Tcp v. Kls
Read the full judgment text of FCMC 9304/2015 on BabelCite. This Family Court judgment was delivered on 23 March 2020 before His Honour Judge I Wong.
Matrimonial law – Ancillary relief – Non-disclosure – Adverse inferences – Hidden assets – Child maintenance – Equal division – District Court – TCP v KLS – Parties failed full and frank disclosure regarding proceeds of property sales – Court added back funds to matrimonial pot – Total assets HK$12,915,900 – Equal division ordered – Wife to pay Husband lump sum $293,100 – Husband to pay child maintenance $30,800 per month – Interim maintenance discharged – No order as to costs
Legal issues: Non-disclosure and adverse inferences · Quantification of hidden assets · Child maintenance assessment · Division of matrimonial assets
Outcome: Ancillary relief granted; matrimonial assets divided equally; child maintenance ordered; interim maintenance discharged; no order as to costs.
Cited by 15 cases · Cites 4 cases
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FCMC 9304/2015 & FCMC 11007/2014 (Consolidated) [2020] HKFC 67 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 9304 OF 2015 ----------------------------
--------------------------- IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 11007 OF 2014 ----------------------------
--------------------------- (Consolidated by the Order of Deputy District Judge D. CHEUNG dated 29 March 2017)
__________________ J U D G M E N T (Ancillary Relief) __________________ 1.This is a trial on ancillary relief upon the divorce of the parties. 2.The major issue in dispute that has prevented the parties from resolving their claims is a typical one; both parties are claiming the other side has undisclosed assets and accordingly both are seeking to have assets to be added back to the matrimonial pot to which they have agreed equal division. 3.Before I come to this major issue it is necessary for me to set out the parties’ background and to recite some of the salient transactions of their properties during the marriage which form the backdrop against which the parties’ respective allegations could be understood. Background 4.The petitioner husband is now aged 41 and the respondent wife is 42. They were classmates when they were studying for a Higher Diploma in Engineering back in 1999. 5.In about May 2000 they started cohabitation and in October 2004 they formally married. 6.There were 2 children of the family. The elder is a son, born in May 2006 and is now nearly 14 years old. The younger one is a daughter, aged 10. 7.Sadly, the relationship formally ended in August 2014 when the husband petitioned for divorce on the ground of the wife’s unreasonable behaviour. This was the petition with the case reference FCMC 11007/2014. 8.By an order of 9 January 2015, the husband was given leave to issue another petition for divorce on the ground of ‘One-year Separation with Consent’. This is the petition under the case reference FCMC 9304/2015. Both parties agree they separated from each other as from June 2014. 9.By an order dated 2 June 2015 the husband was ordered to pay a monthly sum of $35,000 as interim maintenance for the children. He, however, has never paid. 10.Decree nisi was granted on 4 September 2017. 11.The children matter, which had been subject to a number of applications where the parties were fighting for the care and control of their children, was finally resolved by way of a consent order of 29 November 2017 pursuant to which the joint custody of the children was given to the parties with care and control to the wife and reasonable access to the husband. The Parties’ Business and Salient Facts During the Relationship 12.Both parties have engineering background but only the husband took up the profession. He began his career by working in a company and subsequently started his own business by establishing a company in the name of SP with a Mr Tsang in 2003. Later on, the business was turned to a limited company in the name of SP Limited (“SP”) in 2005. 13.In 2007, another company SP (HK) Limited (“SPHK”) with the same shareholdings was established. According to the husband, Mr Tsang left in late 2011 or early 2012. 14.At trial, it is not in dispute that both SP and SPHK have ceased operation though they have not been formally dissolved. 15.As for the wife, she started a tutorial school right after having graduated in 1999. This business lasted until July or August 2012. There is some dispute about the extent of the husband’s involvement in this business. The husband said the tutorial school was a joint venture but the wife said he was merely a tutor. Be that as it may, this dispute is not relevant to the issues required to be determined in the ancillary relief proceedings. 16.In 2013 the parties decided to apply for emigration to Canada and for this purpose made a 3-week trip there. An application, apparently on the ground of entrepreneurship and with the husband as the applicant, was made by their immigration consultant. The business plan, so submitted for approval by the Canadian authority, was for the husband to purchase an eatery that had been operated for many years by a relative of the husband in the remote city of Fort St. John in the British Columbia. 17.The emigration plan, however, never fructified. Before the application was approved, the husband went ahead to purchase the eatery and even flew there on his own in June 2014 to operate the business without a lawful visa. This result in a deportation order being made against him. He eventually returned to Hong Kong disgracefully in about February or March 2015. 18.Mention has to be made that it was when the husband was staying in Canada that he petitioned for divorce in August 2014. Companies 19.Several companies feature in the trial in the context of money transactions between these companies on the one hand and the husband or the wife on the other. Apart from the SP and the SPHK, there is also the TH Limited which was used as the vehicle for holding some of the family assets. Each of the parties holds 50% of the shareholdings of the TH Limited. Property Transactions 20.Apart from their respective business, the parties actively involved in real estate investments too. 21.The first property was purchased shortly after their graduation in May 2000. It was a flat in Westview Heights (“the WH Flat”). That was purchased for $1,530,000 in the joint names of the parties and is currently being occupied by the husband. 22.The second property was a flat and a car parking space in Metro Harbour View purchased in May 2003. The purchase price was $2,760,000 for the flat and $156,000 for the car parking space. Again, these properties were purchased in the joint names of the parties. The flat was already sold in December 2008 and is not relevant to the present dispute. The car parking space (referred to as “CP1”) is still being owned by the parties. 23.The third property, also a car parking space at Metro Harbour View, was purchased in their joint names in December 2005. It was subsequently sold in April 2012. 24.The fourth was a flat at Kiu Fai Building. It was purchased, again, in the parties’ joint names, for $1,000,000 in February 2007. It was subsequently sold for $2,970,000 on 24 September 2013. I shall refer this property as “the KF Property”. 25.The fifth was a flat and a car parking space in Regent Building. These were purchased for a total of $5,560,000 in May 2008. They subsequently sold the flat in June 2010, leaving the car parking space still remained in their hands. I shall call this car parking space “CP2”. 26.The sixth was a shop at Luen Hing Building purchased in September 2009. This time they used the TH Limited as the vehicle for holding the property. The shop was first used by the wife’s tutorial school until its closure in mid of 2012; then it was used by SP and SPHK. I shall refer this property as “the LH Shop”. 27.The seventh transaction concerning two adjoining flats, the Flat H and the Flat G, in The Pacifica which were purchased in August 2011. The Flat H was purchased in the name of the husband while the Flat G was in the name of the wife. The parties had removed the partitioning wall so that the 2 flats formed into one which became their matrimonial home. Sadly, this turned out to be their last matrimonial home. I shall for convenience refer these properties as “the Flat H” and “the Flat G”. 28.The eight and the final transaction was a car parking space in The Pacifica that was purchased in the name of the TH Limited in November 2011. I shall refer this car parking space as “CP3”. 29.On 18 May 2012, the LH Shop was sold for $11,000,000. 30.In the interim, in 2013 the parties applied for emigration to Canada. 31.On 24 September 2013, the parties sold the KF Property for $2,970,000. 32.On 16 May 2014, the wife sold the Flat G for $4,900,000 and at about the same time on 30 June 2014, the husband sold the Flat H for $5,500,000. At the time of the sale the husband had already moved to Canada; and June 2014 was the time the parties subsequently agreed that they started to separate from each other. 33.The net result of these transactions is that, as far as the landed properties are concerned, what remained in the matrimonial pot are: -
34.The parties agree the total value of these 4 properties at $10,000,000. This forms the bulk of the matrimonial assets subject to distribution in these ancillary relief proceedings. Issues in Dispute 35.It is out of these transactions that the parties are now pointing their finger against each other alleging the other side having embezzled the proceeds of sale and has parked them somewhere beyond the reach of the other. The husband alleges that the wife has parked the sale proceeds of the KF Property and the Flat G; and the wife alleges that the husband has hidden the proceeds of sale of the LH Shop and the Flat H. Both are seeking the adding back of funds into the matrimonial pot. The Parties Case 36.Put it broadly, the husband’s case is that the proceeds of sale were properly used on family expenses including those incurred in emigration to Canada, repayment of mortgages of their properties and on clearing the indebtedness of his business that was running downhill at the material times. 37.The wife doubts the existence of such debts. She essentially puts the husband to strict proof of his case. In addition, she complains the husband has failed to give a full and frank disclosure of his financial situation by producing the relevant statements of his, SP and SPHK’s bank accounts. That is in defiance of clear directions and orders given by the court. On that basis, she invites the court to draw adverse inferences against the husband as regards his financial resources. 