Case Document

100%Judiciary

FCMC3409/2019

[2020]HKFC142

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 3409 OF 2019

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BETWEEN
	LKCS	Petitioner
	And
	WYSA	Respondent

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Coram: District Judge K.K. PANG in Chambers (Not open to public)

Date of Hearing: 9 July 2020

Date of Judgment: 20 July 2020

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J U D G M E N T

(Maintenance Pending Suit)

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Background

1.The parties were married in 1986 in Hong Kong. The children of the family namely a girl (‘the daughter’) and a boy (‘the son’) were born in 1990 and 1993 respectively. The daughter graduated from Oxford in 2011, and then obtained P.C.LL. from HKU and became a barrister-at-law. The son graduated from the Brown University in 2015. The respondent wife (‘W’) as the petitioner therein petitioned for divorce under FCMC 12581/2016 on 30 September 2016. By consent, the said petition was withdrawn on 30 November 2016. The parties began to live apart in January 2017. The petitioner husband (‘H’) petitioned for divorce under the present proceedings on 25 March 2019. By the summons dated 9 December 2019, W made an application for maintenance pending suit (‘MPS’) for herself in the sum of $90,000 per month, the first payment to be paid on the date of the order to be made. Despite that W’s summons dated 9 December 2019 does not include any application for litigation funding, Mr Melvin Ho counsel for W argues that W should be granted litigation funding by reason of her immediate and reasonable needs. This is the hearing of W’s said summons.

2.The Decree Nisi was pronounced on 14 May 2020.

3.While H opposes W’s present application, he proposes that: -

(1) A commercial building unit in Queen’s Road West (‘the Kenbo Property”) jointly held by the parties through different holding companies be sold and the net sale proceeds (estimated at about $4.8 million) be divided equally between the parties; or alternatively

(2) An insurance policy dated 23 December 2014 (‘the Business Fund’) that was purchased by W for the son with an annual premium of $650,000 be surrendered and the cash value be divided equally between the parties. According to the illustration provided by the policy document, the current cash value is between $1,988,120 to $2,556,870.

The Applicable Principles

4.W’s application is governed by section 3 of the Matrimonial Proceedings and Property Ordinance, Cap. 192.

5.The court has a wide discretion in the matter, subject to the result being reasonable: TL v ML & Ors (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263 per Deputy High Court Judge Mostyn QC (as he then was) at 1289:

“The sole criterion to be applied in determining the application is ‘reasonableness’ (s. 22 of the Matrimonial Causes Act 1973), which, to my mind, is synonymous with ‘fairness’.”

6.Rayden[1] at §11. 78 provides:

“There is no hard and fast rule, and no fixed proportion: each case depends on its own facts. The approach to maintenance pending suit should be empirical, and that ‘in the ordinary sort of case the district judges who deal with these applications will have to take a broad view of means on the one hand and income on the other and come to a ‘rough and ready’ conclusion, or to take a ‘broad brush approach’. The overall consideration is the actual needs of the parties pending suit.”

7.In HJFC v KCY [2012] HKFLR 27, Hartman JA said at §37:

“The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness. This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a deputy High Court judge, in TL v ML and Others (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it. For present purposes, it is sufficient to cite the relevant principles without citing the judge’s reference to the source of those principles:

i. The sole criterion to be applied in determining the application is ‘reasonableness’, which is synonymous with ‘fairness’.

ii. A very important factor in determining fairness is the marital standard of living. This is not to say that the exercise is merely to replicate that standard.

iii. In every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing. That budget should be examined critically in every case to exclude forensic exaggeration.

iv. Where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources. In such a situation, the court should err in favour of the payee.

v. Where the paying party has historically been supported through the bounty of an outsider, and where the payer is asserting that the bounty had been curtailed but where the position of the outsider is ambiguous or unclear, then the court is justified in assuming that the third party will continue to supply the bounty, at least until final trial”

W’s reasonable needs

8.H argues that the parties has made gross profits of about $17,834,800 (before deduction for expenses) through the sale and purchase of landed properties in Hong Kong during the period from March 2004 to September 2008. W contends that H’s argument is misconceived in that his calculation wrongly assumes that the entirety of the profits made were cumulative. Despite that W has produced a table

showing that most of the profits made from previous sales were reinvested into following property purchases, H believes that W is yet to give a full account of the whereabouts of the said $17,834,800. The parties went to great lengths to show their respective cases on whether W has hidden assets. I however take the view that it is inappropriate to make any finding on the parties’ factual disputes in this regard on paper examination. I leave the matter to be dealt with in the substantive ancillary relief proceedings.

