Wysl v. Fhcba

CACV 399/2018

[2019] HKCA 814

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 399 OF 2018

(ON APPEAL FROM HCMC NO 8 OF 2016)

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J U D G M E N T

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The Court:

A. INTRODUCTION

1.This appeal is brought by the Wife against the judgment of Anthony Chan J on an application for ancillary relief and an application to set aside dispositions pursuant to section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”).  The interveners are the Husband’s elder brother (“Brother”), the Brother in his capacity as the administrator of the estate of the Husband’s father (“Father” and “Estate”), and the Husband’s mother (“Mother”).  Judgment was given on 19 July 2018 after a trial involving oral evidence that lasted five days at the end of May and early June 2018.

2.The judge dismissed the Wife’s application under section 17 of the MPPO in respect of various properties which, on the interveners’ case, had belonged beneficially to the Father and then to the Estate.  He ordered the Husband to pay the Wife a lump sum payment of $24 million and that the payment be made within four months from the date of the order with liberty to apply.

3.Orders nisi were made for the costs of the two sets of proceedings^[1]. In respect of the costs of the application for ancillary relief, the Husband was ordered to pay the Wife’s costs with a certificate for two counsel, and credit was given to the total sum of $3.44 million already paid by the Husband to the Wife as legal costs provision.  For the section 17 application, the Wife was ordered to pay the costs of the Husband and the interveners, with a certificate for two counsel.

4.The Wife seeks to set aside the judgment on the ancillary relief application and the section 17 application and asks this court to substitute its discretion for that of the judge, alternatively that the matter be remitted to the Court of First Instance for rehearing by a different judge.

5.The Wife concedes that her case is a “needs” case and not a “sharing” one, although it was contended that the scale of wealth of the Husband is important to assessing her needs claim.

6.It is the Husband’s contention that as the Wife’s claim for ancillary relief is a “needs” case, the dispositions sought to be set aside under section 17 (whether successful or not) would not have any impact on the Wife’s ultimate award.

7.There is no dispute about the relevant legal principles.  Comprehensive guidance on the principles and steps to be taken in the exercise of the discretionary powers when making orders for ancillary relief under section 7 of the MPPO has been given by the Court of Final Appeal in LKW v DD (2010) 13 HKCFAR 537.  The dispute is about the application of the legal principles to the facts of this case.

B. BACKGROUND

8.We will first set out the relevant factual background, as taken from the judgment.

B1. The marriage

9.As stated in the judgment:

“4. The Husband and Wife were born, respectively, in August 1968 and August 1971 (she is aged 46)^[2]. They began their relationship in 2002 and were married in January 2005. They separated in December 2014. The Wife petitioned for divorce on 31 March 2015 and the decree nisi was pronounced on 26 November 2015.

5.   This was a childless marriage of about 10 years.  However, the couple wanted to have children, and for that purpose the Wife had undergone extensive medical procedures including IUI, IVF and surgery^[3] over the course of 6 years involving 8 failed pregnancies.”

B2. The Father

10.The judgment has this to say about the Father:

“23. He came from a rich family, but he was a successful businessman in his own right. He was active in making various investments, including shares and properties, and had a stock brokerage business (Brokerage).

24. On matters of investment, the Father trusted only himself and was fully in control. He did not rely on any of his children on such matters, despite the fact that the Brother was acting as his personal assistant from 1995 or 1996. He did not trust the investment acumen or ability of any of his children.

25. The Father suffered from a life threatening lung decease in about the end of 2003. With the help of the best medical care, he managed to recover from it. From about 2005, his condition stabilised and began to improve. However, he had to carry an oxygen tank with him all the time to assist his breathing.

26.   In about February 2015, the Father was unwell and admitted to hospital.  To the surprise of his family, his condition deteriorated rapidly and he passed away on 2 March 2015.”

“65. A few words have already been said about the Father. He was very much the dominant patriarch of the family. The evidence shows that he was a careful man with his money, and he did not treat his family differently in this regard. The Husband was not given an extravagant allowance or any gift of such nature. The only exceptions were 3 sizable cash gifts on his birthdays^[4]. Although there were properties acquired by the Father in his name^[5], there is no evidence that he ever benefited from them financially or was in control of them. He always dealt with them as instructed by his father.

66. The evidence suggests that the Father did not relinquish control of any asset to his children. However, he did not like to deal with paperworks, and he relied upon the Brother for the same.

67. There is a long history of the Father having his assets held in the names of his children, which preceded his illness in 2003 and the marriage in question:

(1) In March 1994, when the Father (born in 1941) was in his early 50s, he asked his investment partner, Ms Wong, to transfer her 3,500 shares in K C Ltd to the Brother (then 27 years old) to hold them on his behalf. The Interveners’ case that these shares were held by the Brother for the benefit of the Father is not disputed;

(2) In 1998, the Father opened a Hang Seng Bank account in the name of the Brother and one in the Husband’s name (Account A). They were then aged 31 and 30. I shall have to come back to Account A below as one of the Disputed Properties;

(3) In mid-2000, the Father set up 3 HSBC Private Bank accounts under each of his children’s names^[6] to hold funds for him and to build up their credit profiles for obtaining loan financing for him in the future;

(4) In 2001, the Father instructed the Brother and Husband to each hold 38% of his interest in a newly incorporated company (Company) which took over the Brokerage as a result of him being reprimanded by the SFC. The brothers also held accounts with the Company to facilitate the Father’s securities trading.

(5)   In 2002, the Parents’ Home^[7] was purchased by the Father in the names of his children, then respectively 35, 34 and 26 years old, with the view to avoid estate duty.  …”

11.We would mention here that the shares of K C Ltd^[8] have been held by the Brother, the Husband and the Sister since 2004 in equal proportion, save that the Brother holds one extra share.  There were other companies with the shares jointly held by the three children in the same way and they were used by the Father as corporate vehicles in property and other investments.  Two of them were mentioned in the judgment, W H Ltd and B Ltd.

12.There were other instances when the Father purchased properties in the name of one of his children. In March 2010, he bought a property at Tai Hang Road for $32,510,000 in the name of the Brother, which was then used by the Brother as his matrimonial home.  Also in March 2010, the Father bought a property at Centre Stage in Hollywood Road with a sitting tenant in the name of the Husband at $14,680,000 (“Flat A”).  In January 2011, he bought another property at Centre Stage with a sitting tenant at $16,590,000 in the name of the Sister, who was then living with her parents.

