Wt v. Ylc
Read the full judgment text of FCMC 9820/2015 on BabelCite. This Family Court judgment was delivered on 23 March 2018 before Her Honour Judge Sharon D. Melloy.
Ancillary relief – Pre-marital assets – Short marriage – Child maintenance – Costs – District Court – Wife breast cancer – Separate finances – Dispute over asset classification – Whether pre-marital assets should be quarantined – Child maintenance amount – Interim maintenance clawback – Wife receives 55.6% of assets – Child maintenance HK$40,000/month – No costs.
Legal issues: Treatment of pre-marital assets · Child maintenance calculation · Interim maintenance clawback · Costs order
Outcome: Ancillary relief granted; property transfer ordered; child maintenance awarded; no order as to costs.
Cited by 2 cases · Cites 4 cases
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FCMC 9820/ 2015 [2018] HKFC 38 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 9820 OF 2015 ----------------------------
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----------------------- J U D G M E N T ----------------------- Introduction 1.This is an application by a Petitioner wife for final ancillary relief for herself and for the only child of the family, C who is now 7 years of age. In addition, both parties have issued summonses with respect to an interim interim order for maintenance made by Deputy Judge S Wong on the 12 October 2015. On the 7 July 2016 the wife issued a summons seeking inter alia to vary the maintenance up. She also sought an order for litigation funding. The husband for his part filed a summons dated the 15 March 2017, seeking to vary the interim maintenance order down and to be released from his undertakings to pay for the mortgage and management fees on the jointly held property in which the wife and C currently live. Although arguably somewhat moot these applications have nevertheless been adjourned for determination at this trial. It is the wife’s position that the issue of interim maintenance is no longer relevant and that the court need not address it further. The husband does not agree and asks that I “add back” a sum of at least HK$1,813,835, being the amount that he says that he has overpaid by virtue of the interim maintenance order. 2.There are a number of issues to be determined, but it would be fair to state that the central point concerns the correct approach to be taken to so called “pre-marital assets”. The wife argues that the assets accumulated by her prior to marriage should be quarantined and retained by her and that the remaining assets or the so called “marital acquest” should be divided on a 50:50 basis. She accepts that likewise a sum of money representing funds brought to the marriage by the husband may be similarly quarantined. The husband for his part puts forward two alternative proposals either a) that all of the parties’ assets shall be regarded as matrimonial assets, regardless of source and that they shall all be divided on a 50:50 basis or b) that some attempt be made to quarantine all of those assets which he says he brought to the marriage and that those assets be ring fenced in a similar way to the wife with the remainder of the assets being divided on a 50:50 basis. He says that the net result will be much the same. The husband also maintains that it would be very unfair to quarantine the wife’s assets without at the same time making some accommodation for the assets that he brought to the marriage. As will be seen some of the difficulty in this case lies in the fact that although some of the wife’s assets are easily identifiable as being arguably “pre-marital” the husbands are less so, which in turn has led to arguments concerning the “mingling” of each party’s individual funds with joint assets post marriage. Although on the face of the documents there is also a potential issue concerning post separation accruals, given that a number of the husband’s properties and one other significant asset were purchased after the parties separated in April 2015, this was not an issue that was pursued at trial. 3.There is however a further issue concerning each party’s earning capacity going forward. The wife argues that that she no longer has a significant earning capacity and that consequently she should receive a capitalized lump sum presumably in addition to her pre-marital assets and her share of the marital acquest in order to “reflect her diminished earning capacity”. This is not accepted by the husband, who says that his earning capacity will also likely decrease significantly given his age and recent changes in the foreign currency options industry generally. He also does not accept in principle that it would be fair or reasonable for the wife to receive such a capitalized lump sum or that she is otherwise entitled to maintenance for herself, given that she has a significant earning capacity and is now “well”. His position is that the parties should contribute equally towards C’s expenses. Background to the marriage 4.This was a short marriage of approximately 4½ years between two successful professionals, who married later in life. They started to live together in November 2009, when the wife was about 35 and the husband 40 years of age. They married less than a year later on the XX September 2010, a month or so before C was born on the XX October 2010. C is now 7 years of age and she attends an international school in Discovery Bay. Unfortunately, she was born with a cleft lip and it is acknowledged by both parents that she will most likely need further corrective surgery in due course, most probably at ages 10 and 18 years. 5.The wife, who is now 43 years of age, is from the Mainland originally and she has an undergraduate degree in Economics, majoring in financial accounting. She also studied Japanese and began, but was unable to complete an MBA programme. She has held a number of senior positions in the financial sector and was a successful investment banker for a period of time. Her last position was as the Team Head and Founding partner of a private Equity Fund for a well-known banking group. The wife acquired permanent Hong Kong residency in 2012 and she now lives in Hong Kong with C on a full time basis. 6.Very unfortunately the wife was diagnosed with stage 2b breast cancer in December 2013. She ceased working in January 2014, initially taking sick leave and then unpaid leave, whilst she had treatment, including radiotherapy, chemo therapy and surgery. This was broken down into four months paid leave from 1 January 2014 – 30 April 2014, four months on half pay from the 1 May 2014 – 31 August 2014 and one-year unpaid leave. Her employment contract came to an end on the 31 August 2015. It was suggested during the trial that the wife had engineered her own resignation. For the avoidance of doubt this is not accepted. As will be seen this and related matters concerning her earning capacity are a matter of some considerable dispute between the parties. 