9.On 23 December 2014, W purchased the Business Fund for the son with an annual premium of $650,000. W suggests that the parties both have agreed to set up the Business Fund for the benefit of the son. W has paid the annual premium of $650,000 for 4 years, i.e. from December 2014 to December 2018. In order to pay the annual premium, W alleges that she borrowed from the Bank of China $710,000 in 2017 and $276,975.13 and $257,473.75 in 2018 and she withdrew her entire MPF of $488,399.56 in November 2018. H vehemently denies W’s contention that the Business Fund was set up with his agreement. In H’s opinion, W has used the Business Fund as an excuse to transfer away not less than $650,000 X 4 = $2.6 million of the family asset.

10.W has stated in a bank Application Form dated 20 July 2016 that she had shares/ unit trusts of about £1,050,000. W now denies that she has had any shares or unit trusts and she suggests that the said statement in the said bank document is untrue. She explains that she made the said statement because she believed that it would assist her application for a mortgage to fund the purchase of an apartment in London (‘the Wellington property’) at that time. In H’s opinion, W’s denial is artificial and utterly unbelievable.

11.Nevertheless, H takes notice that: -

(1) On 20 February 2017, W sold a landed property in Hong Kong (‘the Kee On Property’), held by W through a shelf company, for $4.85 million and obtained the net sale proceeds of $3,688,378.

(2) On or about October 2017, W sold a landed property in Japan held by W and obtained the net sale proceeds of $433,856.76.

(3) On or about December 2017, W sold the 2^nd landed property in Japan held by W and obtained the net sale proceeds of $491,258.

(4) On or about June 2018, W sold the 3^rd landed property in Japan held by W and obtained the net sale proceeds of $851,525.

(5) The said sale of the 4 properties were without his prior knowledge or consent.

12.The total net sale proceeds of the said 4 properties amounts to $5,465,000. While W contends that she has already used up the proceeds from the sale of the Kee On Property and the 3 properties in Japan to support her living and personal expenses, H is of the opinion that it is unreasonable that W suggests that she has spent her savings of about $2.5 million and the said $5,465,000 i.e. totally about $8 million over a period of about 3 years i.e. from the parties’ separation in January 2017 to the date of the present application in December 2019.

13.As shown in the Audited Report of a company held by W, there was a dividend payment of $5.3 million. W explains that the said dividend payment is an overlapping with the net sale proceeds of the Kee On Property. H does not accept her explanation. In his opinion, W has yet to disclose the whereabouts of the said $5.3 million.

14.W contends that she is currently heavily indebted to her friend Pricilla, younger brother Frank and the two children of the family. In contrast, H expresses the opinion that there is serious doubt whether W’s said debts truly exist and whether they need to be repaid at all.

15.It is clear to me that I am not in a position to resolve the parties’ factual disputes at this interlocutory stage, however. I leave the parties’ differences as set out in the above paragraphs (8) to (14) inclusive to be dealt with in the substantive ancillary relief proceedings.

16.For the present purpose, it can be safely assumed that the bulk of the matrimonial assets include 4 landed properties, namely (1) the Kenbo Property; (2) the Wellington property; (3) an apartment in Middlesex, London (‘the Middlesex property’); (4) a condo unit in Phuket (‘the Phuket property’) of which properties (1), (2) and (3) are jointly held by the parties and property (4) is registered in W’s sole name. Apart from the above landed properties, the parties each own a number of insurance products, the cash value of which are to be confirmed.