B3. The Trust and the Estate

13.The judge said this about the Trust and the Estate:

“27. The Father set up a trust (Trust) in June 2004 when he was quite ill. It was a private discretionary trust to provide for his wife and children. Each of them is entitled to ¼ of any distribution from the Trust. The Husband’s entitlement under the Trust is one of the disputes in this case.

28.   The Father died intestate.  It is uncontroversial that the Mother is entitled to ½ of the Estate, and the children each entitled to 1/6.  The Estate is administered by the Brother.”

“128. The Trust is a typical discretionary trust. It was stated in clause 3.3 of a Confidential Memorandum dated 12 December 2012, which contained the Father’s wishes, that “[u]pon the death of [the Father], the Trustee would consider holding and distributing the Trust Fund as to both income and capital of the Trust Fund … for the benefit of [the Mother and the children] … absolutely in equal shares”.

129.   There is no dispute that the Trust Fund is worth US$27 million and the Husband’s ¼ interest is worth about HK$55.7 million.  There has been no distribution from the Trust.” 

B4. The Husband and his income

14.The judge gave this account about the Husband and his income:

“6. The Husband did not perform well in school. He completed high school education in USA, followed by a 2‑year certificate course in Hotel and Restaurant Management in Canada.

7. It appears that the Husband had little ambition. His first job was that of a kitchen assistant earning HK$3,000 per month, which lasted 3 months because he accidentally cut his hand. In about 1992 or 1993, the Husband was employed as a videotape operator, performing a mechanical task, until he was laid off in 2000. At the time, he was a senior operator earning HK$32,000 per month.

8. After the redundancy and throughout the marriage, the Husband never resumed any gainful employment. He was involved in opening a bar in 1999 with his sister (Sister), and helped out in other catering businesses of the Sister in minor roles. Such pursuits did not result in much financial return for the Husband.

9. The Husband has a strong passion for fixed gear bicycles. In about 2008 and 2010, he ran a small business selling such bicycles. They were not profitable and did not last long. Recently, he has started another small bicycle business as well as one trading in crystal ware. Both of them are running at a loss.

10. Throughout the marriage, the Husband was relying on the monthly living subsidy from the Mother, initially in the sum of HK$30,000 per month and increased to HK$50,000 per month in 2013.

11. During the 3 years before the Father passed away (on 2 March 2015), the Husband received lai-see money from his parents on his birthday: HK$440,000 in 2012 for his 44^th birthday; HK$450,000 in 2013; and HK$460,000 in 2014^[9].

12.   The monthly subsidy ceased after the Husband had received a distribution of HK$6.8 million from the Estate in January 2016.”

“58. The Husband was not a person with any interest in finance or figures. He does not appear to be a very sophisticated person. My impression of him is that he has a relaxed attitude and is not a focused person.”

B5. The Wife and her income

15.The judge’s description about the Wife is as follows:

“16. The Wife has a bachelor degree in Business and Administration obtained in 1999. She was in gainful employment throughout the subsistence of the marriage.

17. From February 2003 until April 2018, the Wife was working for a medical service provider in Hong Kong. At the time she was made redundant in April 2018, she was the Head of Marketing as well as the Head of Operation of certain clinics. In those roles, she was leading a team of 11 or 12 staff.

18. From this employment, she had an average income of HK$60,458 per month, including double pay, bonus and commission, as of May 2015. Her fixed monthly salary was HK$37,500. Her last salary was HK$42,500 per month, excluding double pay. The drop in her aggregate income was a reflection of certain change applied by her employer in respect of the payment of bonus and commission.

19. The Wife has an MBA degree which she studied for and was awarded during the marriage.

20. It is fair to say that the Wife was an independent career lady. She was considerably more ambitious than the Husband, and was free to pursue her chosen path with the benefit of a comfortable home, looked after by a domestic helper, provided by the Husband with the Father’s resources.

21. The Wife was free to spend her income as she saw fit. In addition, she was given 2 supplementary credit cards by the Husband. Probably encouraged by the fact that everything was provided for her, she did not have the habit of saving.

22.   After her redundancy, the Wife has actively tried to find another job.  However, so far she has met with little success, save for a job as marketing manager at a training provider which pays significantly less than what she was earning (HK$26,000 per month plus annual bonus of 1 month’s salary).  There is no evidence that she has taken up that position.”

“55. My impression of the Wife is that she is a strong minded and independent career lady. She is intelligent and articulated, never shied away from any challenge in cross‑examination. These characteristics are consistent with the fact that she was the leader of a sizable team of colleagues.”

B6. The matrimonial home and household expenses

16.The judge stated the following:

“13. The former matrimonial home occupied by the Husband and Wife, situated at Kotewall Road (Home), was purchased with the Father’s money and registered in the name of K C Ltd. It had a net area of 1,223 sq ft (1,532 sq ft gross), a balcony and quarters for a domestic helper. The building was renovated a few years ago and had a swimming pool.”

“15. It is uncontroversial that during the subsistence of the marriage the Husband was paying the household expenses in addition to his own personal expenses.”

17.The agreed value of the matrimonial home registered in the name of K C Ltd is $28 million^[10].

B7. The Family Arrangement

18.The Wife alleged that the Family Arrangement was a litigation tactic designed to cover up the inconsistencies in the Husband’s case and with these proceedings in mind, even though the Family Arrangement did not form any part of her section 17 application.

19.The Family Arrangement as described in the judgment was as follows:

“69. It is the case of the Husband and the Interveners that after the unexpected demise of the Father in March 2015, the family had discussions on how to deal with the Estate without a will, including the assets in the children’s names. It was eventually agreed that, to avoid the trouble of transferring the assets from the children back to the Estate for distribution, and with the hope that it would facilitate a settlement between the Wife and the Husband (by increasing the funds available to him), the Mother would forego her entitlement in respect of those assets in her children’s names, and they would be treated as gifts to the children.

70.   In addition, the Mother would keep the money, totalling just under HK$11 million, which were transferred to her after the Father’s death.  In respect of the Parents’ Home, it was agreed that the Mother would continue to live there for as long she wanted.  The children would not dispose of their interest in the property without her consent and, should she wish to sell the property and move to another place, the children would make the necessary arrangements for her.”