7.The wife has sole custody and care and control of C with defined access to the husband by virtue of a consent order dated the 11 January 2016. It is therefore her case that she is now primarily a full time mother and housewife with little earning capacity. She does though own two properties, plus a half share in four others, which provide her with a passive income, in addition to the interim interim maintenance order and her own savings and other investments. 8.The husband for his part was born in South Korea and raised in the United States after his family emigrated there when he was about 8 years of age. He is also well educated and has a number of degrees. It is also of note that he is a US qualified lawyer. However, although he worked as a lawyer for a short period of time, he later changed course and he has since forged a career as a Foreign Currency Options Broker. The husband is now 48 years old. 9.Consequently, both parties had accumulated some assets prior to the marriage and each had commanded a significant salary in their respective fields. The husband’s salary was also a matter of some considerable dispute during the trial. 10.By all accounts the marriage was not an easy one and in April 2015 the parties separated. The husband moved out from the matrimonial home i.e. the Seahorse property in Discovery Bay to a rented flat in Pokfulam and the wife and C moved to a smaller flat in Discovery Bay i.e. the jointly owned Coastline property. The parties had decided that it made commercial sense in the circumstances to rent out the Seahorse property and it has been leased out since that time, with the rental amount covering the mortgage repayments and providing a net income of over HK$20,000. The wife now wishes to return to live in the Seahorse property with C and says that this more closely resembles the standard of living enjoyed by the parties during the marriage. 11.The wife issued divorce proceedings based on the husband’s unreasonable behaviour on the 31 July 2015. The proceedings were initially contested. Thankfully common sense intervened and a decree nisi was pronounced on the 29 December 2016 following amendment of the particulars on the 30 May 2016. 12.On the 12 October 2015 Deputy Judge S Wong made the interim interim order, which has become the subject of much complaint, with the husband arguing inter alia that it was made on the basis of inaccurate financial information provided by the wife in her Form E. It is also of note that the wife had not made any application for maintenance pending suit and/or interim maintenance at that time. The order states that the husband do pay interim interim maintenance in the sum of HK$40,000 per month (presumably for C, although that is not stated) and that he also undertake to pay for the mortgage and management fees on the jointly owned Coastline property in which the wife and C were then living. In total this amounted to a maintenance sum of HK$80,514 per month. 13.In the wife’s subsequent summons to vary the maintenance up, dated the 7 July 2016 she sought HK$70,000 per month for herself and C, plus a continuation of the husband’s undertakings to pay for the mortgage and management fees on the Coastline property plus a further sum of HK$30,000 per month for litigation funding. She estimated her expenses at the time at HK$120,000 per month and said that this was more in keeping with the standard of living enjoyed by herself and C during the course of the marriage. 14.In the husband’s summons dated the 15 March 2017 he offered the wife HK$22,075.75 per month only, as his contribution towards C’s monthly expenses. He also asked to be released from his undertakings to pay for the mortgage and management fees on the C property. 15.It is accepted by the parties that they maintained separate finances throughout the marriage. The wife states at paragraph 44 of her second affirmation dated the 27 January 2017 that:
Similarly, the husband made the following comments in his affirmation dated the 14 March 2017:
16.It seems not to be disputed that this arrangement and indeed the marriage itself began to finally break down once the wife became ill and she was unable to financially contribute as she had done in the past. The husband says that the parties’ last contribution to the parties joint account was on the 11 March 2015. This is disputed by the wife, who says that she stopped contributing completely after the husband initiated the separation in January 2015 and that her last contribution was when she was still receiving a half salary of just over HK$50,000 per month. She says that there was a payment of HK$100,000 in March 2015, but that this was for the renovation of the Coastline property. Again there is some dispute over this. In any event there is no doubt that the wife had significant cash assets at her disposal at this time. The husband appears to take issue with the fact that she was not contributing financially as she had done in the past, especially given the fact that she had these cash assets available to her. It is the wife’s case that she should not have been obliged to dip into her own savings given that she was unable to work and the parties were financially sound. It is now clear that the husband was being very well remunerated at work during this period of time. The law on Ancillary Relief 17.The relevant law is not in dispute and is referred to by both sides in their respective submissions. The Court of Final Appeal’s decision in LKW v DD (FACV no 16 of 2008) 13 HKCFA 537 sets out the approach that the lower courts must take when determining issues relating to final ancillary relief. 18.Mr Justice Ribeiro PJ reiterates that there are four underlying principles that must guide ancillary relief proceedings namely fairness, the absence of discrimination, the upholding of the concept of the yardstick of equality and the rejection of a need for a minute retrospective investigation of the parties’ finances. The first and last points are of particular relevance in the context of this case. At paragraph 69 of the judgment Mr Justice Ribeiro says as follows:
As will be seen this point is particularly significant in the context of this case. 19.In addition, he identifies a five step approach to be adopted in all ancillary relief trials, which if I may I will summarize as follows:-
20.The section 7 factors (s. 7 Matrimonial Property and Proceedings Ordinance, Cap 192) are largely dealt with within this general framework. They are:-
21.Reference will be made to the relevant sections when discussing each of the issues in turn. Premarital assets 22.In addition, both sides have referred me to the relevant sections of LKW v DD, which sets out the appropriate approach to be taken when determining whether or not to depart from the yard stick of equality. Mr Justice Ribeiro PJ discusses the various alternatives when dealing with part 4 of his protocol. Reference should be made to paragraphs 86 – 98 of the judgment for a full discussion of the topic. In so far as pre-marital assets are concerned, paragraphs 90 – 93 are particularly pertinent.