38.As regards the proceeds under her control, the wife runs a similar case. The proceeds of sales were spent on clearing the mortgages and on helping the husband’s business. Those remained in her hands, in particular those arose from the sale of the Flat G, were spent on supporting her and the children after their separation in June 2014. Present Situation of the Parties 39.The husband is living alone in the WH Flat and is currently employed as an engineer manager. According to the Social Investigation Reports, the husband has had a new relationship with one Ms Lam for some years but is currently not cohabiting with her. 40.The wife has not been working since the closure of her tutorial school in July or August 2012. She is currently living with the 2 children in a leased apartment. The son is attending Form 2 in a local secondary school and the daughter is at Primary 5. At all times, she has been assisted by a foreign domestic helper in taking care of the children. Open Proposals of the Parties 41.The parties have one key common ground: they agree to have the matrimonial assets shared equally. They, however, differ in respect of maintenance. 42.The husband agrees to pay maintenance in the sum of $7,500 for each child and has no proposal for spousal maintenance. 43.On the other hand, the wife seeks to have the outstanding interim maintenance to be paid in one lump sum with interest; on the top of that, the husband is to pay her a nominal maintenance. As regards the children, she seeks either a lump sum of $3,150,000 or a monthly payment of $35,000. The lump sum is to be paid into court and to be withdrawn on a monthly basis. If a monthly sum is ordered, it should be attached by an order for attachment of income for securing payment. Non-Disclosure 44.In advancing the wife’s case Mr Lee placed considerable weight on the heedless manner in which the husband had made his disclosure regarding his financial position in the proceedings. Specifically, he placed heavy reliance upon the husband’s non-disclosure of his bank statements so that the proceeds of sale of the LH Shop and the Flat H could be traced. This, so submitted by Mr Lee, is a failure on the part of the husband to give a full and frank disclosure of his financial situation. He invited the court to draw adverse inferences against the husband regarding his financial resources. 45.As an overview, Mr Lee drew the attention of the court to the fact that the husband paid no heed to the wife’s repeated requests and gave limited disclosure only. 46.As early as on 2 June 2015 Deputy Judge Ada Yim had already made an order that the husband was to issue an authorization in favour of the wife for the purpose of obtaining his bank statements. A similar order was made by Deputy Judge D Cheung again on 29 November 2017. It was stressed by Mr Lee that notwithstanding that the husband did at one stage provide his written authorisation in the wife’s favour so that she might obtain the statements by herself but the evidence suggested that the husband was not co-operative in rendering further assistance when there were further enquiries from some of the banks before proceeding further (for instance, the provision of an authorisation from another holder of a joint account) as a result of which the wife was not able to obtain the bank statements. 47.The duty of full and frank disclosure is an absolute and continuing one. The principles are succinctly set out in Rayden and Jackson on Relationship Breakdown, Finances and Children:
48.Mr Chan did not seek to argue that the husband had complied with his duty of disclosure. Clearly, he could not. Parties have for the assistance of the court provided an “Agreed List of the Petitioners’ Disclosed and Non-Disclosed Bank Accounts”. The List shows anything but the husband’s compliance of his duty of disclosure. In respect of the bank accounts maintained in his sole name, apart from the HSBC 833 Account (“the 833 Account”) that I shall deal with below, all that the husband produced was at its best just a few months’ statements; and the bank statements of SP and SPHK and those that the husband maintains with a third party were virtually non-existent. 49.Plainly, the husband was opaque in his approach to disclosure. It is patently insufficient for the husband to say he has complied with the duty of full and frank disclosure by giving an authorisation to the wife so that she might have obtained whatever documents or statement she deemed necessary. The fact that the husband was acting in person most of the time before the trial cannot be an exoneration. Nor is the excuse that the husband was not able to afford the copying expenses a valid and justifiable one. 50.Both Mr Chan and Mr Lee refer to NG v SG (Non-Disclosure) [2012] 1 FLR 1211. In that case, after having reviewed the authorities, Mostyn J summarised the relevant principles:
51.There has been some development recently, in particular in respect of the principles set out in para [16] (iii) and (vii) of NG v SG (Non-Disclosure), in the English Court of Appeal case of Moher v Moher[2019] EWCA Civ 1482; [2020] 2 WLR 89; [2020] 1 FLR. 225; [2019] 3 FCR. 244. The court held that in the event of non-disclosure of a party's financial resources in a financial remedies case, the court was not obliged to give a precise figure or bracket for the undisclosed resources before making an order. Instead, it should: (i) seek to determine the extent of the undisclosed resources; (ii) draw such adverse inferences as were justified; and (iii) where appropriate, infer that resources were sufficient that the proposed award represented a fair outcome. Moylan LJ said,
52.I shall deal with the issue of whether adverse inferences should be drawn when I come to the transactions in question. The Proceeds of Sales 53.As said above, at issue was the whereabouts of the proceeds of sale of:
54.There would be logic to conduct the investigation in the chronological order of the dispositions. While I shall deal with them one by one it has to be borne in mind that the transactions or the disposals of the monies are in some ways interrelated and in my view, should also be considered in light of the relationship of the parties at that time and their conducts contemporaneous to the relevant events. The LH Shop 55.I believe the following facts are not in dispute. 56.The LH Shop was initially purchased on 20 May 2005 in the name of SP. It was then sold to the TH Limited on 15 September 2009. At that time, the parties did not see the need to raise any mortgage finance for the purchase. It was only sometime later on 31 October 2011 that the parties, via the TH Limited, raised $3,000,000 by way of a mortgage of the Shop in favour of Honip Credit Limited. A few months later, there was a change in the mortgagee when Honip Credit Limited was replaced by Lei Shing Hong Credit Limited by a new mortgage on 3 April 2012 (“the LSH Mortgage”) for the reason that, according to the husband, Lei Shing Hong Credit Limited was able to offer a lower interest rate. 57.However, about a month later, the LH Shop was sold on 18 May 2012 for $11,000,000. According to the Provisional Agreement for Sale and Purchase, which was signed by the husband for the TH Limited, deposits in the sums of $400,000, $700,000 and $1,100,000, totalling $2,200,000, were payable on 18 May 2012, 31 May 2012 and 20 June 2012 respectively and completion was to take place on 20 September 2012 when the balance, $8,800,000, would be payable. 58.It is not in dispute that after the repayment of the LSH Mortgage and the settlement of the sale-related legal costs and expenses, a net balance of $5,561,609.40 was received upon completion. This sum was deposited into the TH Limited’s account with the Nanyang Commercial Bank (“the NCB”). 59.As it turns out, the wife’s focus is on the whereabouts of the $2,200,000 deposits. Her complaint is that the husband got the money which has since disappeared without a trace. The Husband’s Case 60.The husband said the sale was a joint family decision. At the time of sale, the family was still functioning as a family unit. Starting from 2012, the husband’s business was running downhill and occasionally experienced financial problems; funds from the family had to be used for repayment of some of his business’ debts. These had caused some complaints from the wife but she was still being supportive in making funds available. 61.The husband agreed that he took the 3 cheques covering a total of $2,200,000. These monies, however, should have gone to the TH Limited’s account or one of the parties’ joint accounts. 62.After the repayment of the LSH Mortgage and the mortgage in respect of the Flat G (in the sole name of the wife), the balance was handed to the wife and was used on his business, either for repayment of debts or for working capital, and on the family. All decisions regarding how the funds were put into use, said the husband, were joint decisions. 63.The husband’s account as to how the proceeds of sale were disposed of is as follows:
The Wife’ Case 64.The wife presents a different picture. 65.At the time of sale, the parties’ relationship had turned sour and it was agreed that the proceeds were divided to be into half with each acquiring $5,500,000. In her affirmation of 1 November 2018, the wife accepted that the LH Shop had to be sold because of the husband’s debts and that the husband made use of $3,224,423 out of his share in the redemption of the LSH Mortgage. The husband, however, failed to explain the whereabouts of the balance in the region of $2,200,000. Despite repeated directions and orders from the court, the husband failed to give a full and frank disclosure of the financial situation by producing the relevant bank statements and records. As regards the other half that went into her pocket, she used $4,000,000 in the redemption of her Flat G mortgage and spent the rest on family. 66.The husband is adamant that there was no agreement on the equal division of the sale price. 67.Before I turn to the question of the whereabouts of the proceeds of sale, as I see it, there are two preliminary factual issues that require determination:
The Relationship of the Parties 68.The way in which Mr Lee put the case at the beginning of the trial was that at the time of sale the parties’ relationship had turned sour. I surmise it was so put in order to support the wife’s assertion that the parties had agreed to split the proceeds of sale equally. Yet this assertion was betrayed by the wife’s own evidence because when being cross-examined by Mr Chan, the wife conceded that their relationship was reasonably good and she was even helping the husband out by giving money to solve the cash flow problems of his business. This evidence is totally in line with the husband’s testimony that though they had quarrels in May 2012, their relationship could still be considered as good. 69.On this incontrovertible evidence, the parties’ relationship at the time was clearly reasonably good. This situation should have lasted for quite some time though conceivably there should have been some ups and downs since it was the wife’s allegation that the husband was found ‘cheating’ in 2013. Despite this, the parties were still making plans to emigrate to Canada together and spent a 3-week trip there. They also made a joint decision to have the KL Property sold in September 2013. Whether the Husband’s Business was in Financial Difficulty Prior to the Sale of the LH Shop? 70.The husband’s case is that at that time his business was in terribly bad shape; he was in need of money to pay his creditors and suppliers and he was not able to afford the monthly payments of the LSH Mortgage. 71.The evidence shows that the husband was facing multiple legal actions because of his fragile financial situation. On records were 3 District Court actions taken out by 3 different financial institutions from July to September 2012 for respective sums of $694,298, $187,959 and $72,034, totalling $954,300. In respect of the claim for $694,298, a charging order nisi was registered by the plaintiff bank on 31 August 2012 against the Flat H that was purchased in the sole name of the husband. The order was made absolute on 28 September 2012. 72.The wife initially did not accept the husband was in financial difficulty. She only accepted that the husband needed her money for meeting cash-flows due to the gaps in expenditure and receipts in respect of some big projects and so she expected sooner or later monies would be coming in. 73.When being faced with her own affirmations in this regard, the wife had to admit that the husband’s business was not in good shape and was turning for the worse in about 2011 or 2012. By way of examples, the wife said in her affirmation of 1 November 2018 that starting from 2011 the husband’s business turned for the worse; and beginning from 2012 the husband had cash-flow problems and asked her for money. The wife even produced some transaction slips to show that from 21 June 2012 to 3 September 2012, she transferred a total of $350,000 to SP. It would appear that by 21 June 2012 a total of $1,350,000 was already given to the husband and by 9 September 2012, the total increased to $1,780,000. In her WhatsApp message of 9 September 2012, she informed the husband that she was not prepared to pay further (“唔再俾”). There was not a single statement from her, whether in the affirmations or the Answers, that the husband was merely having cash flow issues and receipts were expected to receive. 74.As said above, it was not necessary for the parties to raise any mortgage finance for the purchase of the LH Shop. It was only sometime later on 31 October 2011 that the parties raised $3,000,000 by way of a mortgage. There is some inconsistency in the husband’s case as to why the mortgage was required. In evidence, the husband said it was for the purchase of the Flat G and the Flat H but the way in which it was put by Mr Chan suggested that the finance was related to the husband’s financial difficulty. 75.The wife’s case in this respect is, however, clear. Her affirmation of 6 March 2015 made in support of her application for maintenance pending suit said it was due to the husband’s business problems that they had to raise $3,100,000 (not $3,000,000) by way of the LSH Mortgage, and she therefore had to have the LH Shop sold; $3,224,423 was given to the husband for redeeming the LSH Mortgage and the rest was used in the repayment of other mortgages: at §14. It is significant to note that there was no mention of splitting of the proceeds into equal shares. 76.The husband admitted he managed to pay the wife living expenses up to the end of 2011. This piece of evidence is again collaborated by the wife who said in evidence that starting from 2012 the husband asked her to use her savings for living expenses. 77.Having regard to all the evidence before me, I disbelieve the wife’s assertion that the husband’s business was not in financial difficulty. The facts surrounding the sale of the LH Shop compellingly point to the fact that the husband was in dire financial situation. 78.There can be little doubt that even after the sale of the LH Shop the husband remained to be financially stringent. 79.First, the wife paid for the hire-purchase loan of $200,000 or $210,000 of the husband’s vehicle in one go in about 2013. The vehicle was purchased some years back then. There was no elaboration from the wife on why instead of paying the hire-purchase on a monthly basis, there was a need to repay the loan in one-go. The husband’s explanation was essentially that he was not able to keep up with the payments. 80.Secondly, according to the wife’s Answer dated 27 November 2017 and her affirmation of 28 November 2017, the husband pawned his wrist watch on 26 April 2013 for $46,000. 81.Thirdly, it was reported in the Social Investigation Report of 4 January 2016 that according to the wife, there was a scuffle between the parties on 6 April 2014 which necessitated the intervention of the police. The wife alleged that she was assaulted by the husband when the latter extorted her for money: §8. 82.As will be seen, these facts are relevant to the issue of the whereabouts of the proceeds of the Flat H. The Whereabouts of the proceeds of Sale of the LH Shop 83.I have disbelieved the wife on the two preliminary issues. I now come to the ultimate question. 84.The provisional agreement for sale and purchase was produced as exhibit “R-1”. This agreement of 18 May 2012 was signed by the husband alone on behalf of the TH Limited. The land search record does not reveal any formal agreement for sale and purchase; so the inference can be drawn is that no formal agreement was ever signed. The assignment dated 20 September 2012 was executed by both the husband and the wife on behalf of TH Limited. 85.According to the provisional agreement, an initial deposit of $400,000 was payable upon signing. Since this agreement was signed by the husband alone, on evidence, it must be the case that it was the husband who handled the transaction and obtained the said $400,000. Likewise, on balance, it must have been the husband who had obtained $700,000 and $1,100,000. 86.The wife’s case is that there was previously a board resolution by the TH Limited whereby the husband was authorized to deal with the LH Shop. It was pursuant to the board resolution that the husband managed to sign the provisional agreement for sale and purchase singly and it was also by virtue of this document that the husband managed to have the initial deposit and the further deposit in total $2,200,000 issued in his favour which is now without a trace. 87.The husband denied there was such a board resolution. He was adamant that he had handed the 3 cheques covering the deposits, which were either issued in the name of the TH Limited or in their joint names, to the wife for handling. Nevertheless, it is not in dispute that these 3 cheques could not be traced on any bank statements produced by the parties. 88.Mr Lee relied upon two arguments. 89.First, the lack of explanation and documentary support from the husband in relation to the use and whereabouts of the proceeds; and secondly, the husband’s non-disclosure of his bank statements. In respect of the husband’s non-disclosure, it is common ground that all that the husband produced was one month’s statement from 31 August 2018 to 29 September 2018 for SP and SPHK each. It was submitted that there was virtually nothing on record to show that the monies were actually used in settling the debts of SP or SPHK as alleged. Mr Lee emphasized that it is incumbent upon the husband to produce the statements of SP and SPHK to prove that his assertions are truthful. 90.I have no arguments with Mr Lee’s submissions. They are certainly valid if the $2,200,000 was taken by the husband. The question is, whether this was the case? The next question following this is, depending on the answer to the first, what was the use of the money? Discussion 91.The wife was ambivalent as to when she first learned of the sale by the husband. Nevertheless, the deed of assignment was executed by both parties; so at least it must have been shortly before the execution of the assignment that she had learned of it. The wife accepted that she and the husband attended their solicitors’ office for the purpose, that she was told by the solicitors of the sale price, and that she was well aware that the husband had obtained $2,200,000. Yet, at that point she did not question the whereabouts of the said $2,200,000 for the reasons that their relationship was still relatively good and that it was always mentioned by the husband that he needed cash-flow for his business. 92.She confirmed she had trust on the husband, so much so that subsequently she even gave him a further $500,000 on 11 October 2012 for SP’s business. Given that the husband had already obtained $2,200,000 not long ago and that according to the wife, the other half (ie $5,500,000) was her own, it is hard to believe that she did not satisfy herself that the $2,200,000 had been used for a proper purpose before she parted with her $500,000. 93.The sale took place in mid-2012, some 2 years before the breakdown of the marriage and, as I found, the parties’ relationship was still reasonably good. It seems to me there is little reason as to why husband would have the intention to siphon off the money as alleged by the wife. 94.The wife insisted that there was an agreement to split the proceeds of sale equally to which the husband denied. A careful reading of the documents shows it was at a rather late stage, when the wife gave her Answers on 27 November 2017, that she first mentioned of this agreement of splitting the proceeds. At trial, the wife said it was an offer or proposal from the husband for obtaining her consent to sell. The offer was that the husband would repay the LSH Mortgage out of his share and take the remaining $2,200,000 and the wife could keep the other half in the region of $5,500,000. It is clear that Mr Lee was not putting a case that there was a ring-fence agreement or the agreement was some sort of nuptial agreement binding upon the parties in the present proceedings. In my view, it must be correct. 95.As I see it, the heart of the matter is the whereabouts the $2,200,000 that the wife says the husband has hidden. At any rate, as I will demonstrate below, I disbelieve the wife that there was such an agreement. 96.It is a common ground that it was the wife who deposited the net balance of $5,561,609.40 into TH Limited’s account with NCB. It is also a common ground that out of this sum, $4,000,000 was used by the wife in redeeming her Flat G. 97.The wife’s evidence is that starting from 2012 the husband asked her to use her savings for living expenses which she did. What is more, she even assisted in the husband’s business by draining her savings. Up to 9 September 2012 her financial assistance was as much as $1,780,000 as mentioned in [73] above. 98.Then on 20 September 2012, upon completion of the sale of the LH Shop, the wife got $5,560,700 odd. Out of this sum, she used $4,000,000 in redeeming her Flat G, so what was left should be about $1,560,700. It has to be borne in mind that on 11 October 2012 she gave a further sum of $500,000 for the husband’s SP: see [92] above. It means her balance further reduced to $1,060,700 for family expenses for the period from September 2012 up to about the end of October 2013 when she received the proceeds of sale from the KF Property, as set out below.