17.Both parties are aged 62. During the period from 1999 to 2015, W worked as an insurance agent. W started winding down her business as an insurance agent in around 2015 and has become fully retired since November 2017. It is undisputed that H used to pay W about $65,000 to 70,000 per month for monthly expenses, in addition to payment of W’s supplementary credits cards and rental payment. He has stopped making any payment since June 2017. For the purpose of the present application, W contends that she has no income apart from the rental income of roughly $25,000 per month from the Wellington Property and averagely $4,000 per month received from the daughter, and that she has only $43,640.11 in savings left and has no other liquid or otherwise realisable assets, excluding about £20,000 presently in a joint HSBC UK account, and that she has to borrow from the two children of the family, Frank and Pricilla to meet her monthly general and personal expenses. W denies that the disclosure given by her has been materially deficient or that she has any hidden assets. H contends the said £20,000 presently in the joint HSBC UK account should be kept as reserve for the purpose of meeting the mortgage payments during the rainy days.

18.H argues that W could be back in gainful employment as an insurance broker or property investment consultant given her experience in the area despite a short break of 2 years and 7 months. W is aged 62 and has lost touch with the business world for some time. I regard that it is unrealistic to expect her to immediately return to a gainful employment, despite that I remains open to the argument that W should work in the longer term.

19.According to W, her monthly general household expenses and personal expenses are $39,840 and $29,182 respectively, totally $69,022. H’s comments on the same are as follows: -

General

W
$

H
$

Rent
25,000

2,500

Utilities
940

940

Food
8,000

3,000

Household expenses
1,000

0

Home insurance
1,000

1,000

Part-time helper
610

0

Others
1,900

900

39,840

9,340

Personal

Meals out of home
6,000

4,000

Transportation
2,000

2,000

Clothing/ Shoes
500

3,000

Personal grooming
1,200

2,000

Entertainment/ presents
632

1,000

Holidays
1,200

3,000

Medical/ Dental
2,000

2,000 (on reimbursement basis)

Insurance premia
5,800

5,800

Mobil phone/ ipad/iwatch
1,500

0

Hobbies
4,900

2,000

Massage
2,400

300

Misc.
1,000

0

29,182

23,100 plus reimbursement not exceeding $2,000

Total
69,022

32,400 plus reimbursement not exceeding $2,000

20.Despite W’s allegation that Frank will return to Hong Kong in August 2020, H argues that W has no urgent need to rent her premises now for the following reasons. First, given the recent health crisis, it is uncertain and indeed unlikely that Frank will in fact come back to Hong Kong. Second, it is W’s evidence that Frank comes back regularly from Japan for a short stay only and therefore W’s true needs are a small sum for her short stay in hotels when Frank comes back to Hong Kong. In his calculation, W only needs a sum of averagely $2,500 per month for renting hotel rooms. Third, he argues that W could consider living with the daughter during such interim period. On top of the above, H argues that W’s monthly general expenses and personal expenses are excessive. Despite that it is accepted that the parties lived a comfortable living standard during the marriage, I take the view that both parties however might have to face the current financial difficulties and dramatically economise the monthly expenses. Taking a broad brush approach, I accept H’s comments on W’s monthly general and personal expenses. In short, I accept that the immediate and reasonable needs of W are in the sum of not exceeding $32,640 per month.

21.It is W’s evidence in her 1st Affidavit dated 9 December 2019 that she receives on average $8,000 per month from the daughter. W’s counsel now alleges in his submissions that W receives on average $4,000 per month from the daughter. No reason or explanation are given. No clarification of the same was made in W’s 2^nd Affidavit dated 26 June 2020. After having carefully considered all evidence, I accept that I should take the figure of $8,000 per month as what W receives from the daughter for the present application. In view of the above matters, W has a monthly income of $33,000 that is sufficient to meet her immediate needs.

22.What is more, I take notice that W has unreasonably refused to accept the proposal that the Kenbo Property be sold and the net sale proceeds be divided equally between the parties. W has made the excuse that she needs half of the Kenbo Property for storage of personal belongings. I take the view that such feeble excuse is unacceptable, given that it is indisputable that there are plenty of storage places available for rent for the safe keeping of personal belongings.

23.Additionally, W’s counsel now asserts in his submissions that the Wellington Property and the Middlesex Property are not properties that can be realised. I take notice that such assertion is not supported by any evidence in W’s 1^st and 2^nd Affidavits and naturally I have no intention to accept counsel’s bare assertion. Over and above that, there is nothing in W’s 1^st and 2^nd Affidavits that can show to the court why the Phuket Property cannot be realised.