23.In this instance we are concerned with properties acquired by the parties before the marriage and further properties purchased after the marriage but arguably with pre-marital funds. It is also of note that a number of assets were acquired by the husband post separation. These points need to be considered in the context of what is, by any definition, a relatively short marriage in terms of duration. 24.The case of Miller v Miller, McFarlane v McFarlane [2006] UKHL 24 is similarly helpful. In that case Lord Nicholls of Birkenhead, when discussing the concepts of matrimonial and non-matrimonial property said as follows:
25.Another important case on this issue, from a Hong Kong perspective, is a more recent decision from our own Court of Appeal in PW v PPTW (Ancillary relief; non-matrimonial property) [2015] HKFLR 213. In that case the husband appealed against the judgment of The Hon Madam Justice Bebe Chu who had divided the matrimonial pot on a 45%:55% basis, notwithstanding the fact that it was acknowledged that nearly all of the assets in the so called matrimonial pot (HK$292 million) had been acquired by the husband prior to the marriage. In this instance however it was acknowledged that this was a longer marriage of some 14 years. The appeal was dismissed and it was held inter alia as follows:
26.With respect I agree. In this instance it is accepted by the parties that I should consider the issue of pre marital assets under step 4 of the protocol. I will first discuss that matter by reference to the “Two stage approach” favoured by the line of cases beginning with Jones v Jones, before I look at the matter overall and consider whether nevertheless some sort of additional adjustment is necessary in order to achieve a just result given the circumstances in this particular case. Each party’s case and the open offers 27.Prior to the trial the parties made very detailed open offers, which also set out their case on some of the issues in dispute. I do not intend to repeat them both in full here, but reference will be made to the most relevant sections as set out below. The wife’s case 28.In essence it is the wife’s case that it is easy to determine the pre-marital assets that she brought to the marriage because she has always kept those assets separate and apart from the matrimonial assets. She says that the two have not been mingled and given the shortness of the marriage that fairness dictates that she should receive those assets over and above her share of the marital acquest. 29.In addition, she seeks generous maintenance for C and a capitalized sum in lieu of any claim that she might have for maintenance for herself. 30.In so far as the husband’s argument on his own pre-marital assets are concerned, the wife says that notwithstanding the fact that it is not always possible to trace what the husband says are his own pre-marital assets to the current schedule of matrimonial assets, nevertheless she has been prepared to accept that certain assets can be notionally attributed to the husband as belonging to him prior to the marriage. She has asked the husband to produce evidence in support of what he says and she has accepted some assets as being pre-marital where he has been able to do so. It is of note that the husband has concentrated on providing evidence to show his asset base as at the date of the marriage. He has not then traced those assets and told the court what he has done with them since. The wife’s open offer 31.The wife’s open offer states inter alia as follows: 10. The parties married at a relatively later age after working for some time, and there were pre-marital assets. W has explained that the assets acquired and brought by her into the marriage, i.e. Her pre-marital assets, comprised the following:
Expenses
Approach
Proposals for capital split
Proposals for the Child
The husband’s case 32.The husband’s case does not fit so neatly into a traditional argument on pre-marital assets. His position seems to be that as he can show that he held certain assets in his sole name as at the date of the marriage and that notwithstanding the fact that in some cases those assets no longer exist, he nevertheless maintains that credit be given to him for those sums and they be attributable to him in the same way as the wife’s pre-marital assets will arguably be attributable to her. The difficulty with this, apart from the fact that the wife appears to have accepted this line of argument in part, is that it does not fit in with established authority which is generally concerned with the extent to which a pre-marital asset has been mingled with other assets acquired post marriage. Mr Coleman S.C for the wife, explained it thus in his closing:
With respect I agree. However, as will be seen, it also seems to me that fairness may dictate that there may be other reasons to depart from the yard stick of equality, which although similar to the approach taken to pre- marital assets, may not exactly the same. Husband’s open offer 33.The husband made the following open proposal:
Husband’s Open Proposal
34.In addition, in the husband’s closing submission he reiterates that he seeks a reimbursement of at least HK$1,813,835 for overpayment of interim maintenance. The issues 35.The issues then are as follows: Stage 1 – an identification of the assets What are they assets? And what value should be attributed to those assets? Stage 2 – an assessment of the parties’ financial needs Stage 3 – whether or not the sharing principle should be adopted? In the event that this is a sharing case how should the assets be notionally divided at this stage? Stage 4 – whether or not there is a good reason to depart from an equal division of the assets? Stage 5 – Deciding the outcome How much maintenance should the husband pay for C going forward? How should the court regard the applications for variation of the interim maintenance order; should that be taken into account when considering the matter overall? What order should be made for costs? What should be the final order? Discussion 36.I must now turn to consider the issues, the law and the parties evidence as set out in their affirmations and as given orally by them during the hearing. For the avoidance of doubt, in so far as the matters set out in this judgment differ from the evidence of the husband or wife, that is because I have preferred the evidence of one or other of them or because I do not find the evidence given credible, or because I consider that the documents produced confirmed my findings of fact. Stage 1 – an identification of the assets What are they assets? And what value should be attributed to those assets? 