Ccyl v. Ccsr
Read the full judgment text of FCMC 15718/2018 on BabelCite. This Family Court judgment was delivered on 10 October 2019 before His Honour Judge I Wong.
Matrimonial Causes – Maintenance Pending Suit – Bankruptcy Petition – Full and Frank Disclosure – Reasonableness of Maintenance – Whether husband's self-bankruptcy was an attempt to defeat wife's claims – No; evidence showed genuine financial trouble – Whether robust assumptions warranted for non-disclosure – No; balancing exercise declined – Whether wife's claimed MPS reasonable – No; figures extravagant – Application dismissed; Respondent ordered to pay $35,000 monthly interim maintenance; Petitioner to pay costs
Legal issues: Whether husband's self-bankruptcy was an attempt to defeat wife's claims · Whether robust assumptions should be made against husband's ability to pay due to non-disclosure · Whether wife's claimed maintenance pending suit figures are reasonable
Outcome: Application for maintenance pending suit dismissed; interim maintenance increased to $35,000 per month; Petitioner to pay Respondent's costs.
Cites 3 cases
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FCMC 15718 / 2018 [2019] HKFC 261 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 15718 OF 2018 ----------------------------
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__________________ JUDGMENT __________________ The Application 1.By a summons dated 21 February 2019, the petitioner wife applies for maintenance pending suit (“MPS”) for herself and for the child of the family (a 1 ½ year old girl) together with legal costs provision against the respondent husband. The wife is seeking MPS at the rate of $200,000 and legal costs provision of $115,000 per month. Background 2.Both parties are young, at the age of 29 only. They were married in June 2014 and a daughter, the only child of the family, was born in February 2018. 3.The wife has been working as a senior teacher (redacted) earning around $26,700 per month. 4.During the relationship, the husband was an entrepreneur in the textile / garment trading business. He owned a Hong Kong company “H Limited” which in turn owned 70% of the shareholding in “TT Limited”, a company incorporated in Bangladesh and operated a textile factory there. 5.In June 2016, the parties purchased, as joint tenants, a pre-construction unit on Robinson Road, Mid-Levels (“the Robinson Road Property”) for $30,418,000 with a mortgage loan of $27,376,000. For the reason that the parties had failed to pay the mortgage payments, the mortgagee obtained a monetary judgment on 3 May 2019 against the parties in the sum of $28,500,000 plus costs. Notwithstanding the judgment, I am informed that the Robinson Road Property has a net equity of around $15,000,000. 6.Sadly, the marriage was a short-lived one. In around August 2018, the parties separated. What happened was that on August 2018 the daughter had a yeast infection and was admitted to a private hospital. The daughter was discharged from the hospital on 23 August 2018 and on the same day, the wife and the daughter moved to live with her parents. Subsequently, the husband also moved out of the former matrimonial home, a leased apartment in Kau To Shan, Shatin, upon the surrender of the lease. 7.On 12 December 2018 the wife petitioned for divorce on the grounds of the husband’s unreasonable behaviour. The Petition is met with an Answer and a Cross-Petition. So far the main suit is still pending as a defended one. 8.At about the same time on 6 December 2018, the husband petitioned for his bankruptcy. The bankruptcy petition has been opposed by the wife and her father who claims to be a creditor of the husband. As of now, the bankruptcy proceedings are still pending. 9.On 25 February 2019, by consent, the court granted the care and control of the daughter to the wife with interim access to the husband. The custody issue and the long-term access arrangement are yet to be determined in the Child Dispute Resolution hearing. On the same date, upon the husband’s concession, the court gave an order that the husband should pay a monthly sum of $20,000 to the wife as the interim periodical payment for the daughter, the first payment to be made on 1 March 2019 until further order of the court. The Present Situation of the Parties 10.The wife and the daughter continue to live with her parents in an apartment at the Riverpark, Shatin. She is still working as a senior teacher and the daughter has started schooling. 11.The husband has moved back to live with his parents. The Wife’s Case 12.The wife has two major grounds. 13.The first is that the husband’s self-petition for bankruptcy was a cynical move designed to attempt to defeat the wife’s financial claims against him. 14.The second and a relating ground is that the husband alleges impecuniosity whilst failing to make a full and frank disclosure of his true financial position. Mr Chan, on behalf of the wife, argued that the husband’s financial disclosure is contrived and unreal. His ‘wait and see’ approach with the hope that the wife might fail to ask the right question is a tactic to be deplored: see L v L [2006] 1 HKFLR 121 at [197] - [198]. 