Case Document

100%Judiciary

FCMC 13650/2019

[2022] HKFC 238

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 13650 OF 2019

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BETWEEN
	CCYL	The Petitioner
	and
	CCSR	The Respondent

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Coram: His Honour Judge I Wong in Chambers (Not Open to Public)

Dates of Hearing: 26 & 27 April 2022

Dates of Closing Submissions: 6 and 19 May 2022 and

Date of Judgment: 8 November 2022

__________________

J U D G M E N T

( Ancillary Relief )

__________________

Introduction

1.This ancillary relief trial, which took place in the absence of the husband, concerns a young couple and their daughter.

2.In this judgment, for the ease of reference, I shall refer to the petitioner as “the wife” and the respondent “the husband”.

3.The parties were born within 3 months of each other. The wife, an American citizen, is of Chinese and Hispanic descent and the husband is a local Chinese. Both of their families have ties in Hong Kong for many years. They met in their high school years and maintained their relationship when both went to the United States for tertiary education but in different States. They soon married in June 2014 in Hong Kong. At that time, they were about 24 years old. Their only child, a girl (“the daughter”), was born in February 2018. She is now 4 years old. Both of them are now 32 years old.

4.The husband has a wealthy background. His parents, who are not married to each other, have established a substantial textile/garment business with operations in Hong Kong, the Mainland and other parts of the world. During the relationship, the husband was an entrepreneur in the same business. He owned or had substantial interest in various companies including a Hong Kong company “H Limited” which in turn owned 70% of the shareholding in “TT Limited”, a company incorporated in Bangladesh and operated a textile factory there.

5.The couple enjoyed a relatively high standard of living during the marriage. It would appear that the wife did not work at the beginning. It was only as from 2015 that she started working as a senior teacher in an international kindergarten.

6.Immediately after the marriage, the couple had lived with the husband’s mother at the latter’s 2,400 ft² penthouse for a month before moving to a leased apartment in Hau To Shan, Shatin. This was their last matrimonial home.

7.In June 2016, the parties purchased, as joint tenants, a pre-construction unit on Robinson Road, Mid-Levels (“the Robinson Road Property”) for $30,418,000 with a mortgage loan of $27,376,000.

8.Sadly, the marriage was a short-lived one. In around August 2018, the parties separated. What happened was that in August 2018 the daughter had a yeast infection and was admitted to a private hospital. The daughter was discharged from the hospital on 23 August 2018 and on the same day, the wife and the daughter moved to live with her parents. Subsequently, the husband also moved out of the matrimonial home upon the surrender of the lease.

9.On 12 December 2018 the wife petitioned for divorce on the ground of the husband’s unreasonable behaviour under case reference FCMC 15718/2018 (“the 1^st Divorce Petition”). It was contested by the husband with an Answer and a Cross-Petition.

10.On 6 November 2019, under the facilitation of this court, leave was granted for the wife to issue a new petition on the ground of “consent one-year separation” and for the husband to withdraw his Answer and Cross-Petition.

11.Hence, a new Petition for Divorce under the present case reference was issued on 18 November 2019. It is not in dispute that the parties separated in August 2018.

12.On 9 November 2020, the joint custody of the daughter was granted to the parties with care and control to the wife and defined supervised access to the husband. This order was made in the absence of the husband.

13.On 5 August 2021, the decree nisi was granted, leaving the ancillary relief to be dealt with at this trial.

14.At this juncture, I need to mention that this court handed down a Judgment on 10 October 2019 (“the MPS Judgment”) (under the previous case reference) in which it made an interim maintenance order in the monthly sum of $35,000 against the husband for the benefit of the daughter. This order was made after a full-argument in which both were represented by counsel and is still valid and subsisting. The grounds relied upon by the wife at this trial are very much the same as those advanced in her MPS application. They are, first, the husband’s self-petition for bankruptcy (see the paragraphs below) was a cynical move designed to attempt to defeat the wife’s financial claims against him and the second is the failure on the part of the husband to give a full and frank disclosure of his financial situation.

Bankruptcy Petition by the Husband

15.Separately, there is currently a bankruptcy proceeding which is essentially contested between the husband on the one side and the wife’s family on the other.

16.In brief, what happened was that 6 days before the wife’s 1^st Petition for Divorce the husband petitioned to the High Court for his own bankruptcy on the ground that he was unable to pay his debts. I shall refer to this proceeding as “the bankruptcy petition”.

17.In his affirmation in opposition to the wife’s MPS application, the husband explained why he had to petition for his bankruptcy. He said his H Limited had to rely upon the banking facilities provided by his bank, HSBC. Since the company was freshly established back then, he was required by HSBC to act as the guarantor for about $8,000,000. Since around March 2018, he was in need of restructuring his business as the same was badly hit due to the collapse of a major customer which had filed a Chapter 11 bankruptcy protection with a US Court. Consequently, his business collapsed. The husband said the wife was well aware of his financial problems at the time.

18.The wife and her father, in the capacity as the husband’s creditors, opposed to the granting of the bankruptcy order. Following this was the exchange of affirmations and the submissions of the Official Receiver’s Report pursuant to an order made by Ng J on 18 March 2019. It would be necessary to refer to the Official Receiver’s Report when I deal with the husband’s financial disclosure. I was told since June 2020 the husband had not taken any step to activate his bankruptcy petition.

The Absence of the Husband

19.The husband was on and off being represented by solicitors and counsel. His modus operandi appeared to be that he would choose to be legally represented whenever there were substantial hearings such as MPS arguments and CDR.

