Cyct v. Fhjal
Read the full judgment text of FCMC 16235/2012 on BabelCite. This Family Court judgment was delivered on 11 April 2022 before HH Judge C.K. Chan.
Matrimonial law – variation of maintenance – material change in circumstances – financial disclosure – assets – lifestyle – District Court. Material change in husband's financial circumstances found due to business failure and loss of employment. Wife found to have substantial undisclosed assets including French properties and bank accounts. Maintenance varied downwards to US$5,500 per month temporarily then to nominal sum. Each party to bear own costs.
Legal issues: Material change in circumstances · Husband's financial circumstances · Wife's financial circumstances · Variation of periodic payment order
Outcome: Application for variation of maintenance granted. Maintenance varied to US$5,500 per month from 4 April 2019 to 10 April 2022, then nominal HK$1 per annum from 11 April 2022.
Cites 1 case
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FCMC 16235/2012 [2022] HKFC 76 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 16235 OF 2012 ------------------------
------------------------ Coram: HH Judge C.K. Chan in Chambers (Not Open to Public) Dates of Hearing: 6-7 May 2021 Date of Respondent’s Closing Submissions: 31 May 2021 Date of Petitioner’s Closing Submissions: 31 May 2021 Date of Respondent’s Reply Submissions: 15 June 2021 Date of Petitioner’s Reply Submissions: 15 June 2021 Date of Judgment: 11 April 2022 ---------------------------------------------------- J U D G M E N T (VARIATION OF MAINTENANCE) ----------------------------------------------------- 1.This is a hearing of the Respondent’s summons filed on 4 April 2019 (P/17) for the maintenance payable by him be varied to a nominal sum of HK$1 per annum, or to such order as this court sees fit. 2.The Petitioner opposed the application. 3.Despite the fact that the parties’ marriage had ended long time ago (decree absolute of divorce being made on 23 January 2015), I shall continue to refer to the Respondent as “the husband” and the Petitioner as “the wife” simply for the sake of convenience in this Judgment. Background 4.The husband is now aged 64 and the wife aged 55. 5.The parties were married in France in June 1993, and shortly thereafter, they moved to Hong Kong in August of the same year. On 12 August 1993, they set up a company called SA for the business of sourcing and packaging of promotional materials for cosmetics and fragrances, and distributing various luxurious goods. 6.Within wedlock, a daughter (“A”) was born in 1996 who is now aged 26 and has completed her tertiary education. 7.On 16 June 1999, another company called TMHK was formed after the husband had successfully obtained exclusive distributorship of the T brand from the parent company in France. 8.In about July 1999, the wife moved to Los Angeles, USA with A and a property at Los Angeles, California, USA (“the CA Property”) was purchased for their residence. 9.From 2008-2012, there was discussion of the family moving back to Hong Kong, but instead, the wife moved to Taiwan in 2010. In the summer of 2012, the wife was told that the marriage was over and on 2 November 2012, a petition for divorce was issued by the wife based on the husband’s behaviour. On 26 November 2013, a decree nisi of divorce was pronounced, which decree was made absolute on 23 January 2015. 10.A consent order was granted on 28 March 2013 in which a joint custody order on A was made with sole care and control to the wife, and reasonable access to the husband. 11.As far as ancillary relief was concerned, the parties were able to reach an overall settlement before HH Judge Bruno Chan on 15 January 2015 (“the Consent Order”) in which they agreed, inter alia, that:
12.It was the husband’s case that his business started to encounter difficulties in 2015 causing his failure to pay the monthly maintenance for June and July 2015. He reduced the amount to US$7,000 starting from August 2015. He said an oral agreement was reached with the wife for the monthly maintenance to be reduced to US$5,000 per month in January 2016, but the sum was slightly increased to US$5,500 per month as from March 2017. 13.The wife denied that there was such an agreement for the reduction in maintenance. 14.The first instalment of the lump sum payment at HK$1,500,000 was supposed to be made on 15 January 2017. The husband failed to pay the first instalment. 15.On 20 October 2017, the husband sold his remaining shareholdings in TMHK for €140,000 and 125 non-voting shares in TIL, which was the new holding company of the T Group in Hong Kong. Under the terms of the Consent Order, the whole lump sum of HK$7,500,000 has become payable due to the sale of the husband’s shareholdings in TMHK. There was no dispute that the husband failed to pay the whole lump sum, or any part of it. 16.On 11 January 2019, TIL terminated the husband’s employment with effect from June 2019. The husband ceased paying maintenance altogether starting from 1 February 2019. 17.On 4 April 2019, the husband filed his present summons for variation of the wife’s maintenance to a nominal sum of HK$1 per annum. 18.It is to be noted that on 3 May 2019, the husband has also applied for setting aside the lump sum payment in the Consent Order by instituting proceedings in the Court of First Instance. But it has been made clear by the husband at the outset of this hearing that his present application only concerns with the periodic payment order, but not the lump sum order. 19.The trial of the husband’s summons was fixed on 6-7 May 2021 but since the wife had all along been residing in the USA and under the present public health situations, her personal attendance at trial was not feasible. Her application to give evidence through video link was approved. The Legal Principles 20.The Court’s power to grant an order for variation is governed by s11 (1) and (7) of the Matrimonial Proceedings and Property Ordinance, Cap.192 (“MPPO”) which provides as follows:
According to the said provision, the court, in considering such an application for variation, has to consider all the circumstances of the case and in particular, any changes in the matters to which regard has been made in reaching the original order. 21.In the case of AEM v. VFM[1], Cheung JA has explained the modern approach in dealing with such an application at paras 14.4-8 of the Judgment:
22.As to the weight to be attached to the original order, Tang VP (as he then was) said in the case of HCTT v. TYYC [2008] 5 HKC 86 at paras 15-16:
23.I shall bear the above principles in mind when I come to consider the facts of this case. Issues 24.After hearing the parties, I am of the view that there are 4 main issues to be determined by this court:
Material Change in the Circumstances? 25.It was the case of the husband that his businesses had encountered difficulties in the year of 2015. At the time of the Consent Order (i.e. 15 January 2015), the husband was the Chief Executive Officer (“CEO”) and sole shareholder of TMHK. His monthly income at that time consisted of 3 parts:
26.By reference to the husband’s Form E dated 25 February 2013 (P/016-017), his then monthly expenses were HK$138,957, inclusive of US$10,000 (HK$78,000) payable to the wife. 27.According to the husband, TMHK started to lose money towards the end of 2014, cumulating in a loss of over HK$3,000,000 for the period from 2015-2016. As a result, he had to forfeit his salary of HK$100,000 from June to August 2015, and afterwards reduced it to HK$58,500 from September 2015 to February 2017. No dividends were declared by TMHK since the financial year of 2014. 28.In order to resolve its financial difficulties, TMHK had to obtain credit from its main supplier, SDR of France, which was also the owner of the trademark of “T”. On 15 September 2015, SDR became the 49% shareholder of TMHK. 29.There was some improvement in TMHK’s finances from March 2017 to January 2019 and the husband’s monthly salary was restored to HK$100,000. However, there was still no dividends being declared or paid by TMHK. 30.Due to this ongoing financial difficulty, on 13 October 2017, the husband had to sell his remaining interest in TMHK and its subsidiaries for €140,000 plus 125 non-voting shares in TIL, the T Group’s new holding company in Hong Kong. 31.On 11 January 2019, the husband’s employment with TMHK was terminated. He was put on notice for 3-months’ gardening leave. His income and benefits were terminated on 17 April 2019. 32.It was the husband’s case that he had all along kept the wife informed of his financial difficulties. He was also grateful for the wife’s understanding and an oral agreement was reached for the monthly maintenance to be reduced to US$5,500. 33.The oral agreement was denied by the wife. She did not accept that there was a genuine change in the financial circumstances of the husband, or alternatively, they were not unforeseen or unforeseeable changes. My Views 34.After hearing the parties in court and reviewing all the documentary evidence submitted, I accept that there had been a material change in the financial circumstances of the husband. He had set out clearly the deterioration of the finances of TMHK from 2015 onwards, with proper documentations including audited accounts. I note that such deterioration happened over a period of time, stretching from 2015 to 2019, resulting in the eventual sale of TMHK to TIL. There was no evidence to suggest that this deterioration of the company’s finances was contemplated by any party at the time of settlement. On the other hand, there was clear evidence on the sale of TMHK and the subsequent termination of the husband’s employment in 2019. I am not convinced that the husband’s loss of income and the sale of TMHK was a sham for the purpose of defeating the wife’s maintenance order. After all, I do not see a serious challenge being put up against the genuineness of the sale of TMHK to TIL. As a matter of fact, when the wife was crossed examined by counsel in court, she accepted that there was such a change of circumstances when she was referred to the documentary evidence on the termination of the husband’s employment. 35.There was also evidence to suggest that the husband’s financial predicament had been conveyed to the wife back in August 2015 when they discussed about A’s educational costs through email exchanges (A1/192-193). From the tone of their discussion, the wife was certainly not happy about the reduction in maintenance, but she nevertheless showed her understanding. She had not raised any doubt on the husband’s financial difficulties but only blamed it on the husband’s mismanagement of his finances. There were words of encouragement in asking the husband not to lose hope and even some business advice was given at the end of the email. There had not been any formal objection to the reduction in maintenance payable by the husband. Bearing all these evidence in mind, I am prepared to accept the husband’s evidence that there had to be an agreement, or at least some form of tacit understanding between the parties on the reduction in maintenance. The Husband’s Financial Circumstances 36.The next issue is the husband’s current financial circumstances. 