99.The wife closed her tutorial school in mid-2012. In her affirmation of 1 November 2018, the wife said as from 2009 she was working in her tutorial school on part-time basis so as to take care of the children. In her affirmation of 6 March 2015, she said in around 2012 she was the only tutor. It can be seen that on her case the income for the family at the time should have been rather limited. 100.It is important to note that the wife said in evidence that before the sale of the LH Shop she had virtually exhausted all her savings. Another important point is that she said before the sale of the KF Property (ie the next property sold after the LH Shop), she still had about $700,000. At this point, it has to be noted that according to the land search record, the wife’s Flat G was only redeemed on 22 November 2013. Since both parties agreed that the redemption money was paid out of the LH Shop, it is safe to assume that when the wife gave the figure of $700,000, this $4,000,000 was already excluded. 101.It follows that as far as arithmetic goes, from September 2012 to October 2013, in a period of 13 months, she only had about $360,700 for family expenses, or on average a monthly sum of $27,746 (($1,060,700 - $700,000) ÷ 13 months)). 102.Mr Lee, in his opening on behalf of the wife, questioned how the proceeds could have been spent on family expenses given that the parties were not in the “super-rich” category. 103.I accept nobody has ever suggested the parties were in that category. Mr Lee seemed to have forgotten what the wife said about their living standard during the marriage. The living standard as depicted by her was clearly a very comfortable one. The family employed a domestic helper, on average had overseas vacation once a year, dined at high-end restaurants, spent around $25,000 monthly on tonic foods, had expensive seafood like abalone, grouper fish and lobster for every dinner and she was a long-term patron of Spa centres, and the list went on. When the parties had separated and the wife was living with the children, she reported her monthly living expenses at $105,676, as can be found in her 1st Form E of 7 January 2015 and her affirmation of 8 January 2015 in support of her application for maintenance pending suit. 104.It can therefore be seen that on the wife’s own evidence there is no way that she, or to be more accurate the family, could have survived up to the sale of the KF Property. 105.The counting does not stop here. This impossible situation is magnified by the following facts. 106.First, on evidence it seems clear that it was after the sale of the LH Shop that the 3 District Court claims as referred to in [71] were settled; specifically, the charging order against the Flat H was discharged on 6 March 2013. It was argued by Mr Lee that Mr Tsang, the husband’s partner in SP, was a co-defendant in 2 of these District Court claims. Mr Tsang should have shared half of the liabilities with the husband. The husband fairly accepted that in law that was the case and he could have sued Mr Tsang for contribution; but Mr Tsang was impecunious and most importantly, the charging order was issued against his Flat H. It appeals to me to be a sensible answer. In any event, with the conclusion that I have come to below, it is not necessary for me to come to a finding in one way or the other. 107.Secondly, money was needed for the 3-week trip to Canada which took place in the summer of 2013. The wife tried to say that the expenses so incurred were paid out from the proceeds of the KF Property notwithstanding that it was after the trip that the property was sold. I must say I am not with her. In all likelihood, at least some of the expenses such as the flight tickets must have been paid before the journey. 108.All these happenings beg the question of how the family could have survived with a meagre of $360,700 over a period of 13 months, there being no suggestion that there were other financial resources available at the time. The inevitable and the only logical conclusion one can draw on the basis of the above evidence is that the family survived on at least part of the $2,200,000 that is alleged to have gone without a trace. This too explains why the wife still had $700,000 before the sale of the KF Property. 109.Having regard to all the matters discussed above, my answer to the first question, ie whether the husband had taken the $2,200,000, must be answered in the negative. It follows that the answer to the question, ie what was the use of the money, is that the money was used at least in part on the family. 110.Following these conclusions, I find against the wife that there was an agreement to split the sale price equally; and with the conclusions I have come to it is not necessary to consider whether adverse inference should be drawn against the husband. The KF Property 111.The KF property was sold in September 2013 for $2,970,000. According to the land search record, the formal agreement for the sale was signed on 24 September 2013. It was free of mortgage so the entire purchase price, net of sales-related expenses, in the total of $2,870,807 was deposited into parties’ joint account with NCB. The money remained intact until the end of October 2013 when it was then (a total of $2,850,000) transferred to the wife’s own account with NCB in early November 2013. 112.Mr Chan validly pointed out that given that for the joint account either the husband or the wife’s signatory would be sufficient for its operation there was no practical reason for the wife to have transferred the money from the joint account to her sole account. 113.The wife accepted that the money was with her but insisted the same was used properly and legitimately on the family. 114.By and large, the husband had little idea as to how the money was spent. Probably this was because according to his evidence in court, his relationship with the wife at the material time was not good; and in this respect, the wife in her affirmation said the husband was caught cheating in October 2013. The Wife’s Case 115.In her Revised Statement of Factual Issues in Dispute of 16 October 2019 (ie the 1st day of trial), the wife’s account of how the $2,850,000 was spent is as follows:
116.In respect of item no. 1, the more precise figure should be $1,093,000 and in respect of item no 4, the figure that the wife said in court was $210,000. These will be the figures adopted in this Judgment. 117.Mr Chan responded by drawing the court’s attention to the fact that the wife’s version regarding most of these expenses was not mentioned in any of her previous 18 affirmations nor were there any documentary proof in support. Further, some of these expenses, leaving the quantum aside, could have been paid by money other than the proceeds of the KF Property. 118.It is most striking to note that this Revised Statement departed in material respect from what she had said in her Statement of Factual Issues in Dispute of 8 October 2019 (“the Earlier Statement”) that was filed after the Pre-trial Review. There can be little doubt that the Revised Statement was a last minute change since Mr Lee’s opening of 16 October 2019 was still based on the Earlier Statement. 119.In the Earlier Statement, apart from item nos. 1 to 6 of the Revised Statement being the same, the wife said about $1,000,000 and $1,200,000 were transferred to the husband’s companies in November 2013 and December 2013 respectively; and in December 2013, the husband deposited $1,000,000 into her account. In other words, a net sum of $1,200,000 was given to the husband. On this version the net total would be $3,153,000. This exceeds the net proceeds of sale by $303,000 ($3,153,000 - $2,850,000); and there would not be any money for family expenses. 120.The fact that a net sum of $1,200,000 was given to the husband’s business would clearly lend support to the husband’s case that his business at the material time was in serious financial difficulty and that the proceeds of sale of the LH Shop were spent in the way advocated by the husband. I surmise this is the reason for the wife’s change of stance. 121.When being cross-examined on why there was such a material discrepancy, the wife simply put the blame on her solicitors. I cannot accept this explanation. The wife has been legally represented throughout and appeared by counsel at least since the failed FDR. The whereabouts of the sale proceeds of various transactions no doubt has all along been a live issue and must have been loomed large in her minds. The Earlier Statement must have come from her instructions. I am not satisfied that there was any plausible explanation. 122.Seen in this light, the items that the wife said to have been paid out from the proceeds of the KF Property must be scrutinized with great caution. 123.Before turning to the Revised Statement, it is helpful to recap that after the sale of the LH Shop but before the sale of the KF Property, the wife gave $500,000 to SP on 11 October 2012, that in 2013 they decided to apply for emigration to Canada, that for this purpose immigration consultants were retained and that the parties took a 3-week trip to Canada in the summer of 2013. 124.As referred to in [100] above, the wife testified that before the sale of the KF Property (ie before September 2013), the family still had $700,000 odd. Therefore, with the sale proceeds of $2,850,000, the wife should have a total of $3,550,000. The wife’s account as to how the proceeds were used is as follows,
125.Allowing for one moment that the wife’s account is assumed to be entirely truthful, the wife said in evidence that before the sale of the Flat G in May 2014, she had just about $300,000 left. In cross-examination, the wife admitted that in a period of 6 months up to the sale of the Flat G, she had spent about $1,297,000 ($1,597,000 - $300,000) or on average $216,000 per month. On any view, it is no doubt very much on the high side. It is to be recalled that even on the wife’s own case, in support of her application for maintenance pending suit, her reported monthly expenses were just $105,676. I form the view that the wife was untruthful when she said she had about $300,000 left in May 2014. This is a failure on the part of the wife to give a full and frank disclosure of her financial resources. This is a specific form of failure as opposed to general failure referred to by Moylan LJ in [86] of Moher v Moher: see [51] above. Doing the best I can, I reckon that the family’s expenses during the period should be about $700,000, so a sum of $597,000 should be added back ($1,297,000 - $700,000). 126.I now turn to the wife’s items. CAD 150,000 127.The wife gave evidence that about $1,093,000 was converted to CAD 150,000 on a date before the remittance was made. She took the cash home and put it in a safe. When the money had to be remitted, she returned the cash to the same bank and opened a foreign exchange account as required by the bank for the purpose of remittance. $720,000 was remitted for the purchase of the eatery in Fort St. John together with the incidental costs. The rest, in the region of $390,000 (about CAD 50,000), intended for future use in Canada including for the purchase of new equipment for the eatery, continued to be kept in the safe. When the parties broke up in May or June 2014, the husband took the money away and even shipped the safe to Canada. 