20.The last time the husband appeared in court was at the CDR hearing of 1 June 2020 when he was legally represented. Prior to this date, the husband had filed his Form E on 19 February 2019 and had given 2 Answers in response to the wife’s Questionnaires and some affirmations.

21.As from June 2020, the husband has not engaged in the proceeding whether by appearing in court or by filing evidence as directed; specifically, he failed to file his updated Form E and the section 7 narrative affirmation for the purpose of the present trial.

22.It would appear that since around June 2020, when the world was virtually lock-downed by the pandemic, the husband was in the United Kingdom.

23.By a facsimile message dated 6 November 2020, the husband informed the court that he was in UK and had exhausted all his efforts to try to return to Hong Kong so as to attend the hearing on 9 November 2020 but to no avail.

24.On 15 March 2021, there was another facsimile message from the husband informing the court that he again was not able to attend another hearing.

25.On 7 April 2021, the husband notified the court by a facsimile message that he would be able to return to Hong Kong by the end of May and would complete his quarantine by June.

26.Despite his “assurance”, the husband again failed to appear in the hearing of 13 July 2021. It seemed to me clear that the husband had no intention to engage. I therefore decided to dispense with the Financial Dispute Resolution procedure and proceed the matter to trial. Relevant directions for trial including the filing of section 7 narrative affirmations were given accordingly.

27.On 12 January 2022, 5 days before the PTR hearing, the husband sent his last facsimile message to court stating that he was inflected with Covid for a second time. Regardless of whether he was really infected or not, this message (and the previous messages too) clearly showed he was well aware of the hearing dates.

28.I have considered the wife’s affirmations of service. I am satisfied that due notice of hearings for trial has been given to the husband.

29.The wife testified that she had contacts with the husband over the financial matters a few weeks before trial. I gathered the husband was careful not to inform her whether he was in Hong Kong or not. In my view, no matter whether he was/is in Hong Kong or not, I am sure the husband has been deliberately evading the ancillary relief proceeding. If he was at any time being detained in UK because of the pandemic, he could still have provided the updated Form E and the section 7 affirmation, and sought to have the trial held by way of Remote Hearing or alternatively, applied for an alternate date for trial. At the minimum, he could have asked for information from the Registry or directions from the court.

30.I was told the husband had not exercised any physical access to the daughter at all since November 2020, while his mother at times requested arrangement to be made for her to see the daughter.

The Present Situation of the Parties

31.The wife and the daughter moved to live with her parents and siblings upon the breakdown of the marriage in August 2018. This remains to be the current situation. At the beginning the wife and the daughter had to share a room with her sister. This arrangement has become more bearable since the moving out of her sister. The wife is still working as a senior teacher and the daughter is attending an international school.

32.As the husband has chosen not to engage in the proceeding, his exact situation is unknown. The wife believes the husband continues to live with his mother at the latter’s spacious 2,400 ft² penthouse. He is also believed to have been travelling between Hong Kong and UK and elsewhere for business.

The Law and Legal Principles

33.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.

34.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].

35.Ribeiro PJ further set out the steps to be taken by the courts in undertaking the exercise. In brief, they are:

(1)  The ascertainment of the financial resources of each of the parties calculated as at the date of the hearing: [71] to [73];

(2)  The assessment of the parties’ financial needs. If the total resources are not enough to meet the parties’ needs, the s.7 exercise should stop at this step and there is no room to apply any sharing principle: [74] to [79];

(3)  If surplus assets would remain after the parties’ needs have been catered for, the next step should normally be for the court to apply the sharing principle to the parties’ total assets, with a yardstick of equal division as part of that principle. This means that the total assets should be divided equally between the parties unless there is good reason for departing from an equal division: [80] to [82];

(4)  In considering whether good reasons exist for departing from equal division, the answer is to be found in the terms of s.7 and the implicit objective of a fair distribution of the assets. Factors like source of the assets, conduct, financial needs, duration of the marriage, contribution to the family and compensation are all material considerations: [83] to [130]; and

(5)  The weight to be given to each of the factors is a matter of discretion for the court: [131].

36.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

The Jointly-Owned Robinson Road Property

37.The Robinson Road Property is essentially worthless. It was worth $36,000,000 as per the valuation report of 3 September 2021 obtained by the wife. However, it has already been foreclosed by the mortgagee. Judgment has been entered for a principal sum of $28,525,000 and outstanding management fees $520,000 plus interest $5,825,000. Daily interest of about $6,000 is accruing. Additionally, HSBC obtained a Charging Order Absolute against the property for the $8,000,000 guarantee provided by the husband.

38.I agree with Mr Ko, who appeared for the wife, that the Robinson Road Property has no impact on the present section 7 exercise.

The Financial Resources of the Wife

39.The wife’s assets are insignificant. The major one is her MPF in the region of $200,000 which cannot be liquidated until 33 years later.

The Financial Resources of the Husband

40.Mr Ko advanced two major arguments. The first is the husband failed to give a full and frank disclosure of his financial situation and the second is the KEWS Third Party Financial Assistance. As the facts in relation to these two grounds are intertwined with each other I shall deal with the facts in one go.

41.The husband’s parents started their textile/garment business long before the husband and his elder sisters were born. There is little doubt that the parents’ business has been a very successful one. As is any other successful business, it comprised of various companies and entities established in Hong Kong and overseas. The wife understands the mother is responsible for the production of the apparel and the father concentrates on sourcing of materials and fabric.

42.In 2012 the husband joined the family business upon completion of his education in the United States. The wife said the husband was very much on the father’s line of business.