37.The schedule of assets is largely agreed. There are only two issues to be determined namely – a) what is the value of the Seahorse property and b) what is the updated value of the OA business. a) The Seahorse property 38.The Seahorse property is the former matrimonial home and the property in which the parties lived with C until separation. The wife wishes to return to live in this property with C. The wife attached a valuation report from Landscope Christie’s dated the 10 November 2017 to her closing submission and asks that the court accept this valuation over and above the valuation provided by the Single Joint Expert. She says that the value of the Seahorse property should be HK$22.9 million. It is of note that the wife did not seek to call anyone to challenge the Single Joint Expert’s report at trial and it is with respect completely inappropriate to attempt to challenge the report now, after the event, and without the husband having the ability to fully respond. Although Counsel for the wife did mention the fact that the wife did not accept the Single Joint Expert’s valuation during his opening, this point was not subsequently pursued. The Single Joint Expert was Midland Surveyors and they provided a report dated the 30 September 2017 valuing the property at HK$24 million. This is the value accepted by the court. It is interesting to note that this is the value attributable to the property in the wife’s first and second Form E’s. b) The value of the OA business 39.This point is a little more difficult to determine. The husband purchased a self-storage business in the US with his brother holding a minority interest of 15%, post separation. This is referred to in the papers as the OA business. There is now a dispute over the value of that business, although this did not appear to be the case previously. Consequently, there is no Single Joint Experts report to assist the court in this respect. It is trite but worth repeating that the wife should have identified this as a potential issue far earlier and the court should then have been properly assisted with respect to the value of OA. 40.In his closing submission the husband says that it had been agreed that the value of the OA business should be adjusted to US$964,857 as follows:
* After applying 39.6% tax to retained earnings of US$86,999 41.Unfortunately, this valuation was not accepted at trial. The wife maintained in her closing submission that a more appropriate value was US$1,125,853. The reasoning for this is summarized in her counsel’s closing submission as follows:
42.This valuation is also challenged in part on the basis that the wife had not excluded the husband’s brother’s 15% share in the business. If one were to accept this argument the wife’s valuation would necessarily come down. 43.In any event, even though it is said that the husband may have been persuaded by counsel’s argument during the trial, in the absence of a valuation report I am less inclined to be so persuaded. It seems to me that the parties should be bound by the valuation of US$964,857 previously agreed to by them prior to trial. I repeat – had the wife wished to challenge this, then she should have done so far earlier and through proper channels. The Schedule of assets 44.Consequently, I accept that there is HK$114,955,692.60 – or say just under HK$115 million in the matrimonial pot. Both parties have been using a similar and very detailed schedule of assets as a basis for discussion and reference has been made to a number of schedules both at the trial and since. Consequently, instead of attempting to reproduce one of these documents in the body of this judgment I have decided instead to attach a suitably redacted copy at attachment “A”. Given that I am in agreement with the valuations proposed by the husband as set out above, I have used the schedule of assets produced by his lawyers and as updated on the 8 January 2018. Reference should be made to that document as appropriate. Stage 2 – an assessment of the parties’ financial needs 45.In this section the court is asked to evaluate the financial needs of the parties. In doing so I will consider some of the other section 7 factors in addition to b), which specifically focuses on those “needs”. This will include an assessment of each party’s earning capacity and the effect that the wife’s illness may have longer term plus the potential financial resources open to each of them going forward. In addition, reference will be made to the standard of living enjoyed by the parties before the breakdown of the marriage. Each parties’ contribution to the marriage will also be considered – financial or otherwise. The income, earning capacity and other financial resources of the parties 46.There was a great deal of argument on the papers and during the trial concerning the wife’s earning capacity going forward. The husband described the wife’s decision not to return to work as a ‘lifestyle choice”. I accept that this was an unfortunate choice of words given the circumstances. Generally speaking, I accept that the wife was advised not to return to her very pressurized lifestyle of old and that she has, for very good reason, decided to make her health her first priority instead. This is not least because she is the primary carer of C, who is still very young. Reference can be made to a letter from one of her treating Dr’s, Dr L, dated the 13 May 2016, which states inter alia as follows:
47.I accept therefore that it would not be reasonable, nor indeed most likely possible, to expect the wife to return to work as an investment banker or to return to the field of private equity. However, I do not accept that the wife has no earning capacity at all. She is clearly a very bright and resourceful woman and I expect that she will wish to return to the workforce in some capacity in due course, despite her protestations to the contrary or perhaps to investigate other ways to make money in addition to the sorts of safe investments that she currently favours. Indeed, it is of note that she has looked into various options, although to date she has not found anything that would be a good “fit”. I am though proceeding on the premise that she will have sufficient resources available to her to maintain herself going forward. For the avoidance of doubt and as referred to above, I accept that the wife did not engineer her own unemployment for the purposes of these proceedings or otherwise. It is also of note that the wife’s medical prognosis going forward is good. 48.The order that I ultimately intend to make will mean that the wife will retain her income producing assets and that these will also be financial resources that she may choose to rely upon in the future. 49.The husband for his part tried to underplay his own employment prospects, maintaining that there were difficulties at work with some of his colleagues moving as a team to a new company. He also emphasized his age and his inability to work in the brokering industry longer term. There was also a lot of debate concerning his actual income at present and his anticipated income going forward. Consequently, I asked to see the husband’s most recent tax return. This was sent to the court after the trial and confirmed that the husband’s income for last year (2016/17) was HK$4,231,962 or over HK$350,000 per month. It is the wife’s case that the husband’s earnt income has historically been higher at just under HK$440,000 per month. In addition, he receives a rental income on some of his properties in the sum of HK$115,880 per month, although it would be fair to state that that income is generally used to pay for the mortgages on the properties and other outgoings. In addition, it is anticipated that longer term he will receive an income from the OA business. At present it is the husband’s case that he and his brother have agreed that any income from this business will be retained by the company in order to pay for the mortgage and other outgoings related to it. At present the husband receives a notional income from this source of HK$769,072 per annum or HK$64,089 per month. Longer term therefore it is anticipated that this will be a good source of income for the husband. 