128.The husband’s response is the CAD 50,000 is a fabrication. 129.To start with, it is rather unbelievable that the wife would have chosen to exchange the Canadian currency in cash and take the money home. Further, the family’s immigration application was handled by their consultant, it is hard to believe that she did not realize from the consultant that the purchase price had to be remitted to Canada. These aside, it is significant to note that the wife never mentioned this incident in any of her affirmations or Answers. The safe in question was first raised by the husband when, in his affirmation dated 15 May 2015, he claimed he discovered in May 2014 that the wife had taken certain documents and all the valuables kept in the safe away: §38. In response, the wife sternly denied this in her affirmation of 28 May 2015 and it was at this point the wife said the husband had shipped the safe to Canada. The said CAD 50,000 (or about $390,000) was not a small amount of money. If the money were really in the safe and when there was an allegation that she had removed some valuables inside, there is simply no reason why the wife would have failed to mention this. I have no doubt that she has not been truthful in this respect. 130.The wife’s evidence was that part of CAD 50,000 was for the purchase of equipment for the eatery. This, however, did not sit well with item no. 3 of her Revised Statement where she said there was another $150,000 for the trip to Canada and for new equipment. This inexplicable overlapping or even confusion casts doubt on the veracity of the wife’s case. 131.Be that as it may, the wife admitted she did not know whether or not any equipment had been bought. It would appear that she was just relying on the terms of the Lease Term Extension Agreement signed by the husband that required him to undertake a complete renovation to the eatery. In response, the husband said he did not carry out any renovation or buy any equipment. Mr Chan also drew my attention to the provision in the Lease Term Extension Agreement under which the husband was not required to carry out the renovation work at the relevant time yet. 132.I find against the wife that any sums had been expended in the purchase of new equipment. 133.The remittance was made on 25 February 2014. On balance, it is likely that the remittance money was paid out of the proceeds of the KF Property. I am conscious that the husband said it was paid out of the proceeds from the LH Shop. With the conclusion that I have come to regarding the LH Shop, this discrepancy is irrelevant to the disposal of the issues before the court. 134.The documentary record shows a total of CAD 97,900 was remitted; converted it to Hong Kong currency would mean about $600,000. The husband however agreed that the costs for this exercise was $700,000. This is the sum to be adopted. It follows that the shortfall of $393,000 ($1,093,000 - $700,000) has to be added back. Immigration Consultant 135.The husband accepted it was the wife who handled the matter but said the immigration consultants costed them $100,000 only; that was around end of 2013 or early 2014. 136.It is true that the wife was able to explain why 2 consultants were engaged. As a preliminary observation, given that the eatery was only for $700,000, it appears that $250,000 is on the high side. A more important point is that the wife said she was able to locate the provisional agreement for sale of purchase of the LH Shop (Exhibit “R-1”) from her “Immigration File”. If there was such an “Immigration File”, one wonders why there was not any documentary proof. That being the case, and with the great caution that has to be given in this exercise, I have to reject the wife’s claim. 137.I would take the husband’s figure, ie $100,000; so $150,000 is to be added back. $150,000 for the trip to Canada and for purchase of Equipment 138.The wife said they spent about $150,000 on the 3-week trip to Canada in the summer of 2013. They visited Fort St. John, where the eatery was, and Vancouver. She agreed that they were staying at their relatives’ place free of charge and this $150,000 covered flights, food and travelling expenses. 139.The KF Property was not sold yet when the trip took place. When being questioned how the trip could be related to the proceeds of this property, the wife explained she paid the expenses by her credit card first and had these reimbursed by the proceeds. 140.The husband’s responded by saying that the wife has grossly inflated the amount. The trip only costed them about $50,000. The flight tickets were bought before the trip so the fares could not have been related to the KF Property. Besides, there were not any credit card statements or receipts ever adduced in support of her case. 141.I believe the wife has exaggerated the expenditure. The trip involved just two of them, with their children being left behind in Hong Kong. It is more likely than not that the flight tickets were paid before the trip and so they only had to spend on inland travelling and food of which some might have been paid out from the proceeds of the KF Property. 142.Having regard to the matters in a round, I accept the husband’s figure; $100,000 has to be added back. Payment of the Husband’s vehicle. 143.The husband accepted the repayment came from the proceeds of the KF Property but the sum was just about $100,000; that was around the end of 2013 or early 2014. 144.The wife was quite uncertain as to whether the sum was $200,000 or $210,000. No clarification, however, was sought from her. As I have commented, the wife’s account must be subject to close scrutiny. I am particularly influenced by the propensity on the part of the wife (as I found) to exaggerate her figures. Accordingly, I would take the husband’s figure of $100,000; so $110,000 is to be added back. Renovation Costs of $150,000 145.Prior to the sale, the KF Property was occupied rent-free by the wife’s father and her younger brother. As a result of the sale, they had to move to a public housing unit; for this, she paid all the renovation costs and bought the necessary appliances for them. The renovation included the partitioning of a room, painting and plastering of the walls, installing a shower trap and all the flooring and tiling work. She also installed a split air-conditioner in the living room and an air-conditioner in the room. All these costed her $150,000. 146.The husband accepted some renovation work had been done but insisted that the total costs should be in the region of $50,000. 147.In my view, it is clear that the husband had no knowledge on the matter. I have carefully listened to the wife’s evidence in this regard. She was able to detail what had been done and it seems to me that $150,000 is a reasonable sum. A Loan of $100,000 148.The wife claimed $100,000 was loaned to one Mr Chan, an employee of the husband. While the husband accepted there was such a loan, he said it was soon repaid. 149.There has not been any documentary proof in support of either’s case. All that the wife could say was the loan was made in 2013. She was not able to be more precise; so the loan could have been made prior to the sale of the KF Property. If it was an unpaid loan as contended by the wife, the same should have been disclosed in her Form E. On balance, I find against the wife. This $100,000 has to be added back. 150.To sum up, following the above analysis, a sum of $1,450,000 has to be added back. The breakdown is as follows:
The Flat H 151.The husband contracted to purchase this property for $4,800,000 in August 2011 with a mortgage finance from the HSBC. It is to be recalled that, clearly on purpose, the adjoining Flat G was purchased and completed on the same date, ie 4 November 2011. 152.The husband later saw the need to raise further finance of $500,000 on 25 April 2014 by way of a second mortgage to Konew Finance Express Limited. 153.Similar to the LH Shop, shortly after the second mortgage, the husband contracted to sell the property for $5,500,000 on 30 June 2014 and completion took place on 7 August 2014. At the relevant time, the parties had already separated and the husband had moved to Fort St. John. The transaction was handled by his mother in Hong Kong. The Husband’s Case 154.Two sums, $3,200,000 and $500,000, totalling $3,700,000, were needed to redeem the 2 mortgages. After deducting all sales-related expenses, the net proceeds were deposited into the husband’s HSBC account by way of 2 cheques totalling about $1,524,039 on 7 August 2014. 155.The husband explained how he spent the $5,500,000:
156.In a nutshell, the monies were properly spent on repayment of debts. The Wife’s Case 157.The wife challenges the existence of the debts so alleged by the husband. She is essentially putting him to strict proof of his case. She also questions whether there was a need for the husband to raise the 2nd mortgage for $500,000. 158.Further, given the sale price was $5,500,000 and the sums needed to redeem the 2 mortgages were $3,700,000, the net proceeds should be in the region of $1,800,000 but what could be found were just 2 cheques totalling about $1,524,039, so some $276,000 is unaccounted for, something which the husband accepted. The Husband’s Non-Disclosure 159.Mr Lee invited the court to draw adverse inferences against the husband as regards his financial resources on the ground of non-disclosure. On a more specific level, it was stressed by Mr Lee in his Opening that the husband failed to provide the statements of the 833 Account for 2014 in support of his assertion regarding how the proceeds of the Flat H were disposed of: see [44] above. Yet, at this point, it is somewhat unclear as to whether there was such a failure. The reason being that the trial bundles were up-dated at the commencement of the trial with the inclusion of the statements of the 833 Account covering the period from October 2011 to February 2016. It is unclear as to who first provided these statements; both are pointing their finger against the other. It was suggested by Mr Chan that most of these statements were long in the possession of the wife. This explained why in her Questionnaire dated 15 September 2016 the wife asked for the bank statements starting from January 2015 only and was able to raise a number of requisitions seeking the husband’s explanation on the deposits and withdrawals in the 833 Account by referring to various entries. 160.Despite Mr Lee’s best effort, it seems quite clear to me that he was at a loss. It is plain that the wife had at least sufficient statements of the 833 Account in order to raise her requisitions. I gather that probably it was because of the change in the wife’s solicitors that over time during the transition she lost the trace of the bank statements. 