43.When the husband joined the family business he was merely 22 years old. As an inexperienced young man, the husband’s assets and the relatively high standard of living enjoyed during the relationship must have been from his family. I accept the wife’s evidence that the husband’s parents held a very elaborated wedding banquet for them at the wife’s home-country in Latin America. I also accept that at least up to mid of 2016 the mother was also responsible for paying their rentals of the former matrimonial home and a majority of their family expenses.

44.This situation, however, did not last long. The wife said starting from March/April 2016, there were “verbal fights” between the husband and the mother over the business. She was not very clear about the details because the exchanges were in Cantonese. She knew from the husband that he wanted to “fly”, meaning, starting his own business. The “fights” cumulated up to the point where the husband started his own office in Kwai Chung in August 2016.

45.There are two documents produced by the wife in relation to “fights”. The first is a 3-page document entitled “Proposal Mandate” prepared by the husband and the second is an email written by the mother to the husband in June 2016.

46.One would not have any idea as to what “Proposal Mandate” by its name means. On the reading of these two documents, it seems to me that the mother’s email was a reply to the husband’s “Proposal Mandate”. In the absence of input from the husband and against the backdrop of the “fights”, my reading is that the husband complained of not being able to make decisions on his own to which the mother disagreed and that the husband and the mother decided on dividing up the lines of business, clients and their employees. The husband seemed to have taken up the “yarn” and “cotton” lines of business and was going to start his new team of staff. He also took up two companies, one of which was the “H Limited” referred to in [17] above and the other was in the name of “L Limited”. Significantly, the mother specifically mentioned that she was not going to give any guarantee for both the “H Limited” and the “L Limited”. Other than on the business side, the mother and the husband seemed to have decided on dividing up the properties in UK and the arrangement as to the interest payment of a property at Palatial Coast in Hong Kong.

47.All in all, my reading is the mother and the husband decided on who owned (or controlled) what such that after the “re-organization”, the mother and the husband were going to operate their lines of business separately, and, perhaps in the eyes of the husband, independently, though it may be that these lines of business or project might still be under the umbrella of the family business.

48.The wife testified that after the “fights”, the husband and his mother did not talk to each other and could not dine or spend time together.

49.According to the wife’s evidence, after the “fights” the husband personally settled the rental payments and the utility bills. The husband also started to use her credit card more for which she had to be responsible.

50.In about September 2016, the husband borrowed USD100,000 (at an interest rate of 3.5% per month) from the wife’s father. In her affirmation, the wife explained that since the husband’s relationship with the mother was very poor, he had to borrow from her family. There were further sums of USD200,000 and USD387,000 in November and December respectively. These debts allowed the wife’s father to intervene in the husband’s petition bankruptcy and remained unpaid up to this date.

51.It is worthy to note that it is not the wife’s case that the monies were lent to the husband and his parents. The inference that can be drawn is that the husband was funding his own business projects.

52.As mentioned above, the husband acted as the guarantor for around $8,000,000 in favour of HSBC. This debt was one of the debts the husband set out in his Statement of Affairs in support of his bankruptcy petition. It is to be recalled the mother stated on her email that she was not going to give her guarantee for the “H Limited” and the “L Limited”. The email explains why the mother was not involved.

53.As regards the Robinson Road Property, the wife said the husband’s parents visited her at work 3 times in August and September 2018. These were the times when her marriage with the husband went into difficulties. The wife said the parents asked her to transfer her part of ownership in the Robinson Road Property as a condition for saving the property. The wife then enquired with the husband. She understood from him that the husband was also asked to do the same and that he had already refused to part with his share of ownership.

54.Another debt disclosed in the Statement of Affairs was an instalment loan of $350,000 from the UA Finance.

55.The wife also lent $148,000 to $156,000 to the husband. These were the proceeds of sale of her car in the United States that the husband had gifted her. She had to pay most of her pregnancy check-ups and medical expenses. I gather it must also have been around the time when the husband failed to keep up with the mortgage payments of the Robinson Road Property.

56.At about the same time, the lease of the matrimonial home was surrendered. The husband also adduced some documentary evidence at the early stage of the proceeding in support of his allegation that he had lost control of his factory in Bangladesh.

57.In the MPS Judgment, I referred to the wife’s 1^st Divorce Petition and Statement as to Arrangement for Children which show that, on the wife’s own evidence, the husband was in financial difficulties at the time when the marriage broke down: at [33] to [40]. It should not be forgotten that the wife also claimed the husband had to borrow from loan sharks, failed to repay their loans and therefore causing the loan sharks to have left threatening messages at the former matrimonial home. The husband fled to UK for his safety: see Para (iv) of the Statement as to Arrangement for Children and the Affirmation of Service dated 4 January 2019.

58.In her section 7 affirmation, the wife said the husband and his mother had always been solely responsible for discharging and paying all the rentals and had been solely responsible for discharging and paying for the great majority of the family expenses throughout the marriage.[1] Upon the court’s enquiry, Mr Ko confirmed that the wife never mentioned these particulars in any of the previous affirmations.

59.I do not accept what the wife said. Quite to the contrary, on the materials before me, I am able to come to a conclusion that since the “fights” in mid-2016 there had been a material change in the manner in which financial assistance was being given to the husband. Previously, what can be considered as unreserved and lavish provision was gone.

60.The “fights”, in my assessment, signified a downturn of the relationship between the husband and his mother. Not only that the husband and the mother emotionally estranged from each other but they also changed in a material way in which they arranged their financial matters.