20.By the Family Arrangement, the Brother and the Sister each got a property in his or her name (the Tai Hang Road property and the property at Centre Stage), but the property in the Husband’s name (Flat A) had been sold and the proceeds were distributed before the Father’s death (the disposition of the proceeds formed part of the section 17 application).

21.As mentioned earlier, the Husband received a distribution of $6.8 million from the Estate in January 2016.

B8. The undisputed assets

22.The Wife’s net assets, which are not in dispute, are about $230,000^[11].

23.The undisputed assets of the Husband have a net value of about $48 million.  They are made up largely of the Husband’s one-third interest in property-holding companies such as K C Ltd, and his one-third interest in the Parents’ Home, which is subject to the Mother’s right to continue to occupy the same as her residence during her lifetime.  The Parents’ Home has been assessed by a single joint expert to have a value of about $44.36 million after taking into account the Mother’s life interest. The Husband’s one-third interest is thus worth about $14.48 million^[12].

24.The assets of the Husband, whether disputed or undisputed, are non-matrimonial in the sense that they are not the financial product of or generated by the parties’ endeavours during the marriage.  It is not in dispute that non-matrimonial assets are available for satisfying a needs based award.

B9. The assets in dispute

25.The Disputed Properties set out in the Wife’s summons in the section 17 application are said by the Husband and the interveners to be the assets of the Father held under the Husband’s name.  The Wife says they were gifts made to the Husband by the Father.  They are set out in this table in the judgment^[13]:

Transferor	Asset	Date	Transferee
Husband	33.33% of the sale proceeds of W H Ltd in the sum of HK$15,967,225.50	Jan 2014	Brother and/or Father
Husband	Sale proceeds of Flat A in the sum of HK$5,239,304.82	2.9.2014	Brother
Husband	Sale proceeds of Flat A in the sum of HK$6,004,186.09	2.9.2014	Brother
Husband	Sale proceeds of Flat A in the sum of HK$6,004,186.09	2.9.2014	Brother
Husband	HK$912,819.22 from Hang Seng account A (Account A)	7.5.2015	Mother
K C Ltd	Sale proceeds of Flat B[14] in the sum of HK$3,000,000	20.4.2015	Brother
K C Ltd	Sale proceeds of Flat B in the sum of HK$10,000,000	21.4.15	Mother

26.There is also dispute over the Husband’s entitlement under the Trust, whether the undisputed value of a ¼ interest in the Trust being $55,711,851 should be regarded as financial resource available to the Husband for the purpose of ancillary relief under the Charman test approved by the Court of Final Appeal in Kan Lai Kwan v Poon Lok To Otto (2014) 17 HKCFAR 414.

C. THE SECTION 17 APPLICATION

27.We will first deal with the appeal from the judgment dismissing the Wife’s application under section 17.

C1. The Wife’s case

28.The Wife alleged that the children of the Father were the beneficial owners of the shares in the property holding companies – K C Ltd, W H Ltd, B Ltd; that the properties held in the names of the children, whether jointly (the Parents’ Home) or singly (the Tai Hang Road property in the Brother’s name, Flat A in the Husband’s name, the flat in Centre Stage in the Sister’s name) were beneficially owned by the legal owner; and that the proceeds of Account A held in the name of the Husband belonged to him beneficially.

29.She asserted that the dispositions by the Husband and K C Ltd to the Father, the Brother and the Mother had to be viewed in the context of the breakdown of the marriage in 2014 and that the impugned transactions were made to rid the Husband of properties and assets with the intention of defeating her claim for financial provision.  She relied in particular on the statutory presumption in section 17(3)(a) of the MPPO regarding intention with respect to a disposition which took place less than three years before the date of the application.

C2. The judge’s findings

30.These three issues were involved in the section 17 application, as identified in §51 of the judgment:

“(1) whether the Husband made any disposition of property within the meaning of that provision (Disposition Issue);

(2) if so, whether any of the dispositions was made with the Husband’s intention of defeating the Wife’s claim for financial provision (Intention Issue);

(3)   whether, if the disposition(s) were set aside, different financial provision would be granted to the Wife (Provision Issue).”

31.It was common ground that in respect of the Disposition Issue, “property” under section 17 is restricted to property beneficially owned by the Husband^[15]. Hence, the threshold question is whether the Disputed Properties were beneficially owned by the Husband (who received them as gifts from the Father, as the Wife has alleged) or by the Father.  This question turned on the intention of the Father at the times when the properties were acquired by the Husband, as inferred from the available evidence, and it was common ground that this was the preferred approach instead of relying on legal presumptions, such as the presumption of gift^[16].

32.The judge analysed the history of the Father’s acquisition, ownership and control of assets from the 1990s down to the Father’s death in 2015, and the Family Arrangement after the Father passed away. He did not think the Wife’s allegation of the Family Arrangement as a litigation tactic was made out.  He saw no reason to doubt the Mother’s evidence in this respect (that she was willing to give up her interest in the properties in the names of the children), and was not persuaded that the “imbalanced distribution” (in that the Husband ended up with no landed property in his name) would have spoiled a family arrangement^[17].

33.He made detailed findings of fact in respect of each of the Disputed Properties: W H Ltd, K C Ltd, Flat A, Flat B and Account A.  He found on the evidence that all these Disputed Properties were held beneficially by the Father and this was determinative of the section 17 application^[18].

C3. The Wife’s appeal

34.The Wife sought to challenge the crucial finding of fact that the Father had beneficially owned all the Disputed Properties.  The main contentions advanced by Mr Richard Todd^[19] on her behalf are as follows.