37.The husband is now aged 64. According to him, his employment with TMHK was terminated on 17 April 2019, after which he was subject to a non-compete clause for a year. In his supporting affidavit filed on 4 April 2019 (i.e. shortly before his formal termination of employment) (at §§ 21-22, P/26-27), he said he would negotiate with the company to vary the non-compete clause. But even if that was successful, at his then age of 61, he was not confident that he could regain the level of remuneration that he used to have at TMHK. 38.As to his current financial position, it could be found in his answers to questionnaire dated 15 April 2021 (P/199-216). In gist, the husband said he had tried to obtain employment by using his network and connections. But since he had been self-employed since 1992, he was difficult in finding recruiters who could find placement for him, especially when he was already over 60 years of age. He was currently engaged in free-lance advisory work in corporate finance and having advisory positions with start-up companies. His latest engagement was with an Australian technology company “L”, and according to his second contract dated 20 March 2021, his remuneration was paid in the form of the company’s shares worth AUD 3,000 per month (P/212). 39.By reference to his Form E dated 26 June 2019 (P/44), the husband’s then overall financial circumstances were as follows:
40.Just before trial, the husband provided his updated assets position as on 4 May 2021 as follows (P/192.341-192.343):
Challenges by the wife 41.Ms. Remedios for the wife asked the court to consider the following 4 issues under section D (paragraphs 63-102) of her Closing Submissions:
The wife’s issues (1) to (3) 42.One would see that the wife’s issues (1) to (3) above are closely linked as they all relate to the husband’s past or current financial circumstances. In respect of issue (3) on the change of circumstances, I have already discussed this in paragraphs 34-35 above. Save to reiterate that I was convinced that there had been such a material change of circumstances in the husband finances, I will say no more on this topic at this stage. 43.As to the wife’s issues (1) and (2), Ms. Remedios in her Closing Submissions (Paragraph 64) submitted that the husband was untruthful in 3 aspects of his evidence:
Invisible income 44.Paragraphs 65-69 of Ms. Remedios’ Closing Submissions were made under the heading of “Invisible Income”. The gist of this submission was that throughout the years of marriage, the husband had not been paid any formal salaries. According to the wife’s evidence, which was repeated in counsel’s submissions:
And in her re-examination, she said:
45.It was the wife’s case that for most part of the marriage, the family was maintained through the companies’ expense account. The wife said that the husband would:
My view 46.In my view, it is not uncommon for business proprietors to charge various expenses on the company’s accounts, sometimes even personal expenses. Therefore, I am quite ready to accept that some of the husband’s personal expenses or even family expenses were charged to the accounts of TMHK or other family companies as well. However, one has to look at the reality as from 2015, or even more importantly from 2019 onwards. I think there is no dispute that TMHK was the main family business that had generated most if not all of the family fortune. The reality was that the business of TMHK had not been doing well since 2015 as indicated in the above discussion. As I have accepted in paragraphs 34-35 above, the company was forced to be sold to TIL with the husband’s employment being later terminated. The business of another family company, SA was also not performing well and it had generated an accumulated loss of over $1,100,000 by 2019. Therefore, I accept that the husband was no longer able to rely on TMHK or SA to provide for him financially. The husband’s life style and expenses 47.In paragraph 70 (a – m) of Ms Remedios’ Closing Submissions, the wife listed out a total of 13 expenses or events in showing that the husband’s life style was not consistent with a person of no means. Most of these expenses related to various overseas trips by the husband during the default period. The general explanation given by the husband was that those trips were either business trips to explore employment opportunities, or leisure trips with minimal payments or expenses being shared by his current partner. 48.I do not intend to go into each and every expense as cited by the wife as it will lengthen this judgment unnecessarily. But by looking at some of the expenses, I do have a feeling that the husband could have been more economical in budgeting his personal expenses. 49.By way of illustration, counsel had prepared a table of the husband’s expenses during the summer of 2018 (Appendix 6 of her Closing Submissions) during which he had stayed in Europe and had spent a total sum of €19,625. By adopting a very rough conversion of 1:8.5, that was a sum of HK$166,812. 50.The husband explained that that trip was for visiting friends and family in France, but also for a planned but failed-to-achieve wedding with his current partner, and the costs were shared. Apart from there being not much evidence on how those costs were being shared, but even if there was, the undeniable fact remains that the husband chose to go for overseas trips spending a not insubstantial amount of his remaining resources, when he claimed inability to fulfil his obligations to pay maintenance under a court order to which he consented in the first place. 