FC, and in the ancillary relief proceedings pursuant to their divorce, the court found that the matrimonial assets totalled HK$65 million for distribution between the parties, but declined the wife’s request to add back the HK$32.5 million to the matrimonial pot to reflect the husband’s ‘underhand’ and ‘deliberate’ misconduct, noting that his undertaking to account for any sums retrieved had dealt with any residual concerns the wife might have. The wife therefore appealed. 80.The Court of Appeal in dismissing the appeal held that where a spouse had frittered away assets by extravagance or reckless speculation, the court could taken into account in ancillary relief proceedings by notionally adding back the value of such assets to that spouse’s matrimonial assets, and by doing so, the reckless spouse was deemed still to have those assets to be shared with the other spouse, but reckless financial conduct covered a wide spectrum of behaviour and would be highly fact sensitive, and that a finding of misconduct would not inevitably lead to the reattribution of assets to the pot, as pointed out by Cheung JA in his judgment at p763:
81.Sitting in the same Court and giving the leading judgment, Fok JA (as he then was) agreed and articulated the principles applied in some of the relevant authorities to further explain that misconduct does not inexorably lead to the conclusion that expenditure made by a spouse guilty of any type of misconduct must inevitably be added back to the marital pot for the purpose of ancillary relief proceedings, as he stated at p772:
82.In the present case the Husband has properly explained in both his narrative affidavit and in his testimony his reasons in details for making those loans and investments, and having heard him in evidence at the trial I agree with Ms Rattigan that it was out of his kindness and generosity that he made those loans to his friends, and for those investments which turned out unsuccessful, he did discuss with the Wife and although some may not have met with her full approval, they were nevertheless his genuine judgment-call and decisions which cannot be regarded as reckless financial misconduct, let alone gross or obvious conduct, as after all, he was the only financial expert here and there was no other expert at the trial to contradict him or to support the Wife’s case of reckless investments. 83.As for the Wife’s argument that she would have filed for divorce 3 years earlier had she known about the Husband’s infidelity then and hence would have been entitled to 50% of a bigger marital pool before he was to make those loans and bad investments, it is in my view purely speculative and no different from, say, an argument that if she had known that their marriage would end up in divorce, she would not have married him in the first place, or that she would have spent more on her own favourite activities. Hindsight rarely assists in court and should have no place in this exercise. 84.As already conceded by the Husband, I agree that his extra-marital expenses of HK$704,565 are to be added straight back to the matrimonial assets for division, whilst for the loans I also agree with his proposal that if and when they are recovered 50% thereof shall be paid to the Wife. In the premises I shall put the total net value of the Husband’s assets at about HK$40.7 million for the present purpose of division. 85.Accordingly and by including the Wife’s assets of HK$25.1 million, I find that the total net value of the parties assets to have come to about HK$65.8 million for immediate division plus whatever monies due to the Husband from those loans if and when they are recovered, but before proceeding to consider the parties’ respective proposal as to how they are to be divided, it would be relevant for me to next proceed to undertake the section 7 exercise, starting with the least controversial one over the Wife’s earnings and earning capacity. Wife’s Earnings/Earning Capacity 86.The Wife now earns HK$35,000 per month from her tutor services which is unquestionably insignificant compared with that of the Husband, and it is submitted on her behalf that her earning capacity is significantly impaired as a result of her parenting the children instead of pursuing her career including giving up offer of equity in London fund management consultancy upon the Husband’s transfer to Tokyo, that the market for tutor services in Hong Kong being very competitive and overcrowded, and her health condition mentioned below. 87.The Husband however believes that the Wife is capable of earning more at HK$55,000 per month as when these proceedings are concluded she will have the ability to take on more pupils for private tuition and to expend her business into more school as she has said she would like to. 88.I agree that it would certainly be in her best interest to do so, and I have no doubt of her intelligence and ability as clearly evidenced throughout the proceedings, but at her age and in particularly her current health condition, and whilst the latter issue will likely improve after the end of these proceedings, as will be apparent when I come to discuss her medical problems later in this judgment, I am unable to say with any certainly at this stage that the Wife will indeed be capable of reaching the level of income as submitted by the Husband. 89.I should however note that the Wife has the benefit of the rental of Rumstick House of US$6,000 per month which is about HK$46,800 per month, although it is her case that most of it has to be spent on various maintenance and up-keeping of the property, to which the Husband has expressed his doubt and I agree that it seems illogical to me that such a valuable property which the Wife once put at US$1.8 million in her Form E would yield such little return, and if it is somehow indeed the case, then the Wife should consider liquidating this asset and put the proceeds to some better investments with much better yields, unless of course it is her intention to return to the US after the divorce and to use it as her future home, of which I will no doubt have more to say when I come to consider her future needs later in this judgment. Husband’s Earnings/Earning Capacity 90.The Husband’s evidence is that given his age and the current market conditions, he had had discussions with CFIC in March 2016 and reached an agreement that the joint venture between GCB and CFIC had been dissolved and that he along with other key members of his team at GCB have since become direct employee of CFIC. 91.Accordingly the Husband is now employed by CFIC as a portfolio manager at a fixed salary of US$350,000 per annum which is on average HK$226,333 per month before tax. 92.The Wife however submits that according to his offer of employment, the Husband is also entitled to the following increment to his salary and/or bonus:
93.It is therefore the Wife’s submission that as foreseeable resources the Husband is a highly talented fund manager who in 2008 was able to earn US$8 million and enjoys strong reputation throughout Asia as both economist and fund manager. 94.The Husband however argues that the Wife’s belief that his earnings from CFIC will increase and that he will receive a bonus is mere speculation, as he claims that there is no such prospect in the foreseeable future, and that instead there is a real risk that he could lose management of the fund and be made redundant at the end of the 12 months period, whilst the CP Fund would need to improve dramatically for 2 years before he would see any increase in his income especially as any profits from the CP Fund would first need to be repaid to CFIC for the losses that they took on, as confirmed by the SJE. In any event he argues that at his age of 55 it is unlikely that his earning capacity will increase drastically prior to his retirement. 95.Whatever the Husband’s future earning may be, given the fact that the Wife now appears to have abandoned her claim for substantial periodical payment save for nominal maintenance, it seems to me sufficient for the present purpose to accept the Husband’s fixed income at just below HK$230,000 per month with entitlement to higher adjustment and/or bonus if his performance reaches certain target or conditions as set out under his employment terms but which may however be adversely affected by the heavy losses absorbed by CFIC as a result of its joint venture agreement with GCB being dissolved earlier during the proceedings. Standard of Living 96.Given the income and assets involved in this case, there cannot be any serious dispute that the parties did enjoy a comfortable lifestyle during the marriage, and according to the Wife it was well reflected in their rental accommodation and travelling as set out in both her narrative affidavit and summarised in her Closing Submission as follows:
97.Whilst the Husband does not dispute that the family had a very good lifestyle throughout the marriage, and when he had very successful years in 2008 and 2013, they were able to move to La Hacienda on the Peak and to go on expensive holidays, but there were also times when the parties had to cut back their spending drastically, such as when he left HSBC with no salary for almost 3 years when the family had had to downsize significantly, or when their daughter left for boarding school, they rented accommodation for just HK$68,000 per month, and when GCB was not doing well in 2015, he argues that their lifestyle has had to change since these proceedings by him moving into a flat on Stubbs Road at HK$55,000 per month and by reducing his spending significantly including not having any holiday for over a year, but that the Wife has refused to do so and which he argues has led to their capital being significantly depleted during the proceedings. 98.For obvious reasons lifestyle and standard of living of course would ordinarily commensurate with the parties’ financial means and resources, and in this case I agree with the Husband that their standard of living varied greatly depending on his income and job situation as the disparate rental costs indicate, and while their lifestyle was indeed at times very good, it was when he made very large amounts of money, and at times when this was not the case, they cut down their costs as demonstrated by their monthly rental expenses coming down from HK$120,000 at Branksome to HK$63,000 at Magazine Gap Road. Given his unchallenged evidence of the poor performance of GCB prior to the breakdown of the marriage, and now that there are two households on a significantly reduced income, I agree that the reality is that there has to be a downsizing as the parties had done in the past, which is indeed the reality in the majority of divorce cases. It is against these circumstances and the remaining available assets and resources of the parties that I now propose to consider their respective needs and how best they can be met. Wife’s Needs 99.The Wife claims to require about HK$200,000 per month for her present expenses, but will need a bit more for her future needs as she explained in her narrative affidavit at para.263 [2(1)/277]:
100.Accordingly she estimates that her future monthly expenses will constitute the following figures:
101.The above expenditure of the Wife is obviously predicated on her staying in Hong Kong which is according to her at least for the next 5 years apparently for the children, which is however not accepted to the Husband that she needs to stay in Hong Kong for them, as both children are over 18 with the son already working while the daughter is in university in UK wholly maintained by the Husband, and whilst she will want to visit the parties in Hong Kong during school holidays, the Husband argues that it is not accepted that the Wife needs to live in Hong Kong for that purpose, as she could choose to move back to the US, the daughter could still visit her there, and if the Wife lives in the Rumstick House property, the daughter has her own room there already. Hence it is submitted by the Husband that it is not accepted that the Wife has to remain in Hong Kong, and more particularly that she has to rent expensive accommodation at a cost of over HK$80,000 per month in Hong Kong on the pretext that it is for the children. 102.Apart from her claimed rental costs, the Husband also takes issue with some of the Wife’s alleged expenses, quite justifiably so in my judgment even if they are to be generously interpreted, such as HK$17,000 for grocery and household and HK$51,300 for clothing, personal grooming, entertainment and holidays as excessive, HK$25,126 for medical as unnecessary when she appears to be already well covered by her existing insurance, and HK$8,000 for children’s expenses as unnecessary for the reasons already stated above. 103.Accordingly the Husband has put the Wife’s needs, generously interpreted at around HK$120,000 per month if she chooses to stay in Hong Kong, and that if she decides to move back to the US then her expenses will be far less as her housing needs will be met without the need for expensive rent. 104.While it is my view that it is not for this court, or anybody else for that matter, to dictate to the Wife where she should make her home after the divorce, I agree with the Husband that it is simply unrealistic for her to maintain the same high standard as before or as much as she claims for her monthly expenditure if she chooses to remain in Hong Kong and hence to have to rent her accommodation. In which case I cannot say that the Husband’s assessment of her reasonable monthly needs, generously interpreted, at about HK$120,000 is improper or without merits. 105.At any rate, with her half share of the matrimonial assets as well as the Husband’s offer of capitalised maintenance for 5 years at the average monthly rate of HK$76,000 as well as her own income discussed above, I agree that the Wife’s future reasonable needs as generously interpreted will be well catered for, as suggested by the Husband’s Duxbury Report from BDO [Attachment 3 to his Opening Submission], and more importantly appears to be accepted by the Wife herself which explains why she no longer insists in seeking substantive monthly maintenance from the Husband. 106.Above all, if it is her intention to make Hong Kong her permanent home, as pointed out above the rental income from her Rumstick House would certainly add to her spending power to enable her to meet her needs in Hong Kong, and if it is true that those rental income have as alleged all been spent on the upkeep of that property, then she can and should sell it to make a better investment out of the sale proceeds, as she has suggested in her narrative affidavit when she said she “can well imagine selling the property for something more manageable and then with the proceeds buying and refurbishing student accommodation near Brown University.” [2(1)/283]. If on the other hand she is to move back to the US and to reside in Rumstick House or some more modest property, I agree with the Husband that her monthly needs should come down quite significantly without the expensive expenses for Hong Kong accommodation. Wife’s Health Problems 107.It is however also the Wife’s case that she has significant medical, physical and psychological problems, with her physical condition of chronic pelvic pain (interstitial cystitis) have existed for more than 7 years prior to the separation, and significant provision for her medical expenses was covered by the parties paying out of pocket as well as medical insurance purchased through the Husband’s employment. 108.Mr Pilbrow submits that the Wife’s long term prognosis is unknown as it is clear from her medical reports that since October 2015 she has been suffering from panic attacks, complex post-traumatic stress disorder (PTSD) and depression on top of her chronic pelvic pain since 2008, which necessitate her attending regularly GP Dr Sarah Borwein, Psychiatrist Dr Jenifer Chan and pain management consultant Dr Carina Li, all of whom collaborate on her treatments and prescribing her antidepressants, sedatives, opioids and sleep medication. 109.According to her evidence, the Wife has recently started the medical procedures recommended by Dr Li in her letter dated 10th August 2016 [C4(13)/2892] in the hope that she can achieve more effective pain relief as well as to be weaned off opioids, but Mr Pilbrow submits that whilst it is hoped that her mental condition will stabilize and her health possibly recover, her medical future remains uncertain. 110.Mr Pilbrow submits that the Wife therefore runs the following risks:
111.It is for these reasons, Mr Pilbrow submits, that the Wife needs to retain a maintenance or at least a nominal claim so that in the event that her health deteriorates further, she can at least be sustained if necessary by maintenance. 112.The Husband has no dispute about the Wife’s illness, which he accepts is not new as it is a condition that she has been living with for some eight years, and that whilst he agrees that it is a painful condition he insists that it is not life threatening and has not stopped her from running her business, from providing private tuition and from pursuing these proceedings with the zeal that she has. 113.Furthermore, he submits that she has adequate insurance which covers her condition, and that on the agreed settlement as well as his Open Proposal she already has more than enough to meet her needs with assets worth more than HK$32 million including a home in USA plus maintenance for another 5 years. 