35.He contended that the finding was unsafe because of the lack of reference in the judgment to the presumption regarding intention in section 17(3)(a) and the judge had in effect reversed the burden of proof by requiring the Wife to satisfy him that the Disputed Properties were made as gifts to the Husband at the relevant times.  He argued that the impugned transactions should be viewed in the light that the Husband was motivated to hide assets from early 2014 onwards as the Husband was explicit in his desire to leave the Wife by then and conducted the transactions to rid himself of assets.  The Husband and the interveners used the “device” that the Disputed Properties did not belong to the Husband beneficially to get around the presumption in section 17(3)(a) and argued successfully before the judge that all the Husband was doing in the transactions was to deal with someone else’s properties and assets.  This is a perpetuation of the same “myth” that the properties and assets in the Husband’s hands were trust assets until the Family Arrangement.  The intention to defeat the claim for ancillary relief need not be the sole or even dominant intention and it was enough that it played a substantial part in the Husband’s subjective intentions as a whole (Kemmis v Kemmis [1988] 1 WLR 1307 at 1330H to 1331A)^[20].

36.Mr Todd again attacked the Husband’s credibility and the Brother’s as well, relying on the same points that had been made before the judge by the Wife’s former counsel.  He referred this court to the relevant parts of the Wife’s written opening and closing submissions in the court below concerning the Husband’s “untruthful” presentation of his assets in his Form E in 2015, how the Family Arrangement (with the Husband coming out as the ‘biggest loser’) was deployed to cover up the inconsistencies in the Husband’s case, the fact that certain properties and assets were not included in the schedule of assets of the letters of administration of the Estate and the purported reasons for the non-inclusion, the subsequent “corrections” of the schedule of assets of the Estate.  The judge should have treated such evidence with some “healthy scepticism” but instead adopted a “credulous” approach.  He failed to give weight or sufficient weight to the extensive analysis of the evidence in the Wife’s opening and closing submissions, and was plainly wrong to hold that the Disputed Assets were beneficially held for third persons notwithstanding the paucity of corroborative evidence.

37.He further criticised the judge for failing to give weight to various presumptions: the presumption of advancement as between father and son in rebuttal of the presumption of resulting trust; the presumption that as the Father had divested assets to the Husband as a form of estate planning, the Father was genuinely giving up his interest rather than perpetrating an estate duty fraud; the presumption that equity follows the law.

38.None of the above contentions are of any merit.

39.Contrary to Mr Todd’s submission, the judge did refer to the presumption in section 17(3)(a) in §52(4) of the judgment.  But as Mr Abraham Chan SC^[21] rightly pointed out on behalf of the interveners, whether that presumption was applied by the judge is in reality academic, as the presumption would only have been relevant to the Intention Issue.  The judge did not find it necessary to decide the Intention Issue given his findings as to the Father’s beneficial ownership of the Disputed Properties on the Disposition Issue.

40.Furthermore, the presumption in section 17(3)(a), which relates to the intention of the party who made the disposition impugned (the Husband in this instance) could have no application here.  The question that the judge had to address first was the Father’s intention in causing the properties to be held in the Husband’s name, in order to determine the beneficial ownership of the Disputed Properties.  The burden of proof fell squarely on the Wife to establish that the Father’s intention was to make gifts of the properties to the Husband.

41.What matters here is whether there are valid grounds for this court to interfere with the crucial findings of fact of the Father’s beneficial ownership for each of the Disputed Properties.  The judge arrived at his findings of fact in respect of the Father’s intention at the relevant times after thorough consideration of the testimony of witnesses, the contemporaneous documents and the inherent probabilities.  The findings were based on the primary facts found and the evaluation of facts assisted by contemporaneous documents which demonstrated how the properties were dealt with over a long period of time.  According to established principles^[22], there is no basis to interfere with findings of primary fact unless it is demonstrated that the judge was plainly wrong, and no basis to interfere with findings arrived at by a process of evaluation of facts or inference without meeting any of the requirements akin to an appeal against the exercise of judicial discretion (that the judge has erred in law or principle, or has relied on irrelevant considerations, or disregarded relevant considerations, or the decision was so plainly wrong that it must have been a faulty assessment of the weight of the different facts which have to be taken into account).

42.It has not been shown that the judge had fallen into palpable errors in his findings of fact to warrant interference in accordance with the established principles.  The mere assertion that the finding of the primary judge is against the weight of the evidence or that the judge should have reached another conclusion because of points advanced in the submissions before him are not errors within that category^[23].  As the Court of Appeal has emphasised in the past, the appellate process is not designed to give a litigant a platform for regurgitating submissions already made in the court below on the evidence and factual aspects in the hope of persuading the appellate judges to come to a view different from the primary judge, and it is a misuse of the appellate process to place before the appeal court submissions which were made at the trial after the judge has heard all the evidence^[24].

43.We are not satisfied that the judge’s findings of fact are wrong, let alone plainly wrong.  The judge was unpersuaded by the Wife’s submissions regarding the Family Arrangement, having fully considered them and rejected them for the cogent reasons he gave^[25].  Besides, as Mr Chan had pointed out, the judge’s dismissal of the Wife’s case on beneficial ownership was not made primarily by reference to his findings on the Family Arrangement.  The judge had made findings of fact in respect of each of the Disputed Properties including the circumstances in which the properties were transferred into the Husband’s name, how the properties were used and controlled, who had derived benefit from the properties, the circumstances in which the properties were sold, and how the proceeds of sale were deployed^[26]. The Wife’s submissions had simply not grappled with these detailed findings.

44.As for the reliance on appeal of various presumptions, there is nothing in this point.  As mentioned earlier, the judge had noted it was “common ground” that the preferred approach was to infer from the available evidence the Father’s intention at various times the properties were acquired, instead of relying on legal presumptions.  It was not necessary to resort to presumptions as the Father’s intention can be resolved by drawing proper inferences from the relevant and admissible evidence^[27].  The judge had considered the submissions regarding the presumption that the Father must have intended to give up his interest to carry out estate duty planning but rejected the arguments having considered the totality of the evidence and evaluated the same with “appropriate realism”^[28].

45.In face of the unassailable findings of fact, the Wife’s appeal must be dismissed.

C4. Conclusion and orders

46.We dismiss the Wife’s appeal against the order dismissing her section 17 application.

47.Mr Chan sought an order that the Wife should pay the costs of the interveners on an indemnity basis, on the ground that her appeal is hopeless and wasteful and should not have been pursued in light of the clear findings of fact of the judge.  Her case admittedly is a “needs” case and she does not begin to show how those needs would be assessed differently leading to a materially bigger award even if the impugned transactions for the Disputed Properties had been set aside.

48.Mr Todd urged this court to give directions for submissions on costs on the handing down of our judgment and for the question of costs to be dealt with on paper.