61.It may be that, on the wife’s own evidence, even after the “fights” the parents paid some mortgage repayments in some of the months and settled the husband’s supplementary credit card bills, and the mother’s domestic helper continued to attend their matrimonial home doing cleaning work for them, but the fact is the parents did not come into the husband’s assistance in the repayments of the mortgage or saving the property from being foreclosed. Last but not least, the parents did not pay for the hospital bill of the daughter referred to in [18] above. It was the wife’s father who paid.

62.That said, it has to be recognised that the above were apparently the situation up to the breakdown of the marriage only; little about the husband’s financial situation and his relationship with his mother/family since then is known to the wife and the court.

The Seychelles Company

63.The wife conducted her own investigation and found out that on 6 February 2019 the husband incorporated a company in Seychelles. The documents unearthed by the wife (Exhibit “P-1”) show the husband is the sole shareholder and director of this company. It is significant to note that the date of incorporation was before the husband’s 2 Answers to the wife’s Questionnaires which were dated 2 April 2019 and 4 October 2019 respectively. The husband failed to make disclosure of this company and its bank account, if any.

64.On the “Information Form” for the purpose of opening a bank account for this company, it was stated that the business activities of this company was “Trading with Textile Products: Jeans, Fabrics, Clothes”, the countries of operation or targeted market were “Asia, Europe”, the majority of clients were said to be located in Europe and the majority of his suppliers were in China. Significantly, it was also stated that the sources of fund were the husband’s savings; and the estimated annual turnover was USD4,000,000 for the 1^st year, USD6,000,000 for the 2^nd year and USD8,000,000 for the 3^rd year.

65.The husband gave his UK telephone number but stated his former matrimonial home as his residential address when clearly he had already moved out. He also named the mother as his additional contact.

The Interactive Brokers Account

66.There is an interactive brokers account opened in the husband’s name with $7.9 million worth of assets as at January 2019. That was the last position known to the court.

67.The husband, in his 2^nd Answers dated 4 October 2019, gave the explanation that the account belonged to the mother and said the records of the account were with his mother who had full authority and control of the account. He produced a copy of a homemade trust deed dated 30 March 2015 in support of the assertion. There are some documentary evidence from him showing that from April 2015 to September 2015 sums of $3,800,000, $15,200,000, 25,000,000 and $10,000,000 were deposited into this interactive brokers account from the mother’s account with HSBC.

68.However, the transaction records produced by the wife (exhibit P-2) show from October 2014 to November 2018 the husband had been transferring huge sums of money, totaling $54,811,469, from this interactive brokers account to his own HSBC saving account. The wife had these transactions records when they were still together. If all the assets sitting in the interactive brokers account belonged to the mother as alleged, there was no reason why these monies would have gone into his account. Obviously, this calls for an explanation from the husband.

69.Further, the wife said the husband’s family sold a building in Yuen Long for $430 million in February 2015. The husband and the mother deposited their 60% share of the sale proceeds into this interactive brokers account which the mother believed to have been opened in her name. The husband lied to the mother; the account was in fact under the husband’s sole name. When the mother discovered it in 2018, she immediately demanded the husband to return her share of the funds.

70.The wife’s evidence on the return of monies is credible in light of the breakdown of the husband’s relationship with the mother. I accept the wife’s evidence that the mother’s share in the interactive brokers account had been returned to her in 2018. It follows that the $7.9 million in the account as at January 2019 belonged to the husband.

The Husband’s Failure to Give Full and Frank Disclosure

71.Mr Ko submitted that while the husband alleged impecuniosity, he failed to make a full and frank disclosure of his true financial position. His financial disclosure is contrived and unreal. His “wait and see” approach with the hope that the wife might fail to ask the right question is a tactic to be deplored: L v L [2006] 1 HKFLR 121, at [198].

72.The duty of full and frank disclosure is onerous; it is an absolute and continuing one. Rayden and Jackson on Relationship Breakdown, Finances and Children states at [13.101].

The importance of the duty of both parties to make disclosure of their assets which is full, frank and clear cannot be overemphasised. Unless a court is provided with correct, complete and up-to-date information on the matters to which, under the MCA 1973, s 25, it is required to have regard, it cannot lawfully or properly exercise its discretion in the manner ordained by that section. The duty on each party is absolute, and it must be discharged regardless of whether the application for a financial remedy is adjudicated upon by the court after full evidence has been heard, or settled after an exchange of financial information between the parties leading to a consent order. The duty is also a continuing one: a party must not mislead the other party and the court into assuming that his financial situation is unchanged if in fact it has changed. Any material changes in the financial situation of either party occurring between the filing of their Form Es and the final dispatch of the claims by the court must be brought to the notice of the other party and the court at the earliest opportunity. A party who seeks to negotiate and secure a settlement without informing the other party about a material change in his or her financial circumstances runs the risk that, if a settlement is reached and a consent order is made, the consent order will be set aside by the failure to provide full, frank and timely disclosure. Shortcomings in disclosure will be visited by orders for costs against the offending party, often on the indemnity basis. Furthermore, deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default.

73.I set out at some lengths the many items that the husband had failed to disclose at [42] to [54] of the MPS Judgment. Mr Ko relied upon the same items of non-disclosure advanced at the MPS application plus the new discoveries about the Seychelles Company and the interactive brokers account in support of his contention that adverse inferences should be drawn against the husband regarding his financial situation.

74.I agree. It has to be recalled that during the MPS argument counsel for the husband conceded his level of disclosure is far from satisfactory but gave the excuse that it was an innocent oversight on the part of the husband. It is now clear that there was no change in the husband’s attitude and the level of disclosure since the MPS Judgment. There was money transferred from a PV Limited to H Limited which the husband said was for his daily expenses for necessities. When being asked of the relationship between these 2 companies, the husband’s answer was simply that they were separate legal entities. The husband also failed to make disclosure by providing the relevant statements of his HSBC saving account so that $54,811,469 allegedly transferred from the interactive brokers account could be verified. I agree with Mr Ko that the husband’s evasiveness was reproachful; worse still, he has simply disappeared.