50.I am therefore proceeding on the basis that the husband has a significant earning capacity. He will also have other financial resources at his disposal which will provide him with a passive income in due course, including the OA business. The husband, by his own admission, has always had an interest in real estate and is seemingly very good and buying and selling for profit. I would also expect that to continue. The financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future The standard of living enjoyed by the parties before the breakdown of the marriage 51.Turning next to the needs of the parties. In general terms I accept that each party will need a home in which to live and sufficient money to live on. I accept that the parties enjoyed a fairly typical, but not overly lavish, middle class life style as one might expect given that they were both initially earning a very good income. I accept that the wife bought good quality clothes and shoes and some designer products when she was working, but this lessened during the period of her illness and since. I also accept that the husband tended to buy good quality suits and shoes on line from the United States. They also travelled reasonably regularly, using their points for flights and hotels where possible. They both have their own hobbies which they seem to enjoy – the wife is keen on photography and the husband is a cyclist. They also had a domestic helper and C attends an international school and enjoys various extra-curricular activities. 52.It is the wife’s case that she would like to return to live in the Seahorse property. This will certainly be an option for her, although I am concerned about the mortgage and whether or not it will be possible for the wife to take out a mortgage in her sole name given that she is currently not working. It may though be possible for her to pay off the mortgage from her cash savings. Another option might be for her to remain in the current Coastline property. In either event the wife will have the resources available to provide a home for both herself and C. Similarly, it will be open to the husband to liquidate some of his assets in order to purchase a home for himself either in Hong Kong – or overseas, presumably in the States. The contribution 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. 53.I accept that both parties made a full contribution to the marriage financially. I also accept that the mother has been the primary caretaking parent and that this is likely to continue. Stage 3 – whether or not the sharing principle should be adopted? In the event that this is a sharing case how should the assets be notionally divided at this stage? 54.It is accepted that this is a case where prima facie there are assets surplus to needs and therefore the sharing principle should apply. Consideration then needs to be given to whether or not, on either parties’ case, there is a good reason “capable of articulation” of departing from the yardstick of equality. In this instance a 50:50 division of the assets would mean that notionally each party would have assets in the region of HK$57,477,846 or say approximately HK$57,500,000 (rounded up). Stage 4 – whether or not there is a good reason to depart from an equal division of the assets? The Two Stage Approach Pre-marital assets The agreed pre-marital assets The wife’s “pre-marital” assets 55.It is agreed that the wife’s Beijing property, which is unencumbered, is worth HK$14.5 million and that according to the updated schedule of assets her MPF fund is currently worth HK$232,034 and that both of these items can properly be regarded as being pre-marital. The wife stated that her MPF fund was worth approximately HK$500,000 as at the date of the marriage. I am though proceeding on the premise that it is currently estimated to be worth HK$232,034 as set out in the schedule of assets. Thus the wife has agreed pre-marital assets of HK$12,732,034. 56.Similarly, it is accepted that the husband’s MPF may also be regarded as a pre-marital asset. It seems to me that logic dictates that the husband’s IRA account should be regarded in the same way. Thus it appears to be accepted that the husband has pre-marital assets worth HK$3,578,545 (MPF fund – HK$3,094,040 + IRA account - HK$484,505 = HK$3,578,545). The disputed pre-marital assets The wife’s other claimed pre-marital assets 57.In addition, the wife claims the following as pre-marital assets. I will discuss each of these in turn.
Net proceeds of Belchers When is a matrimonial home not a matrimonial home? 58.The parties lived in the Seahorse property prior to separation. This is a jointly held property purchased by them as the matrimonial home in June 2011. Prior to that they lived in a property owned by the wife namely The Belchers. The Belchers was not sold in order to purchase the Seahorse property. The wife claims the net proceeds of sale of this property as pre-marital, given that it was purchased by her in her sole name in October 2009 whilst she was in a relationship with the husband, but about a month or so before they began to cohabit. The parties also lived there as man and wife after they got married in September 2010 and it is clear that at this stage it became their first matrimonial home. It was also C’s first home. I accept that the wife is able to show that she paid for the initial deposits on this property and that the net proceeds of sale were subsequently paid into her own account. It is also clear that although the husband contributed HK$15,000 per month towards the household expenses at that time he did not ever specifically contribute towards the mortgage. There does not appear to have ever been any intention that the husband should be regarded as a co-owner of that property. In such circumstances it seems to me that this property cannot be regarded as being the party’s matrimonial home as at the date of their separation and thus the normal proviso in Miller v Miller, McFarlane v McFarlane should not apply. (See paragraph 25 above). The wife kept the proceeds of sale in a separate account. I accept that these funds should be regarded as belonging to the wife. There has also been little if any mingling from this account, although it is accepted that funds from this account were used to purchase both sole and jointly held assets, the remaining funds were nevertheless kept entirely separate. China Merchant Bank account 59.This account was the subject of a fair bit of cross examination during the trial. However, I accept that the wife was able to show that the monies in this account came from savings accumulated by her prior to the marriage, whilst she was living in China and that she has also received income from her Beijing property into this account. In addition, she made “safe” investments, so money left the account and returned to it from time to time. This included China Merchant Bank products including some deposits for certain specified periods of time that attracted a higher rate of interest. She also paid for some of her own credit card expenses from this account and occasionally she withdrew money from it for her own expenses, when in China, as this was a convenient way to access funds. I accept however that notwithstanding this, that