161.That said, as I have made myself clear in the earlier part of this judgment, the husband’s disclosure is manifestly deficient. As far as the Flat H is concerned, his case is that as much as $1,200,000, being split up into numerous tranches, were given to SP or SPHK for repayment to their suppliers. Some of the monies were taken away by way of transfers and the others were just by withdrawals of cash or cheques. Whatever the modes of withdrawals were the monies simply vanished without a trace. There was not a single receipt or evidence of payment adduced in support of the contention. Nor were there any bank statements of SP or SPHK covering the relevant period showing the corresponding entries. It cannot be emphasized enough that even where these documents or any of them had been produced, it was still incumbent upon the husband to present the information in a way that could be readily comprehensible regarding the whereabouts of the proceeds of sale. Yet, his answers of September 2016 to the wife’s Questionnaire were without exception in one stroke of short sentence, “Repayment (Company)” (還款(公司)). The husband made it even worse when under cross-examination, he was found to have been wrong in saying in his Answer that, in respect of a sum of $69,510 that he exchanged for Canadian currency on 21 October 2014, it was for repayment of SP or SPHK’s liability. He corrected to say the money was for his eatery in Canada. 162.At the same time, it has to be remembered that before the sale of the LH Shop, the husband already had $1,780,000 from the wife for his business. After the sale, he had a further $500,000 for SP’s cash flow and $954,300 for the settlement of the 3 District Court actions. He raised a 2nd Mortgage on the Flat H for $500,000 and borrowed $280,000 and $500,000 from his cousins and his friend Mr Lee respectively. All these added up to $4,514,300. That is to say, from 2012 up to the time before August 2014 (the completion of sale of the Flat H), the husband had already had an extra finance of $4,500,000 to fuel his business. 163.At trial, at no time did the husband, being the mastermind of his business, give any particulars or ballpark figures on the extent of liabilities that the companies had incurred since 2012 and to what extent, with the assistance of funds from various sources, he was able to reduce the debts and how much were still due and owing after all the efforts had been exhausted. The court was not even taken to SP or SPHK’s financial statements for at least impinged upon its mind with a general impression as to the extent of liabilities that the companies were subject to at the time, or how with the countless efforts of the husband the liabilities had been reduced. 164.It is difficult not to be reminded at this point of what Lam J (as he then was) said in L v L [2006] 1 HKFLR 121,
165.Recently, in Gooddard-Watts v Gooddard-Watts [2019] EWHC 3367 (Fam); [2019] 11 WLUK 663, a case where the wife sought the setting aside of a financial order for a second time on the ground of non-disclosure of the husband, Holman J said,
166.The husband’s version is unsupported by any documentary evidence such as the bank statements of SP or SPHK. SP and SPHK were at all the times under the husband’s control. The transactions took place in 2014; it was well within the mandatory 7-year period within which SP and SPHK would have to keep their records under the relevant Inland Revenue regulations. The husband should have the relevant records and statements with him or could have obtained the same from the banks or his accountants. Most importantly, these transactions happened in the second half of 2014 and in January 2015 which coincided with the time when the husband took out his divorce proceedings. He was first asked of the use of the proceeds of sale right following the month of the last withdrawal. That was in the wife’s Questionnaire dated 5 February 2015. He was asked of this matter again in the wife’s Questionnaire dated 15 September 2016. Yet, the husband never gave any substantive reply. 167.The husband’s explanation that at that time he was about to leave for Canada, that he was staying in Canada, that SP and SPHK were in a mess and that he had disposed of the records and statements when he was packing up for Canada are no excuse. I fail to see how these could be an exoneration from his failure to give a full and frank disclosure when he was back to Hong Kong and engaging in the present proceedings during which in the last couple of years he must have been repeatedly reminded and even warned by the judge presiding over the 1st Appointment hearings of his duty and the grave consequences if in breach. Needless to say, at the same time, there must have been no lacking of complaints from the wife’s legal representatives in this regard. 168.The only conclusion that can be drawn is the husband deliberately failed to disclose and withheld the information and documents regarding the disposal of the proceeds of the Flat H which he knew he should have disclosed. 169.Having said that, in fairness to the husband, there is some evidence from the wife that lends support to the husband’s claim of financial difficulty at the time. As referred to in [81] above, it was reported in the Social Investigation Report of 4 January 2016 that according to the wife, there was a serious dispute between the parties on 6 April 2014 in which the wife alleged that she was extorted for money: §8. It is relevant to note that it was after this incident that the husband raised the 2nd Mortgage on 25 April 2014 for $500,000 and that earlier (on 5 March 2014), the husband claimed to have borrowed $500,000 from his friend, one Mr Lee. It seems clear to me that the husband at that time was desperately in need of money. Income Surplus 170.Insofar as his alleged debts are concerned another peculiar feature is the husband’s income surplus that counsel referred to at trial. Parties agreed that according to the husband’s reported income and expenditure, from 1 September 2015 to 13 October 2019 the husband should have accumulated an income surplus of $1,379,850, or round it up $1,380,000. 171.At the same time, notwithstanding that according to his latest Form E of 13 August 2018 the husband reported to have liabilities of $3,526,230 and that some of these liabilities may arguably be matrimonial, the husband made a concession at the beginning of the trial that he would give up claiming these debts as matrimonial. 172.In return, the wife agreed that the income surplus are post-separation accruals and accordingly not to be considered as matrimonial assets that ought to be divided. Prior to this consensus, the genuineness of the husband’s debts was subject to challenge. 173.My conjecture is that the concession was made because the husband found it impossible to deny the existence of the income surplus because it was arrived at according to his own figures. The conundrum that the husband faces is that this sum of money, as a matter of fact, is not reflected in any of the assets reportedly to be in the possession of the husband. In other words, it is merely a notional sum. On papers there is simply no explanation from the husband as to where this money has gone. 174.The husband’s 1st Form E of 8 January 2015 (he was still in Canada at the time) disclosed one item only – the $500,000 that he borrowed from his friend Mr Lee on 5 March 2014. However, the husband’s liabilities increased significantly to $3,559,230 and $3,526,230 in his Form Es of 22 December 2016 and 13 August 2018 respectively. It is significant to note that despite the income surplus, not a single dollar was used in the repayment of any of these liabilities throughout these proceedings. At trial, the husband explained that he has given personal guarantee in respect of some of the liabilities, some of his creditors are aware of his predicament and are willing to wait for the outcome of his divorce and some of the liabilities are owed in the name of SP. Be that as it may, it is not open to the husband to say that he has made use of any of the income surplus towards the settlement of some of his liabilities, not even to Mr Lee whom the husband described was his good friend when he clearly had the ability to do so. 175.Mr Lee rightly pointed out that the husband’s debts as reported in his Form Es have remained unsettled for a long period of time. He questioned the genuineness of the debts. If the debts are genuine, the husband had to explain where the money had gone and why he did not made use of them on the settlement of at least some of his debts. 176.Mr Chan, on behalf of the husband, maintained that the liabilities are genuine. It was urged by Mr Chan that the court should take these liabilities into consideration when making deliberation on the level of maintenance to be payable by the husband. 177.In my view, it was clearly a calculated move on the part of the husband to make the concession so that all these tricky issues could be left untouched. However, I do not see it this way. I consider that the non-disclosure of the whereabouts of this income surplus is a breach of his duty to give a full and frank disclosure of his financial situation and the income surplus casts doubts on the authenticity of his liabilities. 178.With all these observations in mind, I now turn to the husband’s account as to how the proceeds were disposed of. $500,000 for Repayment of Konew Mortgage 179.The husband alleged he needed the $500,000 for his business. That was why he needed to take out this 2nd Mortgage. 180.It was submitted by Mr Lee that the mortgage was taken out just about 4 months before the husband’s petition for divorce. There was not a single documentary proof in support of the injection of funds. The husband simply siphoned off this $500,000. 181.I have already set out the wife’s evidence regarding the husband’s financial situation at the time. It is clear to me that on the wife’s own evidence, the husband was desperately in need of money. I believe the 2nd Mortgage was a genuine one and was not taken out with the intention to defeat the wife’s ancillary relief claims. $280,000 for Repayment to Cousins 182.The husband said he repaid his cousins $280,000 on 15 August 2014. It was challenged by Mr Lee that this item, same as the others, lacks any documentary proof. There is also a discrepancy in terms of the figure where in the Answer dated 15 May 2015 he stated the loan was $180,000 and in the subsequent Answer of 3 February 2017, he corrected it to $280,000, the figure shown on his HSBC statement; and he explained that $180,000 was a clerical mistake. For the same reason I have set out in respect of the 2nd Mortgage, I believe this a genuine item. Repayment of Debts to Suppliers and Citibank 183.In his Answer of 15 May 2015 when being asked by the wife on how he had disposed of the proceeds of sale, the husband answered he made use of $500,000 for debts of SP. Later, he expanded this sum to close to $1,200,000 in his further Answer of 3 February 2017, effectively exhausting the entire proceeds. 184.At trial, his explanation for the discrepancy was he missed the items. In my view, there is enormous difference between $500,000 and $1,200,000; there is no reason why the husband could have made the mistake. The burden rests squarely upon him to provide a satisfactory explanation on why this material discrepancy would have occurred. Likewise, the burden rests squarely upon him who is fully capable and was in sole control of the money in his disposal to provide a satisfactory explanation as to where the monies had gone. As I have analysed above, from 2012 up to the sale of the Flat H, the husband already had an extra sum of at least $4,500,000. The question of why he would have the need for another $1,200,000 remained unanswered. 185.Sachs J said of the following in J v J [1955] P 215, [1955] 3 WLR 72 at 227,