24.By reason of the matters aforesaid, I do not accept W’s contention that she has no realisable assets.

H’s ability to pay

25.H, aged 62, is a barrister-at-law of significant seniority. His average gross monthly fee income was $360,974 in 2017/2018, $281,712 in 2018/2019. After slightly picking up to $360,644 per month during the period from May 2019 to April 2019, it dropped to $222,477 per month during the period from May to December 2019. He affirms that his income has been dropping and the decline since January 2020 is expected to be even more noticeable, given the impact of the Covid-19 pandemic and the closure of courts. Despite the decrease in his fee income, his professional expenses e.g. chambers fees have remained more or less the same, i.e. around $100,000 per month. In the premises, his current monthly net income is around $120,000 per month. According to H’s Form E dated 12 August 2019, his current monthly general and personal expenses are $166,751 and 90,900 respectively, totally $257,651. Despite that he is living with his new partner and her two girls (aged 12 and 15 respectively), he does not include any children expenses in his current monthly expenses. He also claims that some of the household expenses are covered by his new partner and she is contributing $29,000 per month for the rent. W asks the question of how he will be able to keep up his current monthly expenses, if he earns only around $120,000 per month. W suggests that H inflates his currently monthly expenses and deflates his income and assets to defeat W’s claim for MPS. H contends that he has been going into debts to support the comfortable living standard of his family, as he did the same during the parties’ marriage. He said he was heavily indebted even prior to the parties’ separation. As shown in his Form E dated 12 August 2019, he had bank loans and overdrafts of totally about $2.7 million. His debt situation has even exacerbated since then due to the decline of his fee income. Looking at the matters in the round, I tend to accept H’s case in this regard. For the present purpose, I accept that his currently take-home income is about $120,000 per month. I am however open to review the question of H’s earning capacity at the substantive hearing.

26.H argues that he has kept his expenses at a low level for a family of 4. W comments that some of H’s alleged expenses are clearly unreasonable. She also contends that H cannot choose to prioritise his new family and ignore his obligation to support W, cites Vaughan v Vaughan [2010] 3 WLR 1209 in support. H has a total monthly expenses of $257,651. Most of his expenses go to fixed monthly payments. Out of the said sum of $257,651, he has to make mortgage repayments for the Wellington Property and 3 other personal loans at a total monthly sum of $107,251. He also needs to pay tax of averagely $32,700 per month. These fixed payments amount to about $140,000 per month. H’s current net income of around $120,000 per month is barely sufficient to cover the fixed payments of about $140,000 per month. It is therefore clear that he does not have the ability to pay W any MPS. In the circumstance, I do not need to go for a detailed forensic examination of each and every expense. I however maintain the view that both parties need to cut down on monthly expenses in view of the current financial difficulties. W contends that the court should take into account H’s ability to borrow to fund the MPS payment. Despite W’s contention to the contrary, I do not regard that it is fair that H should go further into more debts so that he is able to pay MPS in the present case.

27.Having carefully considered all evidence, I consider that W’s MPS application must fail.

28.I am aware that the issue on the parties’ respective financial positions remains a continuing source of disputes that will be sorted out at the substantive hearing.

Legal costs provision

29.The relevant legal principles have been recently reviewed by B Chu J in LCYP V JEK [2018] HKCFI 1907: -

‘26. The Court's power to order MPS (including element for legal costs provision) is stated in section 3 of the Matrimonial Proceedings and Property Ordinance, Cap 192. The sole criterion stipulated by that section is "reasonableness", which has been said to be synonymous with "fairness" ⁵.

27. Wilson LJ had said in Currey v Currey (No 2) [2007] 1 FLR 946 ⁶:-

"In my view the initial, overarching inquiry is into whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means. Thus, to the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services. Furthermore, not to forget the third of Thorpe LJ's three features, she has also to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery. I would add, fourthly, that the court needs also to be satisfied that there is no such public funding available to the applicant as would furnish her with legal advice and representation at a level of expertise apt to the proceedings, i.e. that the applicant does indeed in that regard fall within the unserved constituency…"

28. In short, the overarching inquiry is into whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means and that:

● (i) To the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services.