51.Between February and December 2019, the husband went for another 10 trips to Bangkok, Koh Samui, Phuket, Europe and Singapore. I accept that some of the trips might relate to the exploration of business opportunities, but not all. For example, he went for golfing trips to Bangkok, Koh Samui and Phuket on multiple occasions. He stayed at luxurious hotels, like Banyan Tree in Bangkok or Grand Hyatt Grand Wing in Singapore, which might not be necessary if it were purely for job-seeking. He also went on a 2-month holidays from July to September 2019 to South of France, Germany, Switzerland and Paris, which was reimbursed by O, a company which he said being owned by his current partner, Ms. B. 52.I must say that there is some force in Ms. Remedios’ submission that the husband had maintained a life style that might not be consistent with his claim of impecuniosity. After considering the above evidence in the round, the inevitable conclusion to be reached is that despite the downturn in his business fortune, the husband had not done enough to scale down his life style to one commensurate with his present financial capabilities. If he had done so, he could have utilized some of his remaining financial resources to pay for some of the outstanding maintenance owing to the wife, instead of spending them on leisure trips to Thailand or various parts of Europe. I will bear this in mind when I come to the decision on how to exercise my discretion on the issues of variation and costs. SA 53.It was the case of the wife that SA was a company controlled by the husband, which was still financially sound as it was making a profit of $1,935,997 in the year of 2019. One would note that a not insubstantial part of Ms. Remedios’ cross examination of the husband touched upon the profit of SA and the dilution of the wife’s shareholdings therein. Therefore, it may be necessary to have a discussion on the financial well-being of this company. 54.There is little dispute that SA was a company incorporated in Hong Kong by the parties back in 1993. Its main business was in sourcing and packaging cosmetics and fragrances and distributing these goods in the Asia Pacific Region. There is also little dispute that SA continued to be run by the husband after divorce. It is now the case of the wife that SA is still financially sound and therefore, the husband is understating his ability to pay maintenance. She also complains that her shareholdings were diluted by the husband from 30% to 9.9% without her knowledge or consent. Profitability of SA 55.The husband is currently a 90.1% shareholder of SA. Relying on its latest financial statements (A7/1526), the wife points out the fact that SA was having a profit of $1,935,997 for the financial year ending 31 December 2019, and therefore, the husband was in a much better financial shape than what he was presently claiming. 56.This was denied by the husband. It was his case that SA had not been making profits for a very long time. By the end of 2019, the accounts of SA were in shambles. No audit had been done for a long time and he had to do all the accounts as from 2017. He explained that in the financial statements of 2019, a figure of $1,935,997 did appear to be the profits. But that was only due to the cancellation of a lot of old provisions, which should not have been in the company accounts in the first place. He further explained that the arrangement between SA and TMHK was that the former would buy products from and then sold them back to the latter. By this, a small margin would be generated as SA’s profits. However, over the years, there were quite a lot of damaged goods appearing in the accounts of SA that should really belong to TMHK. What the husband did in 2019 was to call up the Chief Financial Officer of TMHK and cleared up all these old provisions. They cancelled the artificial revenue to be received by SA and at the same time cancelled the artificial expenses, resulting in an artificial profit in that year. The husband said this was only a profit on paper but would not be translated into cash flow. Discussion 57.I think the best way to see whether the husband’s explanations could be verified is to look at the financial statements of SA for the past 6 years between 2014-2019 (A7/1452-1544). The overall impression to be gained is that for that period, SA could not be regarded as a very profitable business:
58.One could see that for the immediate 5 years before 2019 (i.e. between 2014-2018), SA only managed to obtain a small profit for 2 years, but rather substantial loss for the other 3 years. By the end of 2018, the accumulated loss of the company stood at $3,050,425, and even counting the profit of 2019, the accumulated loss for that 6-year period still stood at $1,124,428. 59.If one should conduct a comparison between the income statements of 2018 and 2019 (A7/1526), which are reproduced hereunder:
One would see that the Revenue (according to the explanatory note (Note 3), this means revenue from invoiced sales) were more or less the same for these 2 years (2019: $3,194,722; 2018: $3,133,707). The gross profits from these invoiced sales actually went down from $1,735,952 in 2018 to $1,258,665 in 2019. But a striking feature to be noted is that the item for Other revenue shot up from $4,802 in 2018 to $7,793,223 in 2019, whilst the item on Operating expenses was also increased from $2,709,212 in 2018 to $7,115,891 in 2019. Therefore, it is quite obvious that the profit recorded for the year of 2019 came mainly from this item of Other revenue. 60.In my view, the husband’s evidence that this accounting “profit” of $1,935,997 was an artificial one after the deletion of all the old provisions in the company accounts is likely to be true because:
61.Further to my acceptance of the husband’s explanation, one also has to take note of the fact that the company had been losing money for quite some years. Even after taking this accounting profit in 2019 into account, the accumulated loss of the company still stood at $1,124,428. Therefore, the wife’s argument that SA was a successful or profitable business simply could not stand. As a matter of fact, she admitted this under cross examination. Shortly before the lunch adjournment on the second day of trial, she was asked if she accepted SA was not doing well financially, she frankly admitted that SA had never been profitable as it was never intended to be profitable. Dilution of the wife’s shareholdings in SA? 62.Strictly speaking, after the court has accepted that SA was not making money and its financial worth is minimal, whether the wife’s shareholdings therein had been diluted has become irrelevant in the determination of the husband’s ability to pay maintenance. But since there is such a serious allegation, I am minded to say a few words on it before I move on to the other issues. 63.It is common ground that on 12 January 2021, the husband had allotted additional shares in SA to himself, making him a 90.1% shareholder in the company. As a result, the wife’s shareholding had been reduced from 30% to 9.9%. The explanation given by the husband for such move was that in order to continue to operate SA’s main HSBC accounts, the wife was required to give updated information on her address as a major shareholder. But as she had neglected to provide such information after repeated requests, there was a real risk that the bank accounts would be closed by 20 January 2020 (A7/1549). In order to satisfy the bank’s requirement, the husband had to reduce her status to a minor shareholder and that was why the husband’s shareholding was increased to above 90% by allotting additional shares to himself. 64.I have gone through the correspondence between the parties, the bank and the company secretary (A7/1546-1560). I am satisfied that the bank did make a formal request for the shareholders’ address to be updated; such request was conveyed to the wife, but she did not comply. I am also satisfied with the husband’s explanation that the dilution of the wife’s shareholdings was necessary in order to reduce her shareholder status and thus avoid the need to provide the required address information to the bank. I accept that the husband’s move was not aimed at taking financial advantage of the wife. O 65.O is a company that warrants some discussion. 66.It was the wife’s case that the husband had been actively involved in the business of O and should have received financial benefits therefrom. 67.Despite the fact that O and SA used the same address, the husband denied ownership of the company and its accounts had never been produced. He said it was a company owned by his current partner, Ms. B. During cross examination, he admitted that he spent about 3 to 4 hours a month in helping Ms. B to keep the company’s books without pay. 68.But as rightly pointed out by Ms Remedios, there was clear evidence to the contrary, which has casted serious doubts on the veracity of the husband’s evidence. 69.First of all, in a letter dated 29 November 2013 by the husband’s then solicitors (A3/565), the wife was expressly told that in September 2013, the husband had lent US$100,000 to his 2 friends to set up a jewellery business. I do not think there is any dispute that it referred to O because the letter continued to say that as a security, the husband had registered the brand name “O” in his name. There was no mention that the so called “loan” of US$100,000 was paid in kind. But when a questionnaire was issued by the wife on 21 March 2021 asking for documentary evidence of this loan (P1/203), the husband’s then answer was that:
70.Despite Mr. Egerton’s attempt to draw the court’s attention to the schedules of products purchased by the husband (A6/1349), the expenses paid by the husband (A6/1353) and the reimbursement received by the husband from O and Ms. B (A6/1369), I am afraid that the husband’s explanation on his so called loan to Ms. B was not very convincing. 71.Apart from this, the most damaging piece of evidence to the husband’s case was the wife’s referral to the employment contract between the husband and TIL (paragraph 8.4 therein) in August 2017 (A1/16) which contained a non-compete clause in the following terms:
72.It was abundantly clear that when the husband was employed as TIL’s Chief Operating Officer of Asia Pacific, his ownership of O and SA was expressly confirmed. The husband explained that it was simply a mistake made by TIL. But that was only a bare assertion without any corroborating evidence. Ms. B was not called to prove her ownership of O. Under these circumstances, I do not find the husband’s explanation convincing at all. 73.There was of course other evidence to show that the husband’s involvement in O was more than just a mere creditor. The court was referred to the tables (A6/1354-1369) recording the accounts between the husband, O and Ms. B, which only gave an impression that the finances of the husband, O and Ms. B were intricately mixed. Therefore, the reasonable conclusion to be reached is that the husband must have some financial interest, be it beneficial or otherwise, in O. 74.Be fair to the husband, one must also take note of the fact that O might not be a very big business. There was some evidence to suggest that it had operated an outlet at the Four Seasons Hotel. It might even have other shops. But we all know that the retail sector in Hong Kong has suffered tremendously during the past 2 years due to the pandemic. Therefore, it is unlikely that the financial benefits to be gained by the husband from O, if any, would be comparable to those that he used to receive from TMHK before 2015. The financial circumstances of the wife 75.The starting point in considering the wife’s latest financial circumstances is to review her Form E dated 27 June 2019 (P/69-94). She is now aged 55, and claimed to be unemployed (since 2012). She said her basic income per month was nil (P/83), but it seems that she should have some part-time income as she claimed to have earned US$3,800 since “August 18 to date” with an average of USD 317 per month (P/84). 76.The wife was living at the CA Property in Los Angeles. She claimed to have total net assets of HK$9,679,910, and they were (P/82):
77.She further stated that her normal monthly expenses were HK$110,694 (HK$72,572 + HK$38,122), but due to the husband’s default in paying maintenance, she was forced to reduce her monthly expenses to HK$52,888 (HK$45,925 + HK$6,963) (P/85-87). 78.At trial, the wife gave evidence via VCF. A substantial part of her cross examination was centred on whether she had given full and frank disclosure of her financial resources. It was alleged that she had failed to disclose 2 French properties, 8 bank accounts, her business interests in a company called LCXP, and her interests in 2 trusts. French properties: Rousseau Property and Lemoine Property 79.It was not disputed that there was no disclosure of the following 2 properties in the wife’s Form E (which was dated 27 June 2019):
80.On 9 December 2019, the husband issued a summons (P/130-131) asking for specific discovery on, inter alia, the wife’s purchase of the Rousseau Property in 2015 and her other bank accounts. Faced with such an application, the wife filed her “voluntary answers” on 16 March 2020 (P/157-173) and gave the following additional information on the 2 French properties:
81.I note that when Mr. Egerton referred to the wife’s so called “voluntary answers”, he has put them in quotation mark, indicating the husband’s stance that those answers were only given by the wife because of the husband’s impending application for specific discovery. Discussion 82.The main issue concerning the 2 French properties is whether the wife or her father was their beneficial owner. It is well established that the legal owner of a landed property is prima facie the beneficial owner as well: Stack v Dowden [2007] 2 All ER p.948. The onus is upon the person seeking to show that the beneficial ownership is different from legal ownership. Therefore, in the context of the present case, the onus is on the wife to show that her father was indeed the beneficial owner of these 2 properties, instead of herself. 83.In respect of the Rousseau Property, I accept that there was some evidence to suggest that the purchase price might have come from a family trust but the evidence was not entirely clear. For example, for the cheques payable to the wife dated 16 October 2015 in the sum of US$500,000 (A4/817) and dated 19 October 2015 in the sum of US$35,000 (A4/819), they were issued by the wife’s mother (RT) under the name of “[T] FAMILY TRUST [RT] TTEE”. There was also a bank statement of the Charles Schwab Bank (A4/823) indicating that the bank account was in the name of “[T] FAMILY TRUST [RT] TTEE [JT] TTEE”. Without any further explanation from the wife, especially on what “TTEE” stands for, the reasonable inference to be drawn is that the wife’s parents, namely RT and JT were trustees of the T Family Trust, which in turn held the Charles Schwab Bank account, from which the payments were made. In other words, this court was referred to some evidence to show that the T Family Trust (through the trustees) had paid for the Rousseau Property. There was no evidence to show who the beneficiaries of the T Family Trust were. In my view, the evidence falls short of proving the wife’s father’s beneficial interest in the Rousseau Property. 84.On the contrary, there was evidence on, firstly, that the wife changed the mailing address of her HSBC account in Paris to the Rousseau Property address shortly after purchase (A4/849). Secondly, the Rousseau Property was operated as an Airbnb and the rental income generated therefrom was in fact deposited into the wife’s BNP Paribas account (A5/969). There was no evidence to suggest that the wife had paid those rental incomes over to either the T Family Trust or her parents. These, coupled with the fact that the wife was the only child of her parents, I have come to the conclusion that the wife has failed to prove to the satisfaction of this court that her father, as contended by the wife, was the beneficial owner of the Rousseau Property. 85.The same can be said of the Lemoine Property, except that there was not even evidence to show how the purchase price was made. In other words, there was not even evidence that the purchase money came from the T Family Trust, or the wife’s parents. Again, on the bare assertion of the wife, I can only come to the conclusion that she has failed to discharge her burden of proof that her father was indeed the beneficial owner of the Lemoine Property. 86.As the wife was the registered legal owner of both the Rousseau Property and Lemoine Property, I am satisfied that she was also the beneficial owner of those properties. 87.As to their value, I note that the Rousseau Property should have a value of €564,750 and the Lemoine Property a value of €783,000. The total value of the 2 properties were €1,347,750. If one should adopt an exchange rate of about €1:HK$8.5, they should have a total value of HK$11,455,875. Bank Accounts 88.The wife was in possession of 8 bank accounts which did not appear in her Form E:
89.After considering the wife’s voluntary answers and hearing her evidence in court, I am afraid that her stance in respect of all those accounts were quite obscure. It seems that for the 3 French accounts (accounts (1) to (3)), the wife accepted that she did own those accounts but there was no good explanation on why they were only disclosed after the request for specific discovery by the husband had been made. 90.As to the other five HSBC US Accounts, apart from the wife’s explanation that they were omitted due to inadvertence, her evidence on their ownership was not entirely clear. In her voluntary answers (P/165-169), the wife seems to be saying that for 3 out of those 5 accounts (i.e. accounts (4), (5) and (7)), they were opened:
91.These 3 accounts together with Savings Account 167012xxx (i.e. account (6)) were explicitly listed as “ITF for [A]”. There is no dispute that A is the daughter of the parties. I was not referred to what “ITF for [A]” means. A reasonable inference to be drawn is that it stands for “in trust for [A]”. In other words, the wife’s evidence seems to suggest that all those 4 accounts actually belonged to the daughter beneficially. 92.However, there was evidence inconsistent with the notion that the daughter was the beneficial owner of those 4 accounts. According to the wife, the Premier Savings Account 166650xxx (account (4)) and Premier Current Account 167811xxx (account (7)) were opened to receive income from the Rousseau Property. I have already ruled that the Rousseau Property belonged to the wife beneficially. There was no evidence of gift to the daughter or any explanation on why such rental income belonging to the wife should have paid into an account belonging to her daughter. 93.Another example is Premier Savings Account 167002xxx (account (5)), which was again listed explicitly as “ITF for [A]”. According to the wife, the account was opened in 2018 after her mother’s death and to hold funds previously belonging to the wife’s deceased mother. The wife said she had only withdrawn funds from this account to pay legal fees of US$11,892.97 which was considered as a loan from her father. This was also inconsistent with the notion that the account was held in trust for the daughter. 94.For the last account of Premier 166-648xxx (account (8)), it was an account in the joint name of the wife and her late mother. According to the wife, her name was added shortly before her mother’s death so that she could access the funds when her father was travelling. She further said that following the mother’s death, the funds therein were used by her father at his discretion. She seems to be suggesting that the beneficial owner of this account was her father, instead of herself. 95.Although the latest balance of this account was rather small at US$72.93 (as at 28/9/2018), the fact remained that a rather large sum of US$148,000 was transferred out on 5/9/2018. If one should look at the account statement (A5/1075), the description of that transaction was:
96.Again, no evidence was led by the wife on that particular transaction. But that description seems to suggest that the payment was made to the wife as a beneficiary. This, coupled with the fact that she was the only child of her parents, make it more likely than not that she had received the said sum of US$148,000 as a beneficiary from the estate of her late mother. 97.After considering all the evidence in respect of the bank accounts, I have come to the conclusion that the wife’s bare assertions of the five HSBC US Accounts belonging to someone other than herself (whether belonging to the daughter or her father) could not stand. As the wife was the account holder and her evidence on their beneficial ownership was rejected, I could only draw an adverse inference that all those 8 accounts belonged to her beneficially. As to their late disclosure, I also do not see any satisfactory explanation being offered by the wife. 98.As to the value of all those 8 accounts, the total balance of the 3 French accounts was €21,320.29 (equivalent to HK$181,222.47, at 1:8.5) and the 5 HSBC US accounts was US$224,032.43 (HK$1,747,452.95 at 1:7.8). The total value of the 8 banks accounts was HK$1,928,675.42. Business interest in LCXP 99.In the wife’s voluntary answers, she stated that a company called LCXP was registered in France on 31 July 2019, and that explained why such information was not contained in her Form E which was signed on 27 June 2019. Obviously, that explanation was not acceptable to the husband as it was pointed out that the company actually commenced its business on 1 June 2019. 100.In her voluntary answers (P/170-171), the wife stated that the company was incorporated to receive commission on a property purchase referral. So far, she had only received two commissions, €20,800 (€25,000 less VAT) on 7 August 2019 and €7,756 on 21 March 2021. 