And at 228-229, Sachs J said,
186.The court is duty bound to consider by the process of drawing adverse inferences whether funds have been hidden. On the analysis that I have set out, I consider the present case is one where such inferences could be properly and reasonably drawn. I am prepared to draw adverse inferences against the husband that he has hidden assets. It has been said where a party had been guilty of not making full disclosure, he could not complain if uncertainties were determined against him: L v C [2007] 3 HKLRD 819, at [191(2)]. 187.Doing the best I can and in the broadest terms I would quantify the hidden assets at $1,480,000. This includes the $276,000 that the husband failed to account. I am conscious that the husband has incurred some legal costs. The latest Estimate of Costs dated 31 October 2019 states he has incurred $540,000. This has to be deducted from $1,480,000. Therefore, a net sum of $940,000 ($1,480,000 - $540,000) should be added back to the matrimonial pot. The Flat G 188.On 16 May 2014, the wife sold the Flat G for $4,900,000. That was roughly the time when the husband sold his Flat H for $5,500,000. 189.It is to be recalled the original mortgage in favour of HSBC had long been redeemed by using the sale proceeds of the LH Shop; so the entire $4,900,000 went to the wife’s pocket. The wife testified that she had spent nearly all the money and at the time of trial had about $200,000 left. 190.In cross-examination, the wife’s evidence regarding her monthly expenses was not impressive at all. From her 1st Form E of 7 January 2015 to the 2nd Form E of 16 June 2017, within a period of 29 months, her assets have depleted by $4,327,500 or on average by $149,200 per month. 191.It is also absurd for the wife to have said on the date of trial she had about $200,000 when her latest Form E of 1 August 2018 reported a sum of $224,831. The implication is that she only spent $24,000 in the last 14 months. 192.The wife said at the time of sale (ie May 2014) she had about $300,000; so upon completion she should have $5,200,000. As far as arithmetic goes, from June 2014 to October 2019, in about 65 months, $5,000,000 was gone. Out of this $5,000,000 around $1,000,000 was paid to her solicitors in the present proceedings. The latest Estimate of Costs lodged on 5 November 2019 shows $1,128,000. I would take $1,150,000, so on the wife’s case about $3,850,000 was used on family expenses. 193.As said above, the living standard during the marriage as painted by the wife was clearly a very comfortable one. In her 1st Form E of 8 January 2015, when she was about 6 months into the separation and was living with the 2 children, she claimed a total expenditure of $105,676 per month. This included the purchase of some tonic foods, such as cordyceps and dried fish maw, regularly at $25,000 per month. Despite her explanation, it is hard to believe that she and the children were able to consume such an extravagant sum. Besides, she continued to spend $4,000 each on grooming and holidays as if nothing had happened but the reality at that time was she was not working, engaging in costly litigations, living on proceeds of sale and not least, facing the vicissitudes of life arising from the breakdown of her marriage. 194.The wife’s subsequent Form Es returned somewhat modest figures; her 2nd Form E of 16 June 2017 stated $57,310 and her 3rd Form E of 1 August 2018 stated $57,710. Finally, her affirmation of 26 July 2019 adjusted upward the children’s expenses so that the total monthly sum came up to about $67,107. 195.The husband is willing to concede that the wife needed about $46,875 per month. 196.I have heard evidence regarding what the wife and her children currently need and what were the major changes in the last few years. Doing the best I can, and bearing in mind that the wife is found to have exaggerated the figures in her favour, I assess that overall speaking the wife and the children’s expenses should have been roughly $55,000 per month. With a period of 65 months this would give a figure $3,575,000. Added to this is the legal costs of $1,150,000, making a total of $4,725,000. In other words, $275,000 should be added back to the matrimonial pot ($5,000,000 - $4,725,000). 197.Inclusive of the $1,450,000 to be added back from the KF Property (see [150]), the total sum to be added back is $1,725,000 ($1,450,000 + $275,000). 198.With the arrival of the hidden figures, I see the signpost for finishing line. The Law and Legal Principles 199.The jurisdiction of the court in granting financial provision for a party and for a child of the family is governed by sections 4 and 5 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”). Pursuant to sections 6 and 6A of the same legislation, the court has the power to grant orders for transfer, settlement or sale of properties. 200.The principles upon which this case is to be considered are the conventional ones, namely those set out in section 7 of MPPO which confers a broad discretion on judges dealing with ancillary relief. That said, these principles are to be interpreted in the light of the Court of Final Appeal judgment in LKW v DD (2010) 13 HKCFAR 537. In that case, Riberio PJ referred to the four principles which are applicable to all ancillary relief proceeding, viz, (1) the objective of fairness: [56], (2) rejection of discrimination: [57], (3) the yardstick of equal division: [58] – [61] and (4) avoidance of ‘minute retrospective investigation’: [62] – [69]. 201.Ribeiro PJ further set out the steps to be taken by the courts in undertaking the exercise. In brief, they are:
202.Lastly, I do bear in mind the reminder given by Thorpe LJ in Parra v Parra [2003] 1 FLR 942 at [22] that the proper judicial task of the court is to exercise a singularly broad judgment that obviates the need for the investigation of minute detail. Identification of Assets 203.The husband is a minority shareholder of 5.614% shares in a private company. The parties have agreed not to include the value of these shares in the matrimonial pot. Given that this company is a private company which normally has a restriction against the sale or transfer of its shares and in the absence of any valuation, I consider this is the correct approach to be taken. 204.The parties’ assets are set out in the following table. Schedule of Assets
205.The matrimonial pot is therefore worth $12,915,900. The Husband’s Earning Capacity 206.The parties are at their prime age and well educated. 207.The husband has since graduation obtained a master’s and a doctorate degree. He is 41 years old and is working full-time as an engineering manager and part-time as a lecturer, with a total monthly income of $72,000. 208.The husband, being still young and with impressive qualifications, should be able to make further advancement in his career in terms of position and remuneration. The Wife’s Earning Capacity 209.The wife has since separation returned to school. She has completed a bachelor degree in Decision Science and a master’s degree in Technology Management in May 2018. 210.The wife agreed she has some earning capacity but is currently being prevented from engaging in any gainful employment because she has to take care of the children. She accepted that she should be able to work when the daughter is older, at the age of 15. She assessed she should be able to earn $18,000 per month. 211.The fact is all along the wife has been assisted by a full-time domestic helper and her parents. That was the situation too when she was pursuing her bachelor and master’s degrees. I am not convinced that she has to wait until the daughter turns to 15 years old. She should be able to return to the labour force anytime; and as a start should be able to earn $18,000 per month. Parties’ Financial Needs 212.Before I proceed to consider the parties’ financial needs, it is perhaps pertinent to be reminded of what Thorpe LJ said in Re P (Child: Financial Provision) [2003] EWCA Civ 837, [2003] 2 FLR 865 at [47],
213.Thorpe LJ’s comments were made in the context of a claim for maintenance under Schedule 1 to the English Children Act 1989 (equivalent to a claim under section 10(2) of the Guardianship of Minors Ordinance (Cap 13)), there is however no reason that the approach to be adopted in assessing the parties’ needs should be a different one. The Husband’s Financial Needs 214.The husband’s 1st Form E of 8 January 2015 is of little relevance since it related to the expenses when he was in Fort St. John. His 2nd Form E of 22 December 2016 - by the time he had already returned to Hong Kong - stated his expenses at $51,700 per month. The husband’s latest Form E filed on 13 August 2018 showed a monthly expense of $47,000 of which $7,000 was attributable to the children. 215.There are a few items that I find uncomfortable with when, as claimed by him, he is heavily indebted. 216.The first is the total food expenses of $10,000 per month. The husband explained he has to socialize and treat his parents. It may be that at times he has to dine out with friends and parents but I have no doubt it is on the high side when he considered that the wife and the 2 children’s food expenses, both at home and outside, should be $5,500 only and when he is already paying $5,000 for the maintenance of his parents and on the top of that, he is paying the utilities and the miscellaneous expenses for them. 217.I believe the husband has exaggerated his travelling, clothing, entertainment, and holiday expenses when they are in the respective sums of $7,000, $3,000, $2,000 and $3,000. 218.There is no justification for him to say he needs medical expense of $2,000 when he said there is an insurance coverage by his employer and for this reason at one point he said his children only need negligible sum for their medical expense. 219.Doing the best I can and adopting a board-brush approach, I assess the husband’s monthly needs as follows, Husband’s Monthly Expenses
220.I am conscious that if the WH Flat is sold, in all likelihood the husband would have to lease an apartment in which event his monthly expenses may increase by say $10,000. I assess his needs at $49,250. The Wife’s Financial Needs 221.The husband criticised the wife for having over exaggerated her financial needs. He assessed the wife’s general expenses and personal expenses should only be $29,810 (inclusive of rental of $18,000) and $6,500 respectively and the children’s expenses are $5,460 and $4,950, making a total of $46,720. 222.I am conscious that needs should be “generously interpreted” (see: LKW v DD (2010) 13 HKCFAR 537 at [79]) and have to be considered in light of the circumstances of each case. 223.Doing the best I can and taking a board brush approach, I assess the wife and the children’s needs as follows.