114.In order to show that on his offer the Wife will have more than enough to meet her exaggerated needs as it assumes that she will live in Hong Kong rather than moving back to the US where she will be able to live for far less, the Husband has commissioned a Duxbury calculation from BDO [Attachment-3 to his Opening Submission] which calculates that from her age of 63 when her 5-years of capitalized maintenance will have been used up, she will require a capital of HK$27.5 million in order to sustain monthly expenses of HK$121,000 to the age of 82 being the average life expectation of an American woman. On the basis of the most conservative investment risk, the Husband argues that on his offer of HK$32.5 million to her, the Wife will still have an additional cushion of some HK$4.8 million over and above her needs. 115.Ms Rattigan submits that the Wife will in fact be much better off than the BDO Duxbury assumes as she will be receiving the full lump sum now as opposed to when she is 63 so it can be used to start generating capital earlier than the report supposes and over the next 5 years while she is still receiving capitalized maintenance at the agreed sum of HK$76,000 per month. 116.The Wife’s medical reports, and there are quite a few dating from October 2015 to February 2017 and can be found in [C4(2)/269, C4(11)/2485, C4(13)/2892, 3214, 3216 & C4(14)/3290]. As pointed out by Mr Pilbrow, none of which were challenged by the Husband at the trial, but it would be relevant to refer to some of them in more details so as to have a proper understanding of the extent of the Wife’s health problem and her future prognosis. 117.The earliest report before the court is the one dated 9th October 2015 by Dr Li [C4(2)/269] which confirms that the Wife has since 2008 been followed by her at the Pain Management Clinic for health issues cited as follows:
118.That report was about 6 months into these proceedings and I believe right in the middle of some intensive dispute between the parties over the discovery and disclosure of the Husband’s finances, which may explain the worsening anxiety and depression of the Wife as observed in the report. 119.The next relevant medical report produced by the Wife came on 10th August 2016 and also by Dr Li [C4(11)/2485] in which she gave more details of the Wife’s medical history and her health problems but which again confirmed their connection with her on-going divorce litigations, and also suggested various treatments options:
120.In both of her reports, although separated by some 10 months in between, Dr Li was of the same opinion that the Wife’s worsening condition was to do with her current divorce disputes with her husband. This is further confirmed by the Wife’s psychiatrist Dr Jenifer Chan in her even more comprehensive report dated 16th August 2016 [C4(11)/2489] where she stated how the current divorce litigations have played a significant part on the Wife’s mental health problems which has led to the diagnosis of her suffering from a Major Depressive Disorder:
121.It is therefore clear that from the medical evidence adduced by the Wife and unchallenged by the Husband, the emotional and psychological aspects of the Wife’s health problems were in effect caused by the breakdown of her marriage and exacerbated by her current litigation with the Husband, all of which, as argued by the Husband, will sooner or later become history and no longer a relevant or contributing factor to that part of her problems. 122.There is of course still her chronic pelvic pain which has gone back for years but according to Dr Li’s report, it seems that certain new or advanced treatments have been recommended to the Wife and that she is expected to undergo some of them upon certain financial arrangement has been put in place, of which certainly it would not present any problem on the basis of the Husband’s proposal or the award she is to receive under this judgment. Husband’s Needs 123.The Husband put his current total expenses at HK$268,263 per month [2(1)186], but by excluding the MPS sum of HK$80,000 for the Wife which will no longer be relevant after the divorce, his monthly expenditure should come down substantially to the more manageable amount of just below HK$190,000 and within his income after tax. Furthermore, in 3 years when the daughter should finish university, his burden will no doubt be further reduced. 124.His case is that in 5 years when he will be 60 and ready to retire, and hence he will need all his share of the matrimonial assets and his income for the next few years to meet both his needs and those of the daughter as well as paying for those lump sum instalments for the Wife’s capitalised maintenance for the next 5 years. I agree, but also note that given his undisputed expertise and reputation in his field, his earning years may well be longer than he claims. Revisit of Parties’ Proposals 125.Having found the total matrimonial assets at about HK$65.8 million, and on the basis of an equal division thereof between the parties as proposed by them, it would be appropriate to revisit the parties’ latest revised proposal as set out in their Closing Submission, starting with the Wife’s which is apart from what has already been agreed as above, she seeks a lump sum of HK$15,560,000 and a nominal maintenance from the Husband on the following terms:
126.Her claim for HK$8.5 million under (a) above must however be set against my findings in this judgment that she already has assets worth HK$25.1 million instead of only HK$19.2 million, and that the total assets stand at HK$65.8 million instead of HK$77 million, hence in order to bring her 50% of the total assets to HK$32.9 million it would require a lesser sum of HK$7.8 million instead to be added to her own assets of HK$25.1 million. 127.However, the Husband argues that whilst he originally agreed to pay a lump sum of HK$6,043,859 to the Wife in order to effect an arrangement giving her just over 50% of the assets, but given that the parties have had to go through the second part of the trial and that their assets have since depleted further, it is only fair that the lump sum to be paid to the Wife should come down to HK$4,979,186 with an equalization of legal costs in the manner as proposed in his Closing Submission, plus the fact that the further lump sum of HK$4,560,000 being 5 years of capitalised maintenance at HK$912,000 per year is to ensure that she will not have to incur additional US tax which would otherwise be payable on maintenance payment, and for which the Husband also offers to take out a life insurance policy in the Wife’s favour to ensure she will receive the full lump in the event of his death but with the cost to be shared equally by the parties. 