The Husband’s Statement of Affairs and Amended Statement of Affairs

75.Mr Ko also invited me to consider not only the husband’s financial disclosure in the present proceeding but also his Statement of Affairs, Amended Statement of Affairs and affirmations filed in the bankruptcy proceeding. He highlighted the significant discrepancies between what were disclosed by the husband in the present proceeding and those in the bankruptcy proceeding. In short, different disclosures were made to this court and to the Official Receiver. My attention was drawn to the Official Receiver’s submissions to the Bankruptcy Court where he also expressed doubts over the veracity of the husband’s disclosure in the bankruptcy proceeding.

76.While it remains unknown if the husband still has any interest in the family’s companies, it has now become clear that the husband has been running at least the Seychelles Company. The fact that the husband named his mother as his “additional contact” is telling in that it shows the husband might have reconciled with his mother or that this company is a joint venture with his mother. He still had the means to make overseas trips. In any event, this new business project and probably some other projects as well should be of some value. It is also believed that the husband and/or his companies should have bank accounts in the Mainland.

77.From the “Proposal Mandate” and the mother’s email mentioned above it can be safely ascertained that the husband received at least $20 million after the Yuen Long Building had been sold, that he has some interest in 2 or 3 properties in the United Kingdom and an interest in the Palatial Coast property, the value of which are presumably substantial.

78.Finally, he has at least $7,900,000 in his interactive brokers account.

79.With all the new discoveries together with the wholly inadequate and inconsistent disclosures on the part of the husband, I agree with Mr Ko that the husband has been adopting a “catch me if you can” tactics. I am satisfied that the husband plainly and deliberately failed to give a full and frank disclosure of his financial situation. That was by no means an innocent oversight. The fact that the husband was acting in person most of the time cannot be an exoneration. I am driven to the conclusion that the husband was/is not impecunious as alleged; quite to the contrary, he is a person with means.

80.The next and the most crucial question is if the husband was a person with means, how could this be reconciled with his self-petition for bankruptcy, bearing in mind there are evidence even from the wife that he was apparently in financial trouble in the latter part of 2018 to the extent that he was not able to bring adequate cash home? Was he just having some cash-flow problems due to not being able to liquidate his properties in UK or other investments at that time or was it a calculated decision to default in honouring his business liabilities?

81.It is unnecessary for me to speculate why the husband did in the way he did. It is incumbent upon him, who is the only person in the position, to inform this court (and the bankruptcy court as well) of his reason. I am conscious that it is one thing for the husband’s business to have gone into trouble, it is another whether he was and is impecunious. As I see it, if the husband was impecunious to the extent that he had to file a bankruptcy against himself, what the husband should have done – and it was to his own benefit - was to be crystal clear about his finance by putting everything on the table so that the Official Receiver and the wife could be convinced of his dire financial situation. There is simply no reason for the husband’s evasiveness about his financial situation and the discrepancies in disclosures between the two proceedings unless there is something to hide.

82.On the materials before me, I gather that the husband might have been running his own project on some loans. When the project failed he tried to extricate himself from liabilities by filing a bankruptcy petition with the hope of having his hidden assets preserved. The logical inference that can be drawn is that his bankruptcy petition was to ensure he was not required to repay his business debts and, later when the wife commenced divorce proceeding, to defeat her claim.

83.The husband alleged he received financial assistance in the sum of $3,000,000 from his parents and that his parents did not give him further assistance. I regard this allegation is a mere say-so on his part. Common-sense informs me that any assistance or further assistance from them would have the effect of defeating the husband’s intention.

84.Due to the husband’s failure and non-engagement, the court is placed in very difficult positions as it simply does not have a good idea of what the husband’s real financial position is. I acknowledge that on the one hand there are matters that call for explanation and clarification such as his failure to provide adequately for his family which might or might not have been due to his cash-flow problem. On the other, I should be careful to ensure that the husband’s failure does not give rise to what is called a ‘cheat’s charter’ as Dame Butler-Sloss P put it in Baker v Baker [1995] 2 FLR 829 (CA) and quoted by Mostyn J in NG v SG (Appeal: Non-Disclosure) [2011] EWHC 3270 (Fam), [2012] 1 FLR 1211. If the drawing of adverse inferences is to be too conservative, unfairness would be visited on the claimant giving rise to what might be termed a non-discloser’s dividend: NG v SG (Appeal: Non-Disclosure) at [15]. I accept that the court must be astute to avoid this unfairness and that a strong message must be sent out that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told. But the court must be realistic and there must surely be some finding, soundly based on admissible evidence, as to the broad extent of the hidden funds. This finding can be as broad or precise as the facts of the case demand.

85.Mostyn J summarised the relevant principles in NG v SG (Non-Disclosure) on how adverse inferences are to be drawn:

[16] Pulling the threads together it seems to me that where the court is satisfied that the disclosure given by one party has been materially deficient then:

(i) The Court is duty bound to consider by the process of drawing adverse inferences whether funds have been hidden.

(ii) But such inferences must be properly drawn and reasonable. It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the Court is satisfied he has not got.

(iii) If the Court concludes that funds have been hidden then it should attempt a realistic and reasonable quantification of those funds, even in the broadest terms.

(iv) In making its judgment as to quantification the Court will first look to` direct evidence such as documentation and observations made by the other party.