49.Having heard Mr Chan’s submissions on costs, we do not think it necessary to ask him to reduce his submissions in writing.  We direct the Wife to serve submissions on costs of her appeal relating to the section 17 application within 14 days of the handing down of this judgment, of not more than five pages.

50.We give leave to the interveners and the Husband to serve reply submissions within 14 days thereafter, not exceeding five pages in each instance. We will determine costs on paper.

D. THE ANCILLARY RELIEF APPLICATION

D1. The judgment below

51.Having dismissed the section 17 application, the judge made two further holdings regarding the Husband’s assets.  In respect of the Husband’s one-third interest in the Parents’ Home, he held that the value of this property should be discounted to reflect the Mother’s life interest^[29]. Further, he held that the Husband’s interest in the Trust should not be regarded as part of his assets for present purpose.  So his finding is that the Husband’s assets are limited to the assets not in dispute, with a value of about $48 million^[30].

52.The Husband’s needs are not an issue given the resources available to him.  As for the needs of the Wife, the two main issues are the duration for which she should be maintained and her accommodation needs^[31].

53.The judge found that the couple led a comfortable life, but they did not enjoy a high standard of living.  He rejected the monthly expenses of $140,000 for the Wife put forward by the expert on Duxbury calculations as unsupported by evidence, however generously her needs may be interpreted.  Taking a reasonably broad brush approach, he assessed her needs, generously interpreted, at $118,000 a month excluding accommodation^[32]. There is no serious challenge by the Wife of this figure on appeal.

54.The judge assessed the Wife’s earning capacity at $45,000 per month.  She had been out of work for about two months and received a job offer of $26,000, which was significantly less than what she was earning.  The judge did not think this job offer fairly reflected her earning capacity.  He believed that with her ability, qualifications and experience in a growing field, a suitable opportunity in the job market will arise and it can safely be assumed that she will be able to continue to earn at least $42,500 per month (being her last salary with the same employer for over 15 years), rounded up to $45,000 to take into consideration double pay at the end of the year^[33].

55.The net position on the Wife’s needs, excluding accommodation, as assessed above is therefore $73,000 a month.

56.The Wife relied on Duxbury calculations, based on her actuarially expected lifetime.  On the basis of monthly expenses at $140,000 less earnings of $42,500^[34], the capital sum she would require to meet her needs (excluding accommodation) for her life expectancy have been assessed by the single joint expert at $41 million (premised on “relatively high risk” investments with a higher rate of return) to $55 million (premised on “moderate risk” investments with a return that will exceed the average inflation rate) with an average capital sum of $48 million^[35].

57.The Husband proposed instead a lump sum to capitalise the Wife’s needs (excluding accommodation) for ten years, with no discount for accelerated receipt.  The approach of a capitalised lump sum was accepted by the judge, having considered the authorities which supported the proposition that the parties to a failed marriage should be encouraged to become self-sufficient, and that “the ultimate objective is to give each party an equal start on the road to independent living” (Miller v Miller [2006] 2 AC 618 at §144, per Baroness Hale of Richmond)^[36].  He quoted from the judgment of Charles J in G v G [2012] 2 FLR 48 at §136^[37]:

“What I take from this guidance on the approach to the statutory task is that the objective of achieving a fair result (assessed by reference to the words of the statute and the rationales for their application identified by the House of Lords):

(i) is not met by an approach that seeks to achieve a dependence for life (or until re‑marriage) for the payee spouse to fund a lifestyle equivalent to that enjoyed during the marriage (or parity if that level is not affordable for two households), but

(ii) is met by an approach that recognises that the aim is independence and self-sufficiency based on all the financial resources that are available to the parties. From that it follows that:

(iii) generally, the marital partnership does not survive as a basis for the sharing of future resources (whether earned or unearned). But, and they are important buts:

(a) the lifestyle enjoyed during the marriage sets a level or benchmark that is relevant to the assessment of the level of the independent lifestyles to be enjoyed by the parties,

(b) the length of the marriage is relevant to determining the period for which that level of lifestyle is to be enjoyed by the payee (so long as this is affordable by the payor), and so also, if there is to be a return to a lesser standard of living for the payee, the period over which that transition should take place,

(c) if the marriage is short, this supports the conclusion that the award should be directed to providing a transition over an appropriate period for the payee spouse to either a lower long term standard of living than that enjoyed during the marriage, or to one that is not contributed to by the other spouse,

(d) the marriage, and the choices made by the parties during it, may have generated needs or disadvantages in attaining and funding self- sufficient independence that (i) should be compensated, and (ii) make continuing dependence / provision fair,

(e)   the most common source of a continuing relationship-generated need or disadvantage is the birth of children and their care, …”

58.The judge noted that in the many cases cited to him, there is no guidance on the duration for which a spouse in circumstances similar to the present case should be provided for financially^[38].  He adopted the ten‑year period put forward by Mr Robert Pang SC, who appeared for the Husband below and on appeal^[39]. Having taken into account this was a ten-year marriage during which the Wife was free to pursue her further education and career, that she was aged 46, and there is no discount for accelerated receipt, the judge took the view that Mr Pang’s formula is “not altogether unreasonable”.  He rounded up the figure of $8,760,000 ($73,000 x 12 x 10) to $10 million and assessed that as the capitalised lump sum for the Wife’s needs excluding accommodation^[40].

59.As for accommodation needs, the Husband proposed $14 million as a reasonable sum that the Wife may require to either purchase or rent a property. Accepting Mr Pang’s submission, the judge agreed that the materials obtained by the Wife showed that armed with that amount of money, she will be able to purchase “a flat of roughly 2/3 the size of the former matrimonial home in the Mid-level”^[41]. The judge did not think that proposal was unfair^[42].

60.On the above basis, he awarded a lump sum payment of $24 million to the Wife, which is the equivalent of about half of what should be regarded as the Husband’s assets for the purpose of ancillary relief.

D2. The issues in the Wife’s appeal

61.There are three main issues in the Wife’s appeal:

(1)     if the Wife’s needs should be assessed on the basis of a Duxbury capital sum calculated on her actuarially expected lifetime;

(2)     if the capitalised lump sum of $10 million to cater for the Wife’s needs (excluding accommodation) is fair and appropriate in all the circumstances; and

(3)     if the lump sum of $14 million to meet the Wife’s accommodation needs is fair and appropriate in all the circumstances.