this was a stand-alone account and that it was not mingled in any other way with matrimonial assets. I accept that these funds can also be regarded as belonging to the wife. It is suggested by the husband that the value of this account can only be ring fenced as at September 2010. This is not accepted. JP Morgan Securities Account 60.Similarly, I also accept that this account was set up by the wife in 2009, prior to marriage, from monies generated from her own employment and that the monies in that account are regarded by the wife as being purely for investment. The wife confirmed that she has a Customer Manager for this account and that she meets with her regularly, now 3 or 4 times per year, in order to discuss investment options. Investments are therefore made from time to time from this account and monies are subsequently returned to it. Again there has been no mingling with other matrimonial assets. Consequently, I accept that this fund can also be properly regarded as belonging to the wife. Again it is not accepted that the appropriate date for the value of this account is September 2010. Caribbean property 61.It seems that both parties invested in small units in the same development in Discovery Bay. Each used their own funds to purchase the said properties acquired prior to marriage. But whereas the husband sold his property and then reinvested the net proceeds of sale into a number of other properties, the wife has simply retained hers. The property in question was purchased in April 2010 (see the Wife’s Form E’s) prior to marriage and has generally, but not always been rented out. It is the wife’s case that this should be regarded as a pre-marital asset. The husband suggests that this should not be so regarded given that the wife was not earning a salary from September 2014 and therefore it is likely that he made some sort of financial contribution towards the property – either directly or indirectly. 62.Although there is some force in this argument I nonetheless accept, as explained by the wife in the witness box, that this was a standalone investment and that it should be regarded as belonging to her. The property was purchased prior to marriage and it has always been rented out for an amount in excess of the mortgage. Thus there were funds available to pay for the mortgage in the periods of time when it remained empty (notwithstanding what the wife said in support of her maintenance pending suit application). It was acknowledged that it was empty from May – September 2016. Likewise, small repairs and other miscellaneous items were paid for by the tenant and deducted from the rental payments. All in all, I accept that there was no “mingling” and that this property can be clearly identified as belonging to the wife. HSBC Advance account 63.The wife states that HK$1,573,688 in this account can be quarantined as this account only contained rental from the Caribbean property. The difficulty was that Ms Rattigan was able to show that this account must have held other funds, as even if all of the rent had been saved, the amount in that account would still have been far less than the sum claimed. By way of example the wife was taken to the HSBC Advance account statement for July 2013 which showed a balance in the savings account (xxx xxx 833) of over HK$1 million (HK$1,036,979). The Caribbean property was purchased in April 2010 – a period of just over 3 years to the date of the statement. The wife confirmed that it was originally rented out for about HK$14,000 per month. Thus, even if all of the rental was saved, the maximum amount in that account could still only have been just over HK$500,000. (HK$14,000 x 36 months = HK$504,000). Even if this was stretched to a period of 40 months the figure would still only be HK$560,000 (HK$14,000 x 40 months = HK$560,000). 64.When faced with this the wife conceded that the account must also have held the rental from the Belcher’s property after the parties moved out and prior to its sale. This point was not included in the wife’s written evidence. I accept however that it is more likely than not that the monies in this account belong solely to the wife and should therefore be regarded as prima facie belonging to her. Conclusion 65.In conclusion then I accept that the wife’s disputed pre-marital assets namely the net proceeds of Belchers, the monies in the China Merchant Bank, the monies in the JP Morgan account, the monies in the HSBC Advance account and the Caribbean property in the sum of HK$25,637,457 can properly be regarded as being pre-marital and as belonging solely to the wife. In addition, the agreed pre-marital assets in the sum of HK$12,732,034 should also be regarded as belonging to the wife. In total then the wife has pre-marital assets in the sum of HK$38,369,491. The husband’s case on his own pre-marital assets 66.In the husband’s closing submission, he summarized his position on what should be regarded as his own pre-marital assets as follows:
67.I do not accept the husband’s case with respect to items (iv), (v), (vi), (ix), (x) or (xi). I have already dealt with items (vii) and (viii) in paragraph 56 above. I accept that I am charged with looking at the assets in the matrimonial pot now and analysing it to see if any of the existing assets can be regarded as being pre-marital or if they can otherwise be regarded as belonging to the husband, having taken into account what has happened to them since inception, how they were regarded by the parties both before and during the marriage and whether they have been mingled with the so called marital acquest post marriage. As indicated above I accept that in undertaking this exercise the length of the marriage is an important consideration for all of the reasons set out in above. Clearly it is not open to me to regard as pre-marital any assets which no longer exist. I accept that the approach taken by the husband is fundamentally wrong in this respect and is likely to lead to a “minute retrospective investigation of the parties’ finances”, which I am attempting (perhaps not altogether successfully) to avoid! I am also conscious of the fact that there is a very real danger of double accounting if one were to accept the husband’s approach. 68.When considering the remainder of the assets in the husband’s sole name I am conscious of the fact that the parties by agreement had maintained completely separate finances throughout their marriage. The only difference between the wife’s position and the husband’s position is that the husband sold some of his solely owned properties during the course of the marriage and he then reinvested the net proceeds of sale from these into other properties or assets held either in his sole name or jointly with the wife. As with the wife these assets were largely self-financing, with the rentals covering the mortgage repayments, in much the same way as with the wife’s Caribbean property. The only clearly discernible difference is that the husband may have used some of the salary earnt by him during the course of the marriage to pay for some of the expenses attributable to these properties. I will now consider each of the other assets in turn. Kirkland Property 69.It is the husband’s case that he sold a property previously owned by him in Kirkland in or around May 2014 and that he then reinvested the net proceeds of sale into the