15.There is also a minor point. It has been emphasized by Mr Chan that the husband comes from a wealthy background – he and his family have business in Hong Kong, Mainland China and elsewhere. The husband’s family is able and willing to provide financial support to not only him, but also his own family. Mr Chan drew support from the fact that the $20,000 interim periodical payments were paid by the husband’s family rather than by himself; and on the husband’s own evidence, his mother has already provided funding to him in the tune of $3,000,000. The Husband’s Case 16.The husband opposes the wife’s application. Mr Cheung, acting on behalf of the husband, has advanced 6 grounds in resisting the application. For the reason that is evident below, I only need to set out these grounds briefly. They are: 17.First, the husband is impecunious and has been relying on the financial support of his mother. 18.Second, contrary to the wife’s allegations, there has been no intentional non-disclosure of assets on the part of the husband. 19.Third, the wife has other financial resources to deploy. 20.Fourth, the wife’s proposed figures for MPS are extravagant and unnecessary. 21.Fifth, the wife’s proposed figures for legal costs provision are extravagant and unnecessary. 22.Sixth, the fact that the wife’s application for legal aid was rejected speaks volume of the wife’s case. The Legal Principles 23.Under section 3 of the Matrimonial Proceedings and Property Ordinance, Cap. 192, the court may order either party to the marriage to make to the other such periodical payments for his or her maintenance and for such term, being a term beginning not earlier than the date of presentation of the petition or the making of the application and ending on the date of the determination of the suit, as the court thinks reasonable. 24.The Court of Appeal in HJFG v. KCY [2012] 1 HKLRD 95 summarised the established principles,
25.In connection with the point made by the Court of Appeal in [37iv] of HJFG v. KCY, Rayden and Jackson on Relationship Breakdown, Finances and Children commented as follows,
26.Guided by the above principles, I now turn to the Application. The Husband’s Self-Bankruptcy Petition is an Attempt to defeat the Wife’s Claim 27.In her affirmation, the wife recounted the family’s standard of living during the relationship. The former matrimonial home was a spacious 1,013 ft2, with 3 bedrooms, 2 bathrooms, a spacious living room, a dining room that could fit a dining table for eight, a kitchen and a domestic helper’s room. The family had the use of a Centurion American Express Black Card, flew business class and stayed in 5-star luxury hotels. They averaged 2 short haul and 1 long haul holidays per year. On special occasions, the husband often arranged luxurious dinners at famous and expensive restaurants. There did not appear to be limits as to how much they spent, and they often purchased luxurious items. However, at about the same time when the wife commenced the divorce proceedings, the husband petitioned for his bankruptcy. 28.The husband fairly accepted that the family enjoyed a relatively high standard of living. The family was able to do so because at that time his business was performing well but it is not the case now. 29.The husband explained in his affirmation that during the relationship his company, the H Limited, had to rely on the banking facilities provided by his bank, HSBC. Since the company was freshly established back then, he was required by HSBC to act as a guarantor for the banking facilities. Since around March 2018, he was in need of restructuring the business as the same was badly hit due to the collapse of a major customer, namely, “NW Holdings Limited” which had filed a Chapter 11 bankruptcy protection with the US Court. Consequently, since around mid-2018, his business had been collapsing. The factory in Bangladesh had been seized by the Bangladesh government and forced sold for repayment of outstanding wages owed to the employees there. His factory in Mainland China was also facing litigation for owing money to suppliers and wages. It was due to this dire financial situation that he failed to keep up with the mortgage payments of the Robinson Road Property, resulting in judgment being entered by the mortgagee. He also had to move out of the former matrimonial home because he was no longer able to afford the monthly rentals, while at that time he did hope it would be a short-term arrangement. The husband said the wife was well aware of his financial problems at the time of moving out. 30.It was because of these financial difficulties that the husband filed a bankruptcy petition in December 2018. Discussion 31.It is not in dispute that during the relationship the husband was the main breadwinner of the household. This is illustrated by the fact that the wife’ income was only $26,000 odd, whereas the rentals of the former matrimonial home was already $32,000 per month. 32.As referred to in [25], in the absence of oral evidence, it would be unusual for the court on an application of MPS to be in a positon to make findings of fact on whether or not the husband’s self-bankruptcy is an attempt to defeat the wife’s ancillary relief claim. This does not, however, mean that the court could not come to any view on this issue for the purpose of the present application. It seems to me clear that the question is whether or not there are evidence that the husband’s case as to what happened to him is believable. I believe there are and the same can be found in the wife’s pleadings. 33.At the substantive hearing, I drew counsel’s attention to the wife’s Petition for divorce and her Statement as to Arrangement for the Child, both of which have not been included in the hearing bundles. 34.The wife petitions for divorce on the ground of the husband’s unreasonable behaviour. In para 9(d) of her particulars of unreasonable behaviour, she pleads,