(v) The Court will then look to the scale of business activities and at lifestyle.

(vi) Vague evidence of reputation or the opinions or beliefs of third parties is inadmissible in the exercise.

(vii) The Al-Khatib v Masry technique of concluding that the non-discloser must have assets of at least twice what the Claimant is seeking should not be used as the sole metric of quantification.

(viii) The Court must be astute to ensure that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told. If the result is an order that is unfair to the non-discloser it is better that than that the Court should be drawn into making an order that is unfair to the Claimant.

86.In the more recent case of Moher v Moher [2019] EWCA Civ 1482; [2020] 2 WLR 89; [2020] 1 FLR. 225; [2019] 3 FCR. 244, the English Court of Appeal 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,

86. My broad conclusions as to the approach the court should take when dealing with non-disclosure are as follows. They are broad because, as I have sought to emphasise, non-disclosure can take a variety of forms and arise in a variety of circumstances from the very general to the very specific. My remarks are focused on the former, namely a broad failure to comply with the disclosure obligations in respect of a party's financial resources, rather than the latter.

87. (i) It is clearly appropriate that generally, as required by section 25, the court should seek to determine the extent of the financial resources of the non-disclosing party.

88. (ii) When undertaking this task the court will, obviously, be entitled to draw such adverse inferences as are justified having regard to the nature and extent of the party's failure to engage properly with the proceedings. However, this does not require the court to engage in a disproportionate enquiry. Nor, as Lord Sumption JSC said, should the court “engage in pure speculation”. As Otton LJ said in Baker v Baker [1995] 2 FLR 829, inferences must be “properly drawn and reasonable”. This was reiterated by Baroness Hale of Richmond JSC in Prest v Prest [2013] 2 AC 415 , para 85:

“the court is entitled to draw such inferences as can properly be drawn from all the available material, including what has been disclosed, judicial experience of what is likely to be being concealed and the inherent probabilities, in deciding what the facts are.”

89. (iii) This does not mean, contrary to Mr Molyneux's submission, that the court is required to make a specific determination either as to a figure or a bracket. There will be cases where this exercise will not be possible because the manner in which a party has failed to comply with their disclosure obligations means that the court is “unable to quantify the extent of his undisclosed resources”, to repeat what Wilson LJ said in Behzadi v Behzadi [2009] 2 FLR 649 .

90. (iv) How does this fit within the application of the principles of need and sharing? The answer, in my view, is that, when faced with uncertainty consequent on one party's non-disclosure and when considering what Baroness Hale and Lord Sumption JJSC called “the inherent probabilities” the court is entitled, in appropriate cases, to infer that the resources are sufficient or are such that the proposed award does represent a fair outcome. This is, effectively, what Munby J did in both Al-Khatib v Masry [2002] 1 FLR 1053 and Ben Hashem v Al Shayif [2009] 1 FLR 115 and, in my view, it is a legitimate approach. In that respect I would not endorse what Mostyn J said in NG v SG [2012] 1 FLR 1211, para 16(vii).

91. This approach is both necessary and justified to limit the scope for, what Butler-Sloss LJ accepted could otherwise be, a “cheat's charter”. As Thorpe J said in F v F [1994] 1 FLR 359 , although not the court's intention, better an order which may be unfair to the non-disclosing party than an order which is unfair to the other party. This does not mean, as Mostyn J said in NG v SG, at para 7, that the court should jump to conclusions as to the extent of the undisclosed wealth simply because of some non-disclosure. It reflects, as he said at para 16(viii), that the court must be astute to ensure that the non-discloser does not obtain a better outcome than that which would have been ordered if they had complied with their disclosure obligations.

87.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)].

88.The husband in the present case falls into the broad failure to comply with his disclosure obligations as referred to by Moylan LJ at [86] above. The proper approach to be taken is to infer that his resources are sufficient or are such that the proposed award represents a fair outcome.

89.With the conclusion I have come to, it is unnecessary to deal with Mr Ko’s second ground, ie KEWS Third Party Financial Assistance. On the wife’s evidence, as far as the source of funds is concerned, the mother and one of the husband’s elder sisters have been paying the interim maintenances on the husband’s behalf. The interim maintenance in some of the months were not paid in full or not paid at all. At the time of the trial, there was $120,000 in arrears.

90.I have come to the finding that the husband has the means of his own. The manner in which the interim maintenances were paid must have been for reasons other than the impecuniosity of the husband. It might have been done in order to put pressure upon the wife and/or to paint an illusory picture of the husband’s finance.

91.The parties’ assets are assessed below.

Schedule of Assets

Item
No. Assets Jointly
Owned
In the
Wife’s Name
(HK$) In the
Husband’s Name
(HK$)
Amount
(HK$) Total Amount
(HK$)

1. The Robinson
Road Property

                Sub-total :
            Nil

2. Bank Balance
        74,000

3. Cash/Chattels
      100,000

4. MPF       200,000                    374,000

Item nos. 2 to 4
                Sub-total:     374,000

5. Bank
Balance in
Hong Kong
                    At least
                    96,000

6. MPF                                   97,000

7. Interactive
Brokers
Account
                7,900,000

8. Companies
/ Business
Projects in
Hong Kong
and
elsewhere
(at least 11
in total)
                (unknown)

9. Palatial
Coast
                (unknown)

10. UK
Properties
                (unknown)

Item nos 5 to 10
Sub-total: (at least) 8,093,000

        Total (at least)
8,467,000

92.Given that there were sums of $54,811,469 transferred into his HSBC saving account the monthly statements of which the husband failed to disclose together with his interests in other properties and assets outlined above, I assess the husband has assets significantly more than $8,093,000.