128.This proposal of the Husband as to the lump sum for the Wife would in effect mean that she would end up having just over HK$30 million, which is only about 45% and somewhat short of what the parties have always agreed to an equal sharing of the matrimonial assets. This is of course due to the Husband’s proposed adjustment for equalization of their ever increasing legal costs as a result of the Wife’s continued unreasonable litigation conduct which has led to reckless depletion of their assets. 129.Litigation conduct, however as pointed out by Mr Pilbrow in following the guidance of the Court of Appeal in LSY v HTF (2013) HKLRD 1233, is best sanctioned by an order of costs and not as a factor justifying a departure from equal division. 130.In Tavoulareas v Tavoulareas [1998] 2 FLR 418 cited by the Court of Appeal in LSY v HTF with approval, Thorpe LJ stated that a distinction should be drawn between marital conduct and litigation conduct in determining the quantum of the financial award (at 426):
131.Similarly in M v M (Financial Provision: Party Incurring Excessive Costs) [1995] 3 FCR 321, also cited in LSY, Thorpe LJ applied the same decision at 330:
132.It seems quite clear to me from Ms Rattigan’s Closing Submission that the Wife’s misconduct as alleged by the Husband are all confined to the ancillary relief proceedings after the parties’ separation and hence as submitted by Mr Pilbrow should be more appropriately dealt with by an order of costs rather than be a factor relevant to the quantum of her award. 133.As for the further lump sum payments under (b) and (c) of the Wife’s revised proposal which are either already agreed by the Husband or rejected earlier in my judgment above, while the sum of HK$704,565 has also been added back to the total marital pot for division, the only remaining issue is whether their payments should be secured by way of a charge against the Husband’s assets in respect of non-payment, and whilst it is not clear from the Wife how this is intended to operate or what it is to be secured against, it is rejected by the Husband as unnecessary or unmerited, as Ms Rattigan submits for the following reasons:
134.I agree these are all valid points given the Husband’s various genuine and serious attempts to settle with the Wife throughout the proceedings, and in the absence of any evidence to suggest that he may willingly or deliberately default with those payments which were after all proposed by him in the first place, I am unable to see any justification for them to be so secured as requested by the Wife. Clean Break/Nominal Maintenance 135.As noted above, this is the second major issue between the parties, as the Husband insists that upon the Wife being awarded her half-share of the matrimonial assets, there should be an immediate clean break between them with all her claims to be dismissed, while the Wife seeks a nominal maintenance order due to her limited earning capacity and her medical problem. 136.As pointed out by Mr Pilbrow for the Wife, prior to the enactment of Matrimonial and Family Proceedings Act 1984 in UK, it was the prevalent view in England that a party was entitled to a nominal award and the same could not be dismissed unless with the consent of that party. Whilst those enactments have not been incorporated into the law in Hong Kong, it has been well established that our courts do have the power to dismiss a party’s claims to periodical payments without her consent, as so held by the Court of Appeal in Ngao Tang Yau-lin v Ngao Kai-suen & Another [1984] HKLR 310. 137.Mr Pilbrow however submits that our courts should follow the guidance of English authorities when considering the appropriate circumstances in which this power should be exercised, of which he refers to Jackson’s Matrimonial Finance, 9th edition, where it stated at Chap. 3.23:
138.Ms Rattigan submits for the Husband that given the Wife’s unreasonable stance and terrible vexatious litigation conduct, the Husband remains terrified that the nightmares that this litigation has been for him will never be over, and hence there should indeed be a clean break between the parties upon the Wife receiving her fair share of the matrimonial assets. 139.Such is his willingness to compromise, Ms Rattigan submits, that the Husband was even prepared to do so over the question of nominal maintenance in order to avoid the second part of the trial and to alleviate the Wife’s concern about her medical condition, by reluctantly proposing an order for nominal maintenance that would be conditional that she could only seek to vary the order if the variation related to her existing medical condition of Interstitial Cystitis, that it was not covered by her medical insurance, and that she had exhausted her funds, yet they were refused by the Wife which cements his fears that she has no intention of ever letting this litigation end. 140.Furthermore, Ms Rattigan argues, the Husband’s business has gone under and his employment is precarious, whilst this litigation has taken a terrible toll on him and he cannot be left at the risk of further litigation, as he is already bearing enough risk paying all of the daughter’s expenses and agreeing to a lump sum for capitalised maintenance for the Wife for the next 5 years. 141.On the other hand, Ms Rattigan argues that the Wife has sufficient insurance coverage for her illness and will have assets worth more than HK$32 million including a home in the US plus maintenance for the next 5 years to meet all her needs including medical expenses, as supported by the Duxbury Calculation from BDO noted above, hence Ms Rattigan submits that the court can be well satisfied that the Wife’s needs will be more than met by his proposed settlement, and that this is a case where there must be a finality and a clean break is entirely appropriate. 