101.After considering the wife’s explanation, I accept that she had no intention to hide this information from the husband. Although the wife might still be exploring various business ventures but the actual financial benefits to be gained therefrom was relatively small. Trusts 102.It was the husband’s case that the wife had access to 2 trusts, which she had not disclosed. The 2 trusts were CYT Trust and JCCT Trust. 103.It was the wife’s explanation that for estate planning purposes, she had placed the CA Property upon a trust for the daughter, together some of her US bank accounts. According to her, the setting up of trusts to hold family properties was not something new. During marriage, they had also set up a “LT Family Trust” to hold the CA Property. I accept that the CYT Trust was likely to be such an assets holding trust. As to the other one, namely JCCT Trust, I am not too sure about its existence as this court was only referred to one single entry in the wife’s bank account (A5/1040) which was in the French language. Based on this alone, I am not prepared to accept that the wife was entitled to benefits from this JCCT Trust. Change of the Wife’s Financial Circumstances 104.After the above discussion, one would see that there was not only a change of the husband’s financial circumstances, but also a substantial change in the wife’s financial circumstances. If one should look at her Form E dated 13 May 2013 (P/024-048), her then net assets were stated as HK$1,894,277.15 (P/035). As at trial, her present net assets were HK$23,064,442.42 (HK$9,679,910 + HK$11,455,857 + HK$1,928,675.42 = HK$23,064,442.42). Summary of findings 105.Before I make a determination on whether a variation of maintenance is to be granted, I think it might be helpful to summarize the findings of this court as follows:
Should the periodic payment order be varied? 106.After considering the above facts and all the circumstances of the case, I am of the view that a variation of the periodic payment order to a nominal one is justified. Of course, I am fully aware of the wife’s grievances in that she had to face the husband’s default on the periodic payment not long after the Consent Order. The husband had also obtained an advance payment of his share in the CA Property, instead of waiting for a set off against his lump sum, but eventually defaulted in the lump sum payment as well. However, all these have to be viewed in the context of the bigger picture in that the husband’s main business (i.e. TMHK) had suffered a great loss causing it to be sold, together with the loss of his Chief Executive position. He is now at an age of 64 and his chances to regain a highly paid employment is minimal. His then assets at HK$15,283,837.44 as at 22 February 2013 (P/013) has now become HK$991,330 as at trial. 107.On the other hand, the wife is 9 years younger and more importantly, her assets position had improved from HK$1,894,277.15 before the Consent Order (on 13 May 2013) to HK$23,064,442.42 at trial. Such a substantial change might due to the gifts or legacies she had received from her parents, but it was such a significant change that should not be ignored by this court. 108.Although I have come to a view that a variation of the periodic payment order is justified, I have to take into account 2 additional matters when I decide on how my discretion is going to be exercised. First, as I said in paragraphs 73-74 above, I am satisfied that the husband might still retain some financial interest in O despite the fact that such interest might not be of a very big amount. Second, the fact that the husband had not properly scaled down his life style and chose to go for various leisure trips despite his failure to pay the periodic payments needs to be taken into account as well. 109.After taking into account all the above considerations, I am of the view that an appropriate variation order to be made is for the periodic payment to be varied downwards from US$10,000 to US$5,500 per month as from 4 April 2019 (the date of application) until 10 April 2022 (the date before judgment), reflecting the parties’ agreement or tacit understanding in the reduction of maintenance payable by the husband. Such sum is to be further varied to a nominal sum of HK$1 per annum as from 11 April 2022 (the date of judgment) payable during the joint lives of the parties or until further order of the court. There should not be any further annual adjustment by reference to the All Urban CPI issued by the US Labour Statistics. Order 110.I hereby make an order that:
Costs 111.I note that both parties’ cases were not fully accepted by this court. Although it might be argued that the final result seems to be nearer to the husband’s position, the fact remains that he has failed to disclose his interest in O and has failed to scale down to a life style to commensurate with his diminished financial capabilities. All these have to be reflected appropriately in the costs order. Therefore, I think a proper order on costs is for each party to bear his own costs, including all costs reserved. This will be in the form of an order nisi to be made absolute if no further application is made within 14 days from the handing down of this judgment.
Representation: Ms. Corinne Remedios, Barrister-at-law, instructed by Messrs. CRB, solicitors for the Petitioner Mr. Robin Egerton, Barrister-at-law, instructed by Messrs. Oldham, Li & Nie, solicitors for the Respondent [1] [2008] HKFLR 106 |
Cases cited in this judgment