The Earning Capacity of the Wife

93.The wife has since 2015 been working as an English teacher. During the Covid-lockdown, her wages were reduced to $15,600. She is currently earning around $29,000 per month.

The Financial Needs of the Wife and the Daughter

94.The parties’ needs should be “generously interpreted”. The court should try to ensure that each party and their daughter have enough to supply their needs set at a level that equates, in so far as resources allow, to the standard of living they enjoyed during the marriage; those needs should not be assessed according to some perceived lowest common denominator, but with flexibility in the light of all the relevant circumstances. See: LKW v DD (2010) 13 HKCFAR 537, at [79].

95.The husband accepted in his affirmation filed at the early stage of the proceeding that the family enjoyed a relatively high standard of living. The former matrimonial home was a spacious 1,013 ft² apartment with 3 bedrooms and 2 bathrooms. According to the wife, the family had the use of a Centurion American Express Black Card, flew business class and stayed in 5-star luxury hotels. They averaged 2 short haul and 1 long haul holidays per year. On special occasions, the husband often arranged luxurious dinners at famous and expensive restaurants.

96.The wife is sharing a room with the daughter at her parents’ home in Shatin. She wishes to be able to move to separate accommodation for some additional space and privacy. Ideally, the accommodation should be close to her parents and the daughter’s school so that her parents can continue looking after the daughter for her when she is at work. At trial, she assessed the rentals should be around $20,000 to $21,000.

97.Having regard to the relatively high standard of living during the marriage, I consider the wife and the daughter need separate accommodation. The estimated rental figure is also reasonable.

98.The wife admitted that some of the expenses, such as Holiday Expense, Clothing, Entertainment, Contribution to Parents, as set out in her Form E of 11 April 2022 are aspirational or for the time being beyond her ability.

99.The wife said her and the daughter’s monthly expenses are estimated to be $63,536 (exclusive of rentals). This figure is apparently reasonable and is way below the figure of $216,184 that she pitched when she applied for MPS. I am sure at this moment one should look at the foreseeable future. The wife and the daughter’s post-Covid monthly expenses are assessed as follows.

Monthly Expenses

General

Item Amount
(HK$)

Rent 21,000

Utilities 2,000

Food 3,000

Household expenses 2,000

Other (Netflix, Disney^+, Apple subscription, Zoom subscription, education.com subscription) 800

Total monthly household expenses 28,800

Personal

Item Amount
(HK$)

Meals out of home 3,000

Transport 2,000

Clothing / Shoes 1,000

Personal grooming (including haircut and cosmetics) 2,000

Entertainment / presents 1,000

Holiday 3,000

Medical / Dental 1,000

Tax 870

Contribution to parents 7,000

Others (accountant for US tax) 870

Total monthly personal expenses 21,740

The Daughter

Item Amount
(HK$)

School fees 18,000

School books and stationery 3,850

Medical / Dental 1,000

Extra-Curricular Activities 6,000

Entertainment / presents 2,000

Holidays 1,500

Clothing / Shoes 1,000

Lunches and pocket money 1,000

Uniform 190

Total monthly expenses for daughter 34,540

Total Monthly Expenses HK$ 85,080

100.On the basis that the daughter takes up half of the general expenses, the daughter’s monthly needs would be $48,940 ($34,540 + ($28,800 ÷ 2)) and the wife’s monthly needs would be $36,140. I round up the figures to $49,000 and $37,000 respectively.

101.The wife has a bachelor degree only and is not in possession of any professional teaching qualification. She plans to enrol in a Postgraduate Certificate in Education course and following this, a master’s degree in Education. All these are to be undertaken by distance learning. At the same time, she would continue to work and take care of the daughter. The postgraduate certificate and the masters’ degree would cost her $77,500 and $206,500, totalling $284,000.

102.I think this plan is sensible and realistic. The wife is still young and full of potentials. In time, with these professional qualifications, the wife should be able to elevate herself in her teaching career and achieve financial independence.

The Earning Capacity of the Husband

103.The husband graduated from a university in the United States with a Bachelor of Business Administration. As said, the husband worked at his family’s companies and his present situation is entirely unclear. However, the limited evidence gathered by the wife suggests that the husband is either carrying on his business or assisting his mother or both. One of such pieces of evidence is a shipment record showing that one of the husband’s companies was still importing denim into the United States on 15 December 2021. The value of the business and how much he is able to earn is unknown due to the failure on the husband to engage in the proceeding. I do not accept the husband’s assertion in his Form E of 8 February 2019 that he had no income.

The Financial Needs of the Husband

104.In his 1^st Answers to the wife’s Questionnaire, the husband said his mother has been supporting him with accommodation and meals. His mother also occasionally gives him petty cash to spend on necessities. In my assessment, with the conclusion that the husband deliberately failed to make a full and frank disclosure of his financial situation, the limited extent of the mother’s assistance alleged by the husband must be taken with a grain of salt. I accept the wife’s evidence that the husband is living with his mother at the latter’s 2,400 ft² penthouse and probably has been using his mother’s car. I am sure the husband has the financial resources to provide him with a comfortable living.

The Wife’s Liabilities

105.I accept that as a result of the husband’s inadequate financial support, the wife has had to draw on her own savings and to take out loans to support herself and the daughter. As of February 2022, she had outstanding loans of around $2,830,000 which were mainly her legal expenses.

The Husband’s Liabilities

106.As I have decided to draw adverse inferences against the husband’s financial situation, the extent of his liabilities, whilst remains unknown, should carry little weight.