second Kirkland property referred to in his Form E and that in doing so he took advantage of the US Tax 1031 exchange in order to defer the payment of capital gains tax. The wife queries how the husband could have afforded to buy the second property without recourse to matrimonial assets. According to the husband’s Form E there was a down payment on this property of HK$3,317,000 or approximately US$425,000. In his first affirmation of the 14 March 2017 he states that he made a net profit on the sale of the first property of only US$100,000. Later he clarifies this and confirms that he had paid off the mortgage in or about 2007 and therefore received a net profit of about US$370,000. However, it was put to the husband in the witness box that he still did not have sufficient funds from the proceeds of sale to pay for the deposit on the 2nd Kirkland property as claimed. In answer he said that the balance must have come from the Singapore monies, which he had subsequently transferred into US dollars. Although this was not stated in his written evidence I nevertheless accept that this was highly probable given that the husband kept his own investments entirely separate from the wife’s investments and their jointly held investments. 70.As with the wife’s investment properties the husband maintains that the mortgage repayments were funded largely from the rental income. According to the husband’s latest Form E he has a monthly deficit on this property of HK$7,276 per month. Generally, I accept that this property was regarded as being the husband’s and that given the way in which the parties finances were organised that it is unlikely that joint funds were used to pay for either the down payment or any of the mortgage repayments. It is suggested that the mortgage may have been paid from “matrimonial income” – i.e. the husband’s income during the marriage – given that he bought this property after the wife became ill in August 2014. Although that may have been the case, it does not seem to me that that of itself is sufficient to deem this property as being in the “pot”. As indicated above it is of note that the husband had other funds available to him from time to time from the sale of other investments including the proceeds of sale from a Singaporean property and the proceeds of sale from a property in Midlevel’s. Thus I accept that this property should be regarded as belonging to the husband. The X Lake B property 71.This property is also held in the husband’s sole name. It was purchased on the 29 May 2015, post separation. I accept that it should also be regarded as belonging to the husband. Century Link Property and the 85% interest in OA business 72.As indicated above, both parties invested in a small unit each in the same development in Discovery Bay – the Caribbean properties. The purchases were made prior to marriage. The wife has retained hers, but in October 2015 the husband sold his property and received a net profit of approximately HK$7 million. I accept, that as with the wife’s property, the husband’s original Caribbean property was pre-marital. It was purchased prior to marriage in April 2010 with his own funds and the property was always kept separate from the parties’ joint assets. There was no “mingling”. As with the wife’s property the rental income was used to pay for the mortgage. 73.It is the husband’s case that he subsequently reinvested the net proceeds of sale from the Caribbean property into the Century Link property which is a property that has been purchased “off plan”. Consequently, the payment made have been by way of stage payments. In addition, the husband has made a significant investment into the OA business, which is a self-storage unit purchased with his brother, of nearly US$900,000 (i.e. over HK$7 million). When it was put to the husband that he must have had recourse to either matrimonial or mingled funds in order to make all of these investments, he denied that to be the case. As a general point I accept, as stated above, that the husband did have recourse to other funds of his own and that it is likely that he used those funds for these investments. I am not persuaded that these funds have been “mingled” or indeed that there were other jointly held capital funds that he could have used for this purpose. Again the only matrimonial element here is the income that he was earning at the time. Conclusion 74.In conclusion then I accept that the purchase of the Kirkland property took place during the course of the marriage, and that the purchase of the X Lake B property and Century Link together with the acquisition of the OA business took place post separation. I also accept that they were funded from assets that were originally pre-marital. In the context of this case – i.e. where there is a short marriage and the parties maintained completely separate finances historically, it seems to me that it is only fair and reasonable for these four assets to be regarded as belonging to the husband, even though arguably they may not necessarily be regarded as being pre-marital in the classic sense of that term. Nevertheless, it seems to me that this is a reason, capable of articulation, for prima facie departing from the yardstick of equality. 75.Consequently, then I accept that the husband’s disputed sole named assets namely the Kirkland property (net value HK$6,761,329), The X Lake B property (value HK$5,089,730), the Century Link property (net value HK$3,018,117) plus the OA business (estimated value HK$7,525,885) in the total sum of HK$22,395,061 shall be regarded as belonging to the husband. In addition, the agreed pre-marital assets in the sum of HK$3,578,545 should also be regarded as belonging to the husband. In total then the husband has assets that should prima facie be regarded as belonging to him in the sum of HK$25,973,606. The parties’ joint assets 76.In addition, the parties also hold the following properties jointly:
77.I accept that notionally these properties shall be divided between the parties equally. Thus each party shall receive an additional sum of HK$21,494,321.50. Both parties have proposed that the Seahorse property and the Coastline property be transferred to the wife, although the wife asks that the Seahorse property be transferred to her free of mortgage. This is not accepted. I do though agree that both of these properties may prima facie be transferred to the wife subject to the mortgages. It is a matter for the wife whether she chooses to live in the Seahorse property or the Coastline property. As indicated above in either event she may need to pay off the mortgages if she is unable to secure a mortgage in her sole name. Thus I shall make an order that