D3. If the needs should be assessed on the basis of Duxbury calculations

62.Mr Todd’s primary position was to seek a lump sum based on Duxbury calculations.  He extrapolated the following from the expert’s calculations.  The expert was instructed to work on the basis of the net need of the Wife at $97,500 a month (estimated expenses of $140,000, which the judge has rejected, less earnings of $42,500).  If the need is $118,000 (as assessed by the judge) less earnings of $45,000 (also as assessed by the judge), the net need is $73,000 (74.9% of the expert’s figure).  Applying the percentage of 74.9% to the average Duxbury capital sum of $48 million, this will give $35.952 million, which Mr Todd submitted should be the lump sum assessed for the Wife’s needs excluding accommodation.

63.Mr Todd contended that to capitalise ten years’ maintenance and financially support the Wife for ten years would leave the Wife in an even worse position than a periodical payment award – which would not be limited to ten years and remains potentially variable in the future. Furthermore, in ten years’ time, the wife would be 57 years old and much closer to retirement age.  The lump sum as assessed by the judge was calculated on the premise that the Wife would fully use up her monthly income to maintain herself ($118,000 less monthly income of $45,000 giving a net need of $73,000 and capitalised for ten years), and thus would not have been able to build up significant savings in the meantime.  In ten years’ time, the Wife would still have minimal or insignificant savings (just like the present), no financial support from the Husband and nearing retirement age with minimum retirement benefits.  She would be in a precarious predicament and would have to cut down substantially on her standard of living. In this kind of situation, fairness would require a capital sum to meet the needs of the Wife for the rest of her remaining life.  The award of $10 million (excluding accommodation) does not enable the Wife to accumulate sufficient savings for her retirement life.

64.Mr Pang submitted there is no reason why the Husband should be required to continue to provide for the Wife financially on a lifelong basis, on account of the following matters: this was not a long marriage; there is no child; the age of the Wife; her unaffected earning capacity; the need for her to establish her own life again after divorce.  He contended that the capitalization of the Wife’s needs for the next ten years – a duration equivalent to the length of the marriage – should be more than sufficient to enable her to re-establish her own life.

65.Mr Pang drew attention to the distinction that in the cases cited where a “joint lives” Duxbury calculation was adopted, there had been a child or children of the family^[43]. In the words of Holman J in Murphy v Murphy [2014] EWHC 2263 (Fam) at §35, “the fact of having children … changes everything”, in that the economic impact on the wife is likely to endure not only until the children leave school but for the rest of her life.  In G v G, supra (the parties were married for five years and had a young child) at §§175 to 176, Charles J conducted a hypothetical exercise to consider what the award would have been if the parties had not had a child.  On that hypothesis, it would have been likely that the wife would receive “a capital sum to meet or assist in meeting her housing needs” and “periodical payments over a term to enable her to adjust from the standard of living enjoyed during the marriage … to self-sufficiency”.

66.We think there is force in Mr Todd’s submissions, but the concerns he raised can be addressed suitably by making adjustments to the figure of $10 million assessed for the capitalised lump sum instead of doing away with the judge’s approach altogether.  We do not think the judge has erred in principle in the exercise of his discretion in refusing to assess the Wife’s needs on the basis of a Duxbury capital sum based on her life expectancy.  He has borne in mind the particular circumstances of this marriage and of the Wife and considered it appropriate to assess her needs on the basis that she should and would be able to make a transition from the standard of living enjoyed during the marriage to self-sufficiency and independent living.  It does not seem to us there is sufficient basis to interfere with the exercise of discretion of the judge in this respect.

D4. The capitalised lump sum for the Wife’s needs excluding accommodation

67.Mr Todd submitted that the failure to address the question of where the Wife will be when the ten-year term maintenance ends is a “critical failing” in the judge’s analysis.  The judge did not appear to have considered whether the Wife is supposed to lower her standard of living at a later date, and, if so, when and to what extent and whether the lower standards of living are sustainable on her future income or retirement benefits with what remains of the lump sum award.

68.He further criticised the judge of wrongly assessing the Wife’s earning capacity at a high level, that it can be safely assumed she will be able to continue to earn at least $42,500 a month^[44]. Her long term job working through the ranks with a single employer for 15 years had led to her gradually increased salary built up over the years, and a new job would involve a big step down not least in terms of income.  Her area of speciality had been in the medical industry for a long time and many jobs in marketing may require skills beyond her abilities.  It is not fair or reasonable to assume that she will continue to have the same earning capacity going forward, having been made redundant by her long term employer.  Furthermore, her future job security is likely to be much less stable and her future is likely to be marked by periods of unemployment, which will only become worse as time goes on.  And he criticised the judge’s subjective opinion about her remarriage prospects as lacking in evidential basis and make for uncomfortable reading if not deliberately discriminatory.

69.Counsel laid particular emphasis on the dicta of Charles J in G v G at §136 quoted earlier, that “the lifestyle enjoyed during the marriage sets a level or benchmark that is relevant to the assessment of the level of the independent lifestyles to be enjoyed by the parties”, that “the length of the marriage is relevant to determining the period for which that level of lifestyle is to be enjoyed by the payee (so long as this is affordable by the payor)”, and that “if there is to be a return to a lesser standard of living for the payee, the period over which that transition should take place”.

70.We are inclined to agree with much of the above criticisms of Mr Todd.

71.This is a marriage of moderate length.  The Wife had not made significant savings in the past in a situation generated by lifestyle choices during the marriage and the way in which the parties chose to live their life together.  With the expectation of the wealth level of the Husband and his family, she would not have to worry about financial and livelihood matters, as apparently recognised by the judge^[45].  The Husband’s needs are fully catered for and he will have no financial worries in the foreseeable future.  On the termination of this marital partnership, the aim is self-sufficiency and to give each party an equal start on the road to independent living, having regard to their own talents and attributes, and their obligations and economic disadvantages flowing from the marriage (Miller v Miller at §144; H v H [2007] 2 FLR 548 at §96(ii)(c), per Charles J). The financial provision should enable “a gentle transition” from the standard of living enjoyed during the marriage to the standard the Wife could expect as a self-sufficient woman (Miller v Miller at §158, per Baroness Hale; H v H at §96(ii)(e)).