35.In para 1.3 of the wife’s Statement as to Arrangement for the Child she said,
36.On the future access arrangement, the wife said in Para (iv) of the Statement,
37.It turned out that the husband fled to the UK for his safety, as a result of which the petition for divorce and the relating documents had to be served on him by a Process Server in London. This can be seen from the Affirmation of Service dated 4 January 2019 filed on behalf of the wife. 38.It can be seen there are clear evidence from the wife that the husband was in such a deep financial trouble in the latter part of 2018 that he had to surrender the lease of the former matrimonial home and left Hong Kong for his safety. As mentioned in [6] above, around that time on 20 August 2018, the daughter had a yeast infection and was admitted to a private hospital. She was discharged from the hospital on 23 August 2018 with the wife’s father paying the hospital bill. The wife did not care to explain why it was not the husband who should have paid the bill. She only mentioned that the husband had promised he would pay her father back but he never did. It is also telling that the wife chose not to return to the former matrimonial home for the daughter’s recuperation but chose to move to live with her parents. I gather it must also have been around that time that the husband failed to keep up with the mortgage payments of the Robinson Road Property. In the context of what had been happening at that time the only inference that can be drawn is the husband did not have the money to keep the family afloat. 39.There is a letter of demand dated 24 January 2019 issued by HSBC in support of the husband’s claim that he was being claimed for $7,394,000. The bankruptcy petition was taken out on 6 December 2018; so apparently about $7,394,000 was owed to the bank when the husband took out his petition. He was liable to pay the sum because he had given a guarantee in favour of the bank in September 2014 for securing some banking facilities for use by his H Limited. This liability is one of debts that the husband has disclosed in his Statement of Affairs in support of his bankruptcy. Another debt is said to be in the sum of $350,000, being a personal loan advanced by the UA Finance. There are also some documentary evidence in support of the husband that he has lost control of his factory in Bangladesh. 40.All these evidence are consistent with what have been pleaded by the wife as referred to above and are in support of the husband’s assertion that his business was in great trouble during that time. I believe the wife was aware of all these matters. The wife did not say in her pleadings that all those matters regarding loan sharks, threatening messages or fleeing to the UK were anything other than real or that the same were orchestrated by the husband. Mr Chan argued that the wife did not know whether or not the debts had been repaid. I accept that but it is striking to note that the wife has seen fit not to have raised this question in her supporting affirmations nor in her Questionnaire. On that view, I wonder how the wife could have said that the self-bankruptcy is a scheme calculated to defeat her claims. Where relevant, this issue, ie whether or not the husband was and is impecunious, would have to be adjudicated in the trial of the ancillary relief but for the purpose of the present application, on the above analysis, I am not satisfied the husband’s self-petition for bankruptcy was an attempt to defeat the wife’s claims. In coming to this conclusion, I have taken note of the forceful arguments advanced by Mr Chan regarding the insufficiency of the husband’s disclosure of his financial situation which I will deal with below. The Husband’s Failure to give a Full and Frank Disclosure 41.Mr Chan went to great lengths to set out the husband’s non-disclosures of his financial situation. He invited the court to consider not only the husband’s financial disclosure in these divorce proceedings but also the documents in support of his bankruptcy proceedings. The following are some of the examples. 42.The husband failed to comply with the basic disclosure requirement by disclosing bank statements for the past 12 months in his Form E. Instead, he disclosed not more than 3 months of his bank statements. It was after being specifically requested that the husband then disclosed further statements for one of his two HSBC accounts but still he failed to disclose statements for his savings account. 43.The husband failed to disclose any trusteeship / nomineeship in his Form E and only disclosed his alleged trusteeship / nomineeship in respect of a brokerage account that he said has been holding for his mother when so questioned by the wife. 44.In the Form E, the husband disclosed directorship in 2 companies only - the H Limited and one CF Limited. It was only when being asked about it in the wife’s Questionnaire that the husband disclosed another company. The search conducted by the wife revealed that he was also a director of YFS Limited but had resigned in late 2018. 45.The husband claimed not to have any life insurance policy but it turns out that according to the audited statement of H Limited as at June 2017, the husband had a life insurance in the amount of $1,542,000. 46.The husband claimed his H Limited has a ‘nil’ value but according to the 2017 audited statements, this company had net profits of $1,100,680 for the year ended 30 June 2017 and net assets of $3,453,900. That was the latest account. The husband failed to provide any up-to-date management accounts. 