78.This means that the wife will receive properties worth HK$27,215,620 net and the husband will receive properties worth HK$15,773,023 net. There is a difference of HK$11,442,597. In order to balance this part of the exercise the wife will pay the husband a lump sum of HK$5,721,300 (rounded up). The remaining matrimonial assets 79.The remaining assets include the bank account held in the name of HJI in the sum of HK$91,504 and the husband’s cash assets in the sum of approximately HK$2,763,780 plus his remaining shares and other investments worth approximately HK$1,366,970. The husband also has liabilities of approximately HK$1,114,342 and the wife has liabilities of HK$56,771. The wife currently has cash assets of just over HK$17 million. 80.In such circumstances I accept that the husband should retain his cash assets and remaining securities in the total sum of approximately HK$4,130,750. Both parties will otherwise keep their respective assets currently held in their sole names. The parties shall also close any existing joint bank accounts within 30 days from the date of the Decree Absolute with the balance to split equally between the parties. They shall each be responsible for their own liabilities. Stage 4 Conclusion 81.In total then the wife’s share of the assets will amount to just under HK$64 million and the husband’s share of the assets will amount to just over HK$51 million as follows:
82.Thus in broad terms the wife will receive 55.6% of the asset base and the husband 44.4%. Given the shortness of the marriage and the fact that both parties did bring some assets into the marriage, this seems to me to be a fair and reasonable division of the “matrimonial pot”. One of my main concerns in this case was that it did not seem fair for the wife to retain all of her pre-marital assets, whilst at the same time making claim to some of the assets held in the husband’s sole name. I was not convinced by her arguments with respect to “mingling” and often it seemed to me that the only possibility of “mingling” was that the husband may have paid for some of the expenses on the properties from his own income during the marriage, given that towards the end he was working and the wife was not. There does not appear to have been much “mingling” otherwise. Unfortunately, the wife’s approach appears to have been one of “what is mine is mine and what is yours is also mine”. As pointed out by Ms Rattigan in her closing, the proposal put forward by the wife would have meant that the wife would have retained between 72.6% - 80.7% of the asset base depending on whether the premarital assets on her calculation were included or not. On the face of it this does not appear to have been either fair or reasonable. 83.One of my difficulties however, was that conversely I did not accept the alternative approach put forward by the husband. He argued prima facie that all of the assets should be regarded as being in the pot, notwithstanding the fact that at trial he accepted that the wife’s Beijing property and the MPF fund that she brought into the marriage could be regarded as being pre-marital. Alternatively, he put forward a convoluted argument that was based on the assets that he says he brought into the marriage, a sum of HK$35 million, notwithstanding the fact that many of these assets had been either sold or otherwise disposed of and did not form part of the current asset base. My view in that respect remains as set out in paragraph 32 above. A capitalized lump sum 84.Although the wife originally advanced an argument for a capitalized lump sum she did not seek one specifically in her open proposal. She simply sought a division of assets in excess of a 50:50 split. In her Duxbury calculation she said that she would need a lump sum of HK$50.83 million to generate an income of HK$80,000 per month. In any event I accept that the wife’s own needs can be met from her share of the assets and that it would not be appropriate in the circumstances to include a capitalized lump sum in addition to this. How much maintenance should the husband pay for C going forward? 85.The husband is approaching the issue of C’s maintenance on the premise that each side should be responsible for 50% of her expenses. However, there is no principle to that effect. Sometimes a child’s expenses, including her share of the general household expenses, might be split between the parties on a 50:50 basis. This is often the case where the parties are earning a similar amount or where they have other financial resources at their disposal which makes such an order fair and reasonable in the circumstances. On other occasions a court may split the costs according to the respective amounts earned by each of the parties. So for example, if the husband is earning double what the wife is earning then prima facie he should be responsible for 2/3 of the child’s expenses and the child’s share of the general household expenses. Although this is not an exact science it does provide a useful guide when considering the issue of a child or children’s maintenance overall. 86.At present the wife is not working and although she may return to the workforce in due course, I have accepted that it is unreasonable to expect her to return to work as an investment banker or to work in a similar high pressured environment (see paragraph 47 below). Although the wife will have some income from her investments, it seems to me that nonetheless the husband should be responsible for the majority of C’s expenses. This is especially given the fact that he is currently earning a very good salary despite his “doom and gloom” predictions. 87.The wife seeks an order that the husband contribute HK$35,000 per month for C’s expenses and that in addition he pay for her school fees and other school related expenses. The husband for his part offers just under HK$15,735 per month based on his analysis of a 50:50 split of C’s expenses. 88.According to the wife’s latest Form E her reduced monthly expenses are as follows:
89.The husband for his part has produced an adjusted list of what he says should be C’s monthly expenses as follows:
In so far as the interim maintenance figure of HK$40,000 per month is concerned, there will be no alteration to that given the final order. 93.The husband has a better argument in relation to clawing back some of the mortgage repayments for the Coastline property given that this is a jointly held property. Notwithstanding that he seeks to claw back the whole sum of HK$38,051 per month for the mortgage and a further HK$2,463 per month for the management fee. Prima facie it does not seem to me that this is reasonable. At most he might be entitled to claw back 50% - or say HK$20,257 per month (HK$38,051 + HK$2,463 = HK$40,514 divided 2 = HK$20,257). This remains of some concern however given that the wife was not working at the time and although she had some income it was not enough to sustain her and C in the short term pending either the outcome of this trial or earlier agreement. I also do not think it reasonable to have expected her to rely wholly on her assets. In such circumstances I have therefore decided on balance that there will be no claw back. What order should be made for costs? 94.Given that I have not come down in favour of either side and that I did not fully agree with the approach taken by either the husband or the wife, I will make an order nisi to be made absolute in 28 day’s time that there be no order as to costs. There shall be certificate for counsel. It is of note that according to the wife’s Form H, her estimated costs up to and including the trial amount to just over HK$2.6 million and the husband’s costs were slightly lower at just over HK$2.3 million. I do not know what percentage of those costs have been paid. Final order 95.Therefore I shall make a final order as follows:
Mr. Russell Coleman S.C instructed by Ip & Heathfield for the Petitioner Ms. Mairead Rattigan instructed by Withers for the Respondent
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