224.Therefore, the total family expenses are $55,590 per month. I round it up to $56,000. Maintenance for the Children 225.The children need $15,280 when they are under the care of the wife. In addition, they have a share in the general expenses. Taking a board brush approach that they take up 2/3 of the general expenses, this would mean a further sum of $22,540 ($33,810 × 2/3). The total sum that the children need is therefore $37,820 ($15,280 + $22,540). I would round it down to $37,800. 226.I am conscious that the husband has to incur some expenses when the children are with him. As I have already factored these expenses in as part of the husband’s monthly expenses, for the present purpose, I only need to deal with how the financial responsibility is to be shared when the children are under the care of the wife. 227.I have assessed that if the husband has to rent a place he would need about $49,250 per month and the wife and the children need $56,000, a total of $105,250. It is quite clear that even with a monthly income of $18,000 for the wife, the total monthly income of both parties would not be sufficient to support their daily living. The implication is that inevitably they would have to resort to some measures of austerity or else would have to rely on some of the capital split or both, at least on a short term basis. For this reason, I consider that in fairness both parents should be held responsible in part for their children’s living expenses. The husband currently has a much higher earning capacity so he should take up a greater portion of the burden. Without being arithmetically precise, I consider that the wife should be responsible for $7,000 and the husband should take up the remaining $30,800 ($37,800 - $7,000). 228.The husband should therefore pay a monthly maintenance of $30,800 for the children (ie $15,400 each). 229.I decline to make an Attachment of Income Order at this stage. By now the husband should have realized that an order or a direction from the court has to be complied with, failing which grave consequences will follow. Where necessary, the wife should take out her application under the Attachment of Income Order Rules (Cap 13A). Deciding to Apply the Sharing Principle 230.It appears that after the parties’ and their children’s daily needs have been taken care for, there are surplus assets available for division by the parties. The court generally decides, at this stage, that the sharing principle applies to the total assets, so that they should be divided equally between the parties unless good reason exists to the contrary: WLK v TMC (2010) 13 HKCFAR 618, at [82] Whether good reasons for a departure from equality exist 231.As said above, counsel agree that there are no departing factors and the matrimonial assets should be shared by the parties on an equal basis. Though the court is not bound by the consensus of the parties in the exercise of its discretion, having regard to the fact that in reality it is a relationship lasting for 14 years and each had contributed his or her due share to the family prior to the breakdown of the relationship, the present case is one that seems to me equal division is just and fair to both parties. Deciding the overall outcome 232.I have quantified the family assets at $12,915,900; equal division of them would result in each having $6,457,950. Having regard to all the circumstances of this case and to the parties’ responsibility in taking care of the financial needs of the children, I believe an equal division of the assets is a fair financial outcome for the parties. 233.Leaving the 4 landed properties aside, the value of the remaining assets is $2,915,900 ($12,915,900 - $10,000,000). Each should have $1,457,950 ($2,915,900 ÷ 2). The wife already has $1,949,900 which is more than her share, so subject to the adjustment to be made in the following paragraphs regarding the rental income, the wife should pay the husband an equalization money of $491,950. 234.The 4 landed properties should be sold as soon as possible. In accordance with the parties’ consensus, the net proceeds of sale are to be split equally. I would give them 6 months to liquidate the assets. Rental Income 235.The WH Flat was originally rented out but the husband moved in to live there upon return from Canada. 2 of the 3 car parking spaces (ie CP1, CP2 and CP3) have all along been rented out for income and the remaining one has been used by the husband. Since the parties’ separation in June 2014, all the rental incomes have been pocketed by the husband. The husband is willing to repay the wife half of the net rentals. The parties only have a slight difference of $4,000 in terms of the gross rentals received. Since the rental matters were handled by the husband he should have personal knowledge on the matter and further that, as a matter of fact, his gross figure is in fact the higher one. I will take his figure of $497,800. 236.The parties however differ greatly on the quantum of expenses incurred during the rental period. The husband insists that the mortgage payments for the WH Flat throughout the period has to be included as expenses while the wife takes the view that the mortgage payments during the rental period only should be considered as expenses. I have to agree with the wife on this for the simple reason that if there is no income there is no basis for expenses to be deducted. The mortgage payments and the rates during the period when the husband was using the properties were his general or personal expenses. I reckon that the mortgage payments together with the government rates for the WH Flat should be $4,550 ($4,200 + $350). A period of 12 months would give a figure of $54,600 ($4,550 × 12 months). 237.As for the car parking spaces, the rates and government rents are said to be $350 each, hence the total sum is $45,500 ($350 × 2 × 65 months). 238.The net rental income is therefore $397,700 ($497,800 – ($54,600 + $45,500)) and so half of it that the husband is liable to reimburse is $198,850. This sum can be set off by the equalization money of $491,950 payable by the wife. The net effect is that the wife has to pay a lump sum of $293,100 to the husband. Nominal Maintenance 239.The wife seeks a nominal maintenance order in her favour. Regrettably no submission was made by either side in this regard. 240.A clean break is to be encouraged wherever possible: VP v JP [2008] EWHC 112 (Fam), [2008] 1 FLR 742, at [59]. At the same time, I do bear in mind the remarks made by Baroness Hale in Miller v Miller and McFarlane v McFarlane [2006] 2 AC 618 that too strict an adherence to equal sharing and the clean break can lead to a rapid decrease in the primary carer's standard of living and a rapid increase in the breadwinner's: [142]. 241.With the husband taking up a substantial portion of the children’s financial needs, in times, the wife should be able to attain financial independence. That said, for the reasons that the wife has not been working since 2012 and that in reality it is a relationship lasting for 14 years, I think it is fair to give her a nominal maintenance in case of any substantial change in the circumstances in the future. Interim Maintenance in Arrears 242.The wife seeks to have the unpaid interim maintenance plus interest to be repaid by the husband in one lump sum of $2,330,517. 243.The wife has already made use of the proceeds of the Flat G, which otherwise would have been available for division between the parties, towards the children’s living. There would be double counting if this application is allowed. As such, I do not find any basis for this claim. Orders 244.For the reasons aforesaid, I make the following orders:
Costs 245.In terms of the awards given neither party can be considered as successful in his or her application. Most importantly, both are culpable of being untruthful to the court as regards their hidden assets. All in all, on any view, neither party can be regarded as the overall winner. Taking a broad-brush approach, I consider that the appropriate costs order should be no order as to costs. 246.I make an order nisi that there be no order as to costs of the ancillary relief proceedings (including all costs reserved) with counsel certificate. Section 18 Declaration 247.Lastly, I am satisfied that the arrangements made in respect of the children of the family to whom section 18 of MPPO applies for their welfare are satisfactory or are the best that can be devised in the circumstances and I accordingly make a declaration to this effect.
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