47.Mr Chan also complained that there are no documentary evidence in support of the husband’s assertion that the Bangladesh government had seized the factory. The evidence that the husband produced are on the transfer of his share holdings in TT Limited for BDT610,000 (about $56,000) and resigned as a director in September 2017. To this, Mr Cheung responded that it was difficult for the husband to obtain the relevant documents from the courts of Bangladesh. 48.There are discrepancies between what have been disclosed in his Form E and those in the bankruptcy proceedings. The husband’s Form E disclosed his ownership in H Limited and CF Limited only. Upon being questioned by the wife, the husband acknowledged he also owns NA Limited, GU Textile Limited and RU company. This is different from those in the bankruptcy proceedings where he said he only signed documents on behalf of NA Limited as “authorised signatory”. It has also been emphasized by Mr Chan that the husband did not mention his interest in PV Limited, a company incorporated in Seychelles. The husband has been receiving monies from this company, such as $15,000 on 29 June 2018, $4,600 between 14 to 18 September 2018, $10,000 on 23 November 2018. 49.The husband stated in his Form E, his Statement of Affairs and Amended Statement of Affairs in the bankruptcy proceedings that he is unemployed but he informed the social investigation officer that he earns $8,000 per month. In his Answers to the wife’s Questionnaire, he said he works as a freelance consultant on commission basis for a company trading fabrics and garments. 50.The husband stated in the bankruptcy proceedings that his salary before income tax in the past 12 months was $240,000 but in his Answers to the wife’s Questionnaire, he admitted he was entitled to director’s housing allowance with electricity, water and gas paid by H Limited. He drew at least $10,000 from H Limited on 23 November 2018 for his daily expenses. 51.The statements for the husband’s HSBC current account reveal that he transferred a total sum of $450,000 to his mother’s account in November 2018. He said in his Answers that the monies were ‘given to his mother’. It has been stressed by Mr Chan that was about the time when the husband had stopped paying anything to the wife. 52.In addition, it is unclear as to whether the Centurion American Express Black Card that allowed the family a lavish life-style during the relationship is the supplementary card that the husband’s mother has now cancelled. Mr Cheung said it is but the assertion is unsupported by any evidence. 53.Mr Chan criticised that the disclosure in the husband’s bankruptcy proceedings and in the divorce proceedings are not only inconsistent and contradictory, but also wholly inadequate. He urged the court to make ‘robust assumptions’ against the husband about his ability to pay. 54.In response, Mr Cheung submitted that putting the wife’s case at its highest, it can only be said that there was innocent oversight on the party of the husband, which has already been honestly corrected in his Answers. Discussion 55.The wife has meticulously conducted an inch-by-inch search on the husband’s disclosure, leaving no stone unturned. She is essentially putting the husband to strict proof of all of his assertions. By way of illustration, questions on a sum as small as $1,000 insurance premia were asked of and form part of the non-disclosure complaints. That said, Mr Chan agreed that the court is not required to conduct a forensic examination of the disclosure exercise at this stage. All that is required is a broad brush approach. 56.As said above, Mr Cheung properly acknowledged that the disclosure given by the husband was not satisfactory. I believe whether or not it was an innocent oversight is quite beside the point. As I see it, this is a point rightly conceded since even if Mr Cheung did not do so, I would still hold that the husband’s level of disclosure is far from satisfactory. The ultimate question is whether or not the court should make ‘robust assumptions’ against the husband’s ability to pay. 57.Even with all the imperfections and deficiencies of his disclosure, it does not necessarily mean that the court should exercise its discretion to make ‘robust assumptions’ against the husband of this case – after all, the facts of every case are different. This is a balancing exercise taking the extent and nature of the non-disclosure into consideration on the one hand and the husband’s alleged “sea-change” in his financial situation on the other. 58.In considering whether the court should exercise its discretion to make ‘robust assumptions’ against the husband, I believe it would be unhelpful to just consider how long the list of compliant is. The husband accepted that previously the family had enjoyed a high standard of living. That was made possible because of his well-performed business but the situation started to change in about 2018. The extent and the nature of the husband’s non-disclosure therefore should be seen in this light for the purpose of the present case. 59.In my deliberation, I do take note of the fact that apparently there is a bank account that the husband has not disclosed and from that account 2 sums totalling $603,000 were deposited into his HSBC savings account on 6 and 7 November 2018. In response, Mr Cheung explained that the monies were loans from the husband’s mother but there is no evidence in support of the assertion. It is unsatisfactory as Mr Cheung was essentially giving evidence from the Bar table. That being said, I do not consider the husband should take up the blame entirely. The relevant transactions were already shown on the statements of the husband’s saving account with HSBC that had been disclosed to the wife as part of the annexures to his Form E as early as on 19 February 2019 but for some reasons the wife did not raise these matters in her Questionnaire. 