72.In EJB v CJB [2011] 5 HKLRD 508, which Mr Pang submitted was the closest to the present case, the court was concerned with a childless marriage of six and a half years in which the parties worked as insurance underwriters with the wife in her late thirties and was unemployed at the time of hearing.  The bulk of the matrimonial estate was made up of two properties, one in each party’s name, and the husband’s pensions. Both parties desired a clean break solution.  With the objectives of re-integrating the wife into the workforce and providing for her future security, the judge considered that the mortgage of $2.5 million over the wife’s property should be discharged, thereby providing her with rental income from a mortgage-free property.  The judge took the view it would reasonably take three years for the wife to be re-integrated into the workforce and she would require $900,000 a year in addition to her rental income.  He directed the husband’s property be sold with 71.2% of the net proceeds distributed to the wife (giving a lump sum of $5.23 million) with the result that she was awarded approximately 39% of the matrimonial estate, achieving insofar as possible some balance in the distribution of the estate so that both parties would have liquid assets readily available together with assets that would provide some future security.

73.The Court of Appeal dismissed the wife’s appeal and the husband’s cross-appeal.  The two fundamental needs of the wife as the judge had recognised were prudent and rational.  First, a capital sum to enable her to be able to live to an appropriate standard while she reclaimed her career and became independent again.  Second, a capital sum to provide her with some security for the future in that she would be deprived of being able to share in the husband’s future pensions (at §§39 to 41, 114 to 115).

74.Mr Pang argued that a cushion had already been built into the lump sum award when the judge rounded up the figure from ten years’ capitalisation of $8,760,000 to $10 million.  He again emphasised the factor of accelerated payment and submitted that ten years’ capitalisation for a “gentle transition” should not be regarded as inappropriate in all the circumstances.

75.We do not think the cushion or buffer of $1,240,000 (10.5 months of the Wife’s monthly needs of $118,000) is sufficient to meet the two manifest needs of the Wife, similar to those of the wife in EJB v CJB.  As in that case, the Wife would need time to reclaim her career.  This could not be accomplished overnight.  During this time, she should have available to her a capital sum to enable her to live to a standard insofar as possible commensurate to the standard that the parties had enjoyed during the course of the marriage.  She would also need a capital sum to ensure that she had a capital asset that would provide a future stream of income to give her a measure of financial security.

76.The lump sum award of $10 million was largely to meet one particular aspect of the needs of the Wife in that the estimated monthly deficit of $73,000 would be provided for over a ten-year period to enable her to make the transition to self-sufficiency.  The two other needs of the Wife as mentioned above, both requiring a capital sum, have not been met. To meet those two other needs, we think it appropriate to make an award of an additional sum of $5 million (equivalent to about 3.5 years of the Wife’s monthly needs of $118,000), raising the figure for the capitalised lump sum (excluding accommodation) from $10 million to $15 million.

77.Mr Pang raised the question of the Husband’s affordability of any increased payment.  He had not apparently raised any issue of affordability in the court below.  We will come back to this question.

D5. The lump sum for the Wife’s accommodation needs

78.As mentioned above, in awarding the lump sum of $14 million for the housing needs, the judge had accepted Mr Pang’s submission that on the materials obtained by the Wife, she will be able to purchase a flat of roughly two-thirds the size of the former matrimonial home in the Mid‑levels.

79.We are not prepared to disturb the finding that appropriate accommodation for the Wife would be a property in the Mid-levels of approximately two-thirds the size of the former matrimonial home.  The net area of the former matrimonial home is 1,223 sq ft, so two-thirds of that would be 815 sq ft.  The circumstances of the parties here are far removed from those in AVT v VNT (Financial provision: short marriage and non-matrimonial assets) [2015] HKFLR 385, a case relied on by Mr Pang. 

80.We have examined the materials obtained by the Wife that were placed before the judge.  They were information obtained from the website of an estate agency sent by her solicitors to the Husband’s solicitors in May 2018 with a covering letter and a schedule prepared by her solicitors.  There were a total of nine properties in Mid-levels west. The size of the properties ranged from saleable areas of 452 sq ft to 779 sq ft. The property with the largest saleable area of 779 sq ft (it had the highest utility ratio of 90%) was in a building of 40 years old with a selling price of $14 million.  The property next in saleable area of 741 sq ft (with a utility ratio of 71%) was in an even older building of 53 years, also with a selling price of $14 million. 

81.We think it may be too superficial to take just one or two properties and then conclude that $14 million should be sufficient to purchase a flat of about 800 sq ft in the Mid-levels west.  We worked out the price per sq ft for the nine properties^[46]. On the basis of the average or mean price per sq ft of $23,127, a property of 815 sq ft would cost $18,848,505.  On the basis of the median price per sq ft of $21,527, a property of 815 sq ft would cost $17,544,505.  Taking the average of the two, we think a more realistic amount to provide for the purchase of a property of this size would be $18 million and this should be substituted for the award of $14 million.  We note also that two-thirds of the agreed value of the former matrimonial home would come up to $18.6 million.

82.The total lump sum award would therefore be increased from $24 million to $33 million.

D6. The Husband’s interest in the Trust

83.We come back to the question of the Husband’s affordability of the lump sum payment.

84.As mentioned earlier, the undisputed assets of the Husband have a net value of $48 million, made up largely of his one-third interest in property-holding companies and his one-third interest in the Parents’ Home of about $14.48 million.  He used to receive a monthly living subsidy from the Mother and the subsidy ceased only after he obtained a distribution of $6.8 million from the Estate in January 2016.  His needs are fully catered for and he will have no financial worries in the foreseeable future.

85.As for his ¼ interest in the Trust, the undisputed value of this is $55.7 million.  The judge held that his interest in the discretionary trust should not be regarded as part of his assets for present purpose.

86.We do not think it necessary to take into account his interest in the Trust, as we are satisfied that the lump sum payment we propose is within the Husband’s affordability without causing unfairness to him.  If it had been necessary to do so, it seems to us there may well be good grounds in holding that his interest in the Trust, at least in part, should be regarded as available financial resource for the purpose of ancillary relief.