Deciding to Apply the Sharing Principle

107.It appears that after the parties’ and their daughter’s monthly needs have been taken care for there are still assets available for division. 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

108.At this stage, the court may consider relevant factors that may warrant a departure from equal division. It is a balancing exercise that is fact-specific and discretionary. See: LKW v DD, [92] – [94].

109.In my judgment, there are two factors that I need to consider. They are (1) duration of the marriage; and (2) non-matrimonial assets.

Duration of the marriage

110.The marriage is no doubt a short one. It was a 4-year relationship when they separated in August 2018, there being no suggestion that there was pre-marital cohabitation which moved seamlessly into the marriage: see EJB v CJB [2011] 5 HKLRD 508, at [73].

Non-Matrimonial Assets

111.The assets owned by the respective parties are largely non-matrimonial. As far as the husband’s assets are concerned, the interactive brokers account and the Hong Kong and UK Properties are undoubtedly pre-marital and non-matrimonial; other possible candidates to the list are the Mainland bank accounts, the husband’s interest in the family companies, if any, and other hidden assets. I discussed in details the legal principles regarding the sharing of non-matrimonial assets in SSLT v SMFC (Ancillary relief: Non-matrimonial Assets) [2019] HKFLR 458 at [89] – [104]. Briefly stated, even where a property is identified as ‘non-matrimonial’, there is no hard and fast rule that such property should be excluded. It is very much a matter within the judge’s discretion to be exercised taking account of all the circumstances of the particular case: LKW v DD, at [91] and PW v PPTW (Ancillary relief; non-matrimonial property) [2015] HKFLR 213 at [50].

112.There are two approaches to the issue of how the sharing principle is applied in respect of non-matrimonial property. They are the ‘telescoped approach’ and the ‘two stage approach’. In Hong Kong, the Court of Final Appeal favoured the ‘telescoped approach’ in WLK v TMC (Ancillary relief) (2010) 13 HKCFAR 618, [2011] HKFLR 114, at [84]. It has been said by the Court of Appeal in PW v PPTW that whatever approach the court chooses to adopt, the same relevant factors apply. Apart from the fact that a property being ‘non-matrimonial’, the court may also consider other facts, such as the duration of the marriage, the extent of intermingling, springboard effect and passive economic growth. Ultimately, it is a question of fairness whether non-matrimonial asset or the extent of which ought to be excluded from the sharing principle.

113.It was held by Moylan J (as he then was) in the English case of AR v AR (Treatment of Inherited Wealth) [2011] EWHC 2717 (Fam), [2012] 2 FLR 1 that the sharing principle could apply to non-matrimonial property if such an approach was justified by the circumstances of the case.

114.The ‘needs’ of the parties would be a factor. In S v AG (Financial Orders: Lottery Prize) [2011] EWHC 2637 (Fam), [2012] 1 FLR 651, Mostyn J, upon a review of the authorities about sharing, said it will be rare for the sharing principle to lead to any distribution of non-matrimonial property except in the case of meeting the needs of the applicant. At [7] the learned judge said,

[7] Therefore, the law is now reasonably clear. In the application of the sharing principle (as opposed to the needs principle) matrimonial property will normally be divided equally (see para [14](iii) of my judgment in N v F (Financial Orders: Pre-acquired Wealth)). By contrast, it will be a rare case where the sharing principle will lead to any distribution to the claimant of non-matrimonial property. Of course an award from non-matrimonial property to meet needs is a common place, but as Wilson LJ has pointed out, we await the first decision where the sharing principle has led to an award from non-matrimonial property in excess of needs.

115.The wife, well-educated, is still young and full of potentials. At the same time, I recognise that she carries the heavy burden of taking care of the daughter. Taking a board brush approach, and considering the short duration of this marriage, the non-marital nature of the assets and the absence of evidence of intermingling, springboard effect or passive economic growth of the non-matrimonial assets, I come to a tentative view that a lump sum of $2,100,000 should be the appropriate amount. This sum is roughly about 48 months of her monthly expenses plus the money she needs to re-train herself as a professional educator.

Deciding the Overall Outcome

116.It has to be borne in mind that a finding that one or more of the departing factors are engaged does not necessarily mean that a departure must occur. The court is required to give an examination of the overall picture.

117.This case is not one that falls within the super-rich category. As in any case, the overarching consideration is fairness. Given the short duration of the marriage and the young age of the parties, there is always a possibility for each of them to remarry. As observed by Lam VP (as he then was) in AVT then known as MAM v VNT, CACV 234/2014 (date of judgement: 3 July 2015) where it was a short and childless marriage between young couple,

“1.7 … With the possibility of remarriage, there is also greater uncertainty in terms of changes in finance and personal circumstances. Even without remarriage, the lifestyle pattern of each of them may change substantially in the years ahead. Fairness dictates these inherent uncertainties should be taken into account in deciding the proper level for lump sum award.”

118.At the same time, I do bear in mind that that the wife has been taking care of the daughter single-handedly in the last 4 years and that the husband has been evasive of his responsibility financially as a husband and both financially and emotionally as a father.

119.Considering all the factors in the round, I consider $2,100,000 is an appropriate figure. I must make myself clear that this figure is arrived at on the basis that the wife is not liable for any liability that she may have in respect of the Robinson Road Property. This liability should be taken up by the husband.

Maintenance for the Daughter

120.There cannot be any dispute that the husband was the breadwinner of the household. The wife’s income is clearly inadequate for her and the daughter. As father, the husband should continue to be responsible for the financial needs of the daughter which I have assessed at $49,000. This is the monthly maintenance that the husband should pay for the benefit of his daughter.

121.