60.I also take note of the fact that the husband admitted that he had given a total of $450,000 to his mother in November 2018: see [51] above; that was the time when the husband is said to have stopped paying any money to the wife. 61.Hence, apparently there were some transactions between the husband and his mother at the relevant time. In the context of this particular case, taking the above money-in ($603,000) and money-out ($450,000) together and considering the high standard of living as alleged by the wife, it appears to me that the sums involved are not that substantial. The sums that the husband admitted to have received from H Limited and PV Limited may also be seen in this light. I am conscious that on one view these transactions may well be just a slap shot of the reality. On another view, it can be said that these are all we have after a scrupulous exercise on the part of the wife. Whatever way it is these transactions would have to be investigated into at the ancillary relief trial. 62.With all the non-disclosures in mind, I consider the wife’s own evidence that lends support to the husband’s assertion regarding the downturn of his business must carry weight in the balancing exercise. On the above analysis, weighting all the matters relating to the husband’s alleged non-disclosure and those pertaining to the alleged change in his financial situation, I decline to make ‘robust assumptions’ against the husband about his ability to pay. The Husband’s Family 63.I now turn to the final point relied upon by Mr Chan. As said, it has been emphasized by Mr Chan that the husband comes from a wealthy background; his family is able and willing to provide financial support to not only him, but also his own family. 64.On the wife’s supporting affirmations, it is clear that she is not putting forward a case of third party financial assistance on which guidance has been given by the Court of Final Appeal in KEWS v NCHC [2013] 2 HKLRD 314. At the substantive hearing, Mr Chan also confirmed it was because of the husband’s business that the family was able to enjoy a high standard of living during the relationship. It is true that according to the husband it is only with the support of his family that he has been able to pay the interim MPS of $20,000 per month. Yet there is not a shred of evidence that the husband’s family is willing to support the wife and the daughter at whatever level demanded by the wife, not to mention the legal costs provision applied for. The evidence before me is that the husband’s family is willing to support at the level offered by the husband. The Wife’s Financial Needs 65.With the conclusions that I have come to it is apparent that I only need to deal with this issue briefly. 66.I agree with Mr Cheung that the wife’s proposed figures for MPS both for herself and the daughter are extravagant and unnecessary. Looking at the figures alone, she said in her supporting affirmation she needs $291,092.80 per month, inclusive of legal costs provision of $115,000; and the daughter needs $40,092. Thus, she needs a total of $331,184.80. Leaving the legal costs aside, it would mean she needs $216,184.80 on a monthly basis. I am aware that the wife said she needs to move out to a separate accommodation and so there is a rental of $35,000. Yet, on any view, this is an extravagant amount. The wife said in her affirmation that the husband made “at least HK$80,000+ per month during our marriage, including the director’s fees that he receives. In addition to this, if the family had any extra expenses, his companies would cover it with no questions asked”. Thus, even on her own case, it is doubtful as to whether the family could have afforded as much as $216,184.60 per month during the good days. 67.When it comes to the particular items, again I agree with Mr Cheung that mobile expense of $1,300, landline expense of $500 and holiday expense of $58,333 (for her alone) are, by way of examples, extravagant if not grossly inflated. The wife should understand that this litigation tactic of inflating items would meet with the disapproval of the court. Conclusion 68.For the reasons aforesaid, the wife’s application must be dismissed; and I so order. 69.The husband informed the court, via his counsel, that with the support of his family, he is able to pay an additional sum of $15,000 per month on the top of the current $20,000; making a total of $35,000. On that basis, I give an order that the respondent shall pay $35,000 to the petitioner as the interim maintenance for the child of the family, the 1st payment to be made on or before 1 November 2019 and thereafter on the 1st day of each succeeding month until further order of the court. Costs 70.Since the wife has failed in her application, she should bear the costs of it. I give an order, by way of an order nisi, that the petitioner do pay the respondent the costs of her application, including all costs reserved, and with counsel certificate, to be taxed if not agreed.
Mr Jeremy Chan, instructed by Withers, Solicitors, appeared for the Petitioner Mr Tommy Cheung, instructed by Li, Kwok & Law, Solicitors, appeared for the Respondent | ||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under FCMC 15718/2018