142.As I have already remarked above about the Wife’s health problems and their prognosis that at least her emotional and psychological issues should no longer be relevant after the conclusion of her litigation with the Husband, while her pelvic pain will hopefully be also reduced by the further treatments recommended by her doctors, I agree with Ms Rattigan that with the financial award she is to receive from her equal share of the matrimonial assets and the capitalised maintenance proposed by the Husband, and given the huge costs not just financially but more significantly emotionally and psychologically of their disputes on both parties, it is in my judgment that it will be in the best interest in particularly to the Wife that there be a final closure to their litigation by way of a clean break between them without any order for nominal maintenance, conditional or otherwise. Costs/Litigation Conduct 143.As already noted, both sides have raised the issue of litigation conduct as the basis for seeking costs against the other, with the Wife accusing the Husband of failing to provide full and frank disclosure of his means and breaching court orders as to his disclosure, while the Husband is blaming the Wife for adopting an unreasonable and unrealistic approach in the entire proceedings in seeking unnecessary and excessive discovery against him and in refusing to properly respond to his many settlement proposals and failing to make her proposals until only shortly before the trial. 144.The Wife’s case of the Husband’s failure to make full or frank disclosure is set out in her Closing Submission from paragraphs 42 to 88 of which I do not propose to set out here, but essentially over his various loans made to his friends and investments which turned to be unsuccessful to which he is said to have failed to disclose in the first place, and then thereafter failed to provide their details notwithstanding various orders requiring him to do so. 145.To which the Husband refutes and insists that the Wife’s litigation conduct has been a cause of great concern for him throughout the proceedings and the resultant huge legal costs and depletion of their capital assets, as notwithstanding his answer to her first questionnaire on 2nd October 2016 [B1(3)/424] was accompanied by such extensive disclosure which ran to 8 box files [B1(3) – (10)], the Wife saw fit to employ forensic accountants to examine them and then to seek further discovery from him by way of a schedule of documents that she said were missing from his answers, and for leave to serve further or supplemental questionnaire, all of which he insists he has complied, and still the Wife sought to serve a further questionnaire on those new answers provided by him up to the time of their FDR hearing in March 2017. 146.Ms Rattigan further argues that the Husband has made every effort to settle this matter from the outset by offering 50% of all the marital assets and reasonable ongoing maintenance in accordance with what he earns, but the Wife made no proposal until her letter of 30th September 2016, and then her asset schedule and offer seek to place the lowest possible values on those assets that are in her name or to be transferred to her while inflating other assets and seeking to add back that are entirely unjustified. 147.Whilst I have earlier refused to accept the Wife’s submission that the Husband’s infidelity going back 3 years prior to their separation is a financial misconduct justifying adding back certain assets, I have no doubt about her emotional and psychological distress so exacerbated by the extent of such infidelity and the fact that she was a devout Catholic, but I suspect that they may have also contributed to her apparent bitterness and hostility towards the Husband in the pursuing proceedings, and caused her to not trusting any of his financial disclosure or considering any proposal or offer from him, and instead insisting in leaving no stone unturned in the investigation of his financial resources by adopting what the Husband claims to be senseless forensic investigation into each and every aspect of his finances which led to the huge legal costs in the proceedings and with hers almost doubling his. 148.The sad fact is that by the time of the second part of the trial in February 2017, the Wife’s costs had run to more than HK$6.7 million while the Husband’s were HK$3.3 million, of which Ms Rattigan argues that this represents an obvious disadvantage to the Husband as the assets held by the Wife would have been at a much higher level but for these costs and thereby increasing the amount he has to pay her by way of lump sum to effect a 50/50 division, and therefore suffers the disadvantage of her excessive spending on legal costs. 149.Such disparate levels of costs, Ms Rattigan submits, can properly be adjusted, as Sir Peter Singer held in RH v RH [2008] 2 FLR 2142, and Mostyn J in LS v JS [2012] EWHC 2960 (Fam) and in J v J [2014] EWHC 3654 (Fam), and the Husband therefore invites the court to make adjustment to the Wife’s award accordingly as above by taking adjustment of her legal fees into account, in which case he would be willing to forgo asking for his costs to be met in full, as this would be simpler and less costly than taxation proceedings given the Wife’s litigation conduct, but otherwise he would be asking an order that his costs be met in full by seeking to address the court further in relation to the disparate levels of costs and “without prejudice offers” that have been made to the Wife. 150.There is no question that a combined legal costs of HK$10 million is by any standard a very substantial amount and could have meant an additional HK$5 million for each party in the equal division of the marital assets had they not spent a single cent on legal costs. 151.Whilst the impact of such costs at about 11.5% of the marital pot then disclosed in the parties’ Form E is nowhere near as calamitous as in some of those cases mentioned by Mostyn J in J v J supra, it would still be relevant to refer to his following statement about the court’s concerns highlighted by such costs expenditure and what should be done about it:
152.Mostyn J however also recognised that the power of the court to control the costs charged by lawyers to their clients, and if I may respectfully also add, the costs chosen by the parties to spend, is very limited and can usually only be done after the conclusion of the proceedings, or only after the damage has been done, and suggested that only if steps are taken for fixed pricing and judicial costs capping will such problems be arrested. 153.His Lordship then proceeded to address the problem facing him in the case before him as to who was to be held responsible for running up the costs incurred to £920,000 from total marital assets of £2,885,000 or almost 32% of the assets, and how to resolve the issue:
154.Whilst in Hong Kong we do not have the equivalence of FPR 28.3 upon which our courts to have regard to those factors under paragraphs (7) and (8) thereof in deciding on the issue of costs in ancillary relief proceedings by reference to litigation misconduct, I do find them helpful in particularly subparagraph (f) when both parties here have similarly proposed to apply equal sharing in the division of all their marital assets, and that the various agreed and/or proposed terms were designed and accepted by both parties to ultimately achieve fairness between them as to the division of their marital assets and at the same time properly and sufficiently meeting their respective present and future needs. I therefore propose to apply the same factors where relevant to the facts of this case in the determination of the issue of costs. 155.While I agree, having rejected the Wife’s case against the Husband on both marital and financial conduct for the reasons already detailed above, there seems little difficulty accepting Ms Rattigan’s criticisms of the Wife’s own litigation misconduct in particularly her refusal or failure to accept the Husband’s further proposal to settle after the first part of the trial and still stubbornly pursued her claims over his various loans at the resumed trial which may justify to be reflected in the costs order, given the unchallenged medical evidence of the Wife’s emotional and psychological state of mind during the proceedings, and on reflection I confess to have the same problem as Mostyn J did in J v J to properly reflect her alleged litigation misconduct through a costs order or as to its quantum if not otherwise just symbolically. 156.From the evidence before the court in particularly the unchallenged medical evidence, I agree with Mr Pilbrow that the Husband’s extra-marital conduct and activities did have a very material effect upon the Wife’s emotion and psychological health which may have traumatised her in such a way to have affected her various decisions making in the ancillary relief proceedings and which led to what he now argues to be her litigation misconduct. 157.It is of course necessary, and is in fact the court’s duty, to look at the facts of each case in the cold light of day, objectively and devoid of emotions, and while it has also been well established by authorities that a party’s conduct such as adultery or extra-marital activities may very well be sufficient to end a marriage but not relevant to the resultant ancillary relief proceedings, as I have so found above, I agree with Mr Pilbrow that even if another wife may have reacted differently, it would in my judgment not just be fair but also necessary to have regard to such impacts on the Wife as to her subsequent conduct in the pursuing ancillary relief proceedings. 158.I am of course not suggesting that because a party has reacted so emotionally or so traumatised by the breakdown of the marriage that his or her subsequent litigation misconduct would be acceptable or even justified, especially when it results in serious financial costs or losses to the family assets, but that does not follow either that the court should be so oblivious to any such emotional impact on a particular party when determining how best to assign his or her liability in the resultant costs or losses as a result of his or her such reaction, as after all, marriages are essentially about emotions, and the extent and effect of their breakdown must be to each his own, some much more serious than the other, as Thorpe LJ once famously remarked that when marriages break down, sadly some parties are simply emotionally or psychologically incapable of managing their affairs. 159.Whether this statement applies to the Wife in the present case, and if so how such emotional or psychological state of hers may have affected her decision-making relevant to such litigation misconduct that may justify a costs order against her can perhaps be first gleaned from her narrative affidavit as to how she described about the numerous events during the last years of the marriage which led to her discovery of the Husband’s extra-marital activities and his various financial dealings and their impacts on her emotion. 160.Of course it was just she said which the Husband quite rightly chose not to waste the court’s time during the trial challenging each and everyone of them on the basis that, and again rightly so, they had fallen far short of establishing marital misconduct on his part as gross and obvious for the court to take into account on the issue of add-backs, nevertheless they are clear evidence from the Wife as to how she had been so affected emotionally and psychologically by these events. 161.There is also as noted above clear and unchallenged medical evidence from more than several doctors of the Wife as to the severity of both her physical as well as emotional and psychological problems at the time of the divorce and throughout the ancillary relief proceedings, cumulating of course by that panic attack and depression of hers in the middle of her evidence that broke up the trial into two parts. 162.Of those medical evidence, it would be suffice to refer again to the one from Dr Li’s report dated 9th October 2015 [C4(2)/269] to drive home the point that the Wife’s ability to make proper important decisions may have been so hampered as so stated in that report:
163.It is of course one thing that the Wife’s decision-making ability may have been affected by the medicine which she was taking at the material time, it is in my judgment also relevant to look into her motive or purpose behind her decision to launch such forensic investigations into the Husband’s financial affairs in particularly his various loans and failed investments to determine whether it was her vindictiveness against him for his extra-marital behaviour as suspected by the Husband, or otherwise typical of a wife wishing to maximize her financial claims with legitimate reasons. 164.To do so it would be relevant to revisit her background and the history of her marriage. The undisputed evidence is that she was a “smart and hard-working girl” who went to a good university with aspiration for a successful career in economic and finance, but after marrying the Husband and moving with his job to places far away from home such as Tokyo and Hong Kong, and with childbirth came the inevitable sacrifice of her own career to become a fulltime mother and housewife wholly dependent on the Husband whose career on the other hand had since flourished. 165.In 2008, as pointed in the Wife’s narrative affidavit the Husband “had a year so good we could never have imagined it” when he earned US$8 million and thereafter the parties purchased Rumstick House as their family home clearly with the intention of retiring into it. Then sadly came the Wife’s health problems starting with her Interstitial Cystitis and the gradual unravelling of the marriage and the ensuing divorce proceedings, and it was during financial disclosure that she learnt of the full extent of the Husband’s extra-marital activities as well as his various loans made to his close friends some of whom he also claimed to have suffered substantial losses investing in their business. 166.It must therefore be set against these circumstances that the Wife be judged whether she should be penalised with costs for her litigation conduct, and notwithstanding my criticisms of the way she had prepared her narrative affidavit and her stance taken against the Husband on both marital and financial conduct, it cannot however be said that her initial challenges against his unrecovered loans and failed investments were not without merits, and having regard to all the circumstances in particular her medical conditions at the material time, it is my judgment that this is one of those exceptional cases in which the Wife deserves the compassion of this court notwithstanding such litigation conduct, and accordingly I propose to make an order nisi that there be no order as to costs of the ancillary relief proceedings as the best mean to finally bring closure to the parties’ broken relationship, knowing that the Husband may on reflection agree that his kindness and generosity shown so readily to his friends should also be extended, again, to the Wife. Conclusion 167.In conclusion and for the reasons given above, and on the basis of the parties’ agreement for equal sharing of their matrimonial assets, and in addition to what has already been agreed by the parties at paragraph 35 above and which I hereby so order, and upon the Husband’s undertaking to pay the Wife 50% of any of the loans owed to him if and when they are received by him, I order that the Husband shall pay the Wife a lump sum of HK$7.8 million to bring her current marital assets from HK$25.1 million to HK$32.9 million being half share of the total assets of HK$65.8 million within 3 months of the decree absolute. 168.For the agreed payments of the capitalised maintenance for the Wife by way of a further lump sum of HK$4,560,000 for the next 5 years by 5 equal instalments of HK$912,000 each annually starting from the first anniversary of the date of this judgment, I also so order upon the Husband’s undertaking to take out a life insurance policy in the Wife’s favour so that in the event of his death within the 5 years period she will stand to receive the balance of the said sum with the costs to be borne equally by the parties, with of course liberty to apply. 169.These terms shall be in full and final settlement of the parties’ claims for ancillary relief against each other as a clean break between them, which claims shall be dismissed. 170.As for the support of the daughter, I also accept the Husband’s undertaking to continue to be wholly responsible for her until she finishes university. Accordingly I also make the Section 18 declaration. 171.As indicated above, I also make an order nisi that there be no order as to costs of the ancillary relief proceedings between the parties, which order is to be made absolute at the expiration of 21 days, and should there be any application to vary the order nisi, I suggest that it be done on paper and for the parties to agree on a time table for filing their written submission. 172.Last but not least, I am most grateful to counsel for both sides for their most valuable assistance rendered to the court and in particularly for the restrains and discipline they conducted their argument and cross-examination during the trial given the obvious emotions exhibited by the parties as well as the Wife’s health conditions.
Mr David Pilbrow SC and Mr Robin Egerton instructed by M/S Oldham, Li & Nie for the Petitioner. Ms Mairèad Rattigan instructed by M/S Boase, Cohen & Collins for the Respondent. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under FCMC 5376/2015