● (ii) She has also to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery;

● (iii) The court needs also to be satisfied that there is no such public funding available to the applicant as would furnish him/her with legal advice and representation at a level of expertise apt to the proceedings.

29. What was said by Wilson LJ in Currey was endorsed by Cheung JA and Hartman JA in HJFG v KCY [2012] 1 HKLRD 95 ⁷who held that the Currey principles should in future be adopted as providing prudent guidance to both judges and practitioners in this jurisdiction.

30. Mr Yim had also referred the Court to the English case of A v A (Maintenance Pending Suit: Payment of Legal Fees) [2001] 1 WLR 605 , in which the wife who was dependent upon the husband applied for an order for maintenance which includes provision for legal costs. Holman J had stated as follows ⁸:-

"But Mr Singleton submits that the costs of the suit itself are in a different category. I do not agree. Just at the moment they are, after the provision of a roof over her head and food in her mouth, the wife's most urgent and pressing need and expense. She could manage without holidays, though I have made some provision for them. She could no doubt manage for a while without buying new clothes. She could manage for a while without buying new clothes. She could manage without her manicures, pedicures and yoga and keep fit classes, for all of which I have, on the facts of this case, made provision. She could even manage without the provision for forms of private medical care (to which the family has been accustomed) for, if necessary, she could fall back on the NHS. But she simply cannot make any progress with the dominating issue in her life if she cannot pay her lawyers, and for this the state will not provide." (emphasis added)

31. As to why legal costs provision is particularly crucial in cases where there is a great disparity in wealth and earning capacity as a consequence of the marriage, Holman J had this to say:-

"This wife has always been dependent on her husband. She is locked into a bitter struggle with him, whose outcome is of intense importance to her. She has an acute need for good legal representation and in circumstances in which her lawyers do not lawyers have to be desperately economizing relative to the husband. He himself is spending huge sums on the litigation. He can, in my judgment, afford to pay the sums I have ordered and it is reasonable that I should require him to do so ⁹."

He then went on to say:

"In my judgment, in an appropriate case, maintenance pending suit provides a partial answer and, for the reasons I have now given, I made the order in the present case. I add that, since I made the order, the House of Lords has given its judgment in White v White [2000] 3 WLR 1571. That did not, of course, impact at all on my decision which I had reached and announced several days earlier, not on my reasons for it. However, Lord Nicholls of Birkenhead stressed, in relation to the substantive outcome, that there is to be no place for discrimination between husband and wife and their respective roles. In my view, that substantive approach may be illusory if a wife is unable to vindicate it due to the difference in their roles, and its discriminatory effect upon their income and capital and upon a wife's ability to match the legal representation of her husband. The changing climate for the outcome of matrimonial litigation, which the House of Lords has clearly heralded, further fortifies me in my view as to financing its interlocutory stages ¹⁰." ’

30.Up to her 2^nd Affidavit dated 26 February 2020, W’s legal fees incurred are $870,000, of which $276,000 is outstanding. She anticipates that she will need to pay around $66,000 per month as legal fees going forward. She relies upon the Form H dated 11 June 2020 in support of the estimate of her future legal costs.

31.H has rightly pointed out that there is no claim for litigation funding in W’s summons dated 9 December 2019. W firstly raised that she needs a sum of $66,000 per month as legal costs going forward in her replying 2^nd Affidavit. Without a proper application, I accept that her so-called application for litigation funding is unlikely to ever get off the ground. More importantly, I have found in the above that W has failed to prove that she cannot deploy the Kenbo Property, the Wellington Property and/ or the Middlesex Property in order to meet her legal costs. Accordingly, she has failed to bring herself within the Currey test. After

having carefully considered all evidence, I take the view that W’s application for litigation funding must fail.

Disposal

32.It is ordered that W’s present application be dismissed.

Costs

33.I take the view that W’s present application is unmeritorious. I see no reason why costs should not follow the event. I would make an order nisi that W shall pay H the costs of by this application including all reserved costs with certificate for counsel’s attendance. The order nisi becomes absolute 14 days after this order is made unless a party has applied to the court for varying the order.