87.Under the test formulated by Wilson LJ in Charman v Charman [2006] 1 WLR 1053 at §12, the central question is whether, if the husband were to request the trustee to advance the whole or part of the capital of the trust to him, the trustee would be likely to do so.  In confirming this test in Kan Lai Kwan v Poon Lok To Otto, Ribeiro PJ at §28 also approved this helpful elaboration of Lewison J in Whaley v Whaley [2012] 1 FLR 735 at §113:

“… a discretionary beneficiary has no proprietary interest in the fund. But under section 25 [of the Matrimonial Causes Act 1973] the court looks at resources; not just at ownership. Thus whether a beneficiary under a discretionary trust has a proprietary interest is not relevant. The resource must be one that is “likely” to be available. This is the origin of the “likelihood” test. No judge can make a positive finding about the future: the best that can be done is to assess likelihood. What is relevant is the likelihood of the trust fund or part of it being made available to him, either by income or capital distribution. If the husband were to ask the trustees to advance him capital, would the trustees be likely to do so: Charman v Charman [2006] 1 WLR 1053; A v A [2007] 2 FLR 467, 499? The question is not one of control of resources: it is one of access to them.”

88.On 13 February 2018, the Husband’s solicitors wrote to the trustee HSBC International Trustee Ltd informing them that they acted for the Husband who is the respondent in a divorce suit and asking for information of what is the Husband’s entitlement in the Trust and when will his entitlement be available for distribution.  A trust relationship officer replied as the administrative assistant of the trustee on 28 February 2018 stating that the Husband is one of the discretionary objects of the Trust and as such has no entitlement legal or otherwise to the Trust fund, and as he has no entitlement, the question of when his entitlement will be available for distribution was “not applicable”.

89.The Husband’s solicitors wrote again on 12 March 2018 making reference to clause 3 of the Confidential Memorandum which recorded the Father’s recommendations that upon his death, the trustee would consider holding and distributing the Trust Fund as to both income and capital for the benefit of the Mother and their three children absolutely in equal shares.  The solicitors asked the trustee that in light of the above if the Husband were to request the trustee to advance to him the whole or part of the capital or income of the Trust fund, whether the trustee acting in accordance with its duties and having regard to all relevant considerations including the settlor’s recommendations would be likely to do so.  The solicitors also asked the trustee to explain why if the trustee should answer that question in the negative.

90.In the reply which came two days later, the trust relationship officer simply stated that “the exercise of any of the Trustee’s powers of appointment, advancement or maintenance is entirely at the discretion of the Trustee and any wishes expressed by the settlor are not binding on the Trustee.”

91.The stonewalling replies of the trust relationship officer were most unhelpful.  In merely stating the strict legal position, it does not appear that the trustee had given proper or careful consideration whether it would exercise its power of advancement and distribution if requested by the Husband.  We do not know (instead of merely stating that the Husband is the respondent in a divorce suit) whether the trustee would be more forthcoming if the Husband’s solicitors had explained fully that there are good reasons for requesting the trustee to make an advancement, and that the requested information was required to assist the court to assess the likelihood of part of the Trust fund (and approximately how much) being made available to the Husband either by income or capital distribution, for the purpose of providing for the ancillary relief of the Wife.

92.The judge mentioned that the trustee is given very wide power under the terms of the Trust and that the Confidential Memorandum was expressly stated to be non-binding.  He further stated that the trustee is empowered to add to the beneficiaries.  He noted also the distinction drawn between two types of trust by Charles J in G v G at §91: a trust created by a party to the marriage and whose trustees have been acting or can be expected to act at the direction of the wishes of that party; and a trust created by a non-party under which a spouse is one of the beneficiaries and which is not a nuptial settlement.  Charles J mentioned that in the second type of trust, the common approach is that the trust interests of the spouse were not resources that should be taken into account in applying the sharing rationale.

93.Even though the Trust would belong to the second type, applying the Charman test the court would still need to enquire and assess the likelihood if the Trust fund would be available if the Husband had requested an advancement.  We see no reason why the trustee would not give effect to the clear wishes of the settlor in the Confidential Memorandum in the exercise of its discretionary power in good faith, and there is nothing in the evidence to suggest that if the Husband had requested for distribution this would be regarded as unreasonable by the other potential beneficiaries, such as the Mother and the Brother.  As for the power to add to the eligible objects of benefaction, we think it unlikely that this would affect the Husband’s ¼ share, as the Confidential Memorandum had stated the settlor’s wishes that the Trust fund was to be held and distributed upon his death for the benefit of the four individuals mentioned absolutely in equal shares, and it is unlikely that any one to be added would be unrelated to any of the four existing potential beneficiaries.  Should any eligible beneficiaries be added by the trustee, the distributions to be made to those added should come out of the quarter share of that particular individual on whose account eligible beneficiaries were added.

94.If it had been necessary to assess the likelihood of the trustee advancing in part the Trust fund to the Husband, we are inclined to think that the trustee would, on the balance of probabilities, be likely to do so.

D7. Conclusion and orders

95.For the above reasons, we allow the Wife’s appeal against the judgment in her application for ancillary relief.  We set aside the order for lump sum payment of $24 million and replace this with a lump sum payment of $33 million with $3.44 million deducted therefrom being an amount already paid by the Husband to the Wife as her legal costs provision.  We do not disturb the costs order nisi in the court below.

96.As for the time for payment of the lump sum ordered by this court, if no agreement is reached between the parties within 14 days of the handing down of this judgment, we remit this matter to be resolved by the judge who would consider this with the pending application to vary his costs order nisi.

97.For the costs of this appeal, we have not heard submissions but we see no reason why costs should not follow the event.  We direct the Husband to serve submissions on the costs of this appeal within 14 days of the handing down of this judgment, and the Wife is to serve submissions in reply within 14 days thereafter.  Submissions are not to exceed five pages.

Mr Richard Todd and Mr Jeremy S K Chan, instructed by Withers, for the Petitioner (Appellant)

Mr Robert Pang SC and Mr Eugene Yim, instructed by Chaine Chow & Barbara Hung, for the Respondent (Respondent)

Mr Abraham Chan SC and Ms Bonnie Y K Cheng, instructed by Sit, Fung, Kwong & Shum, for the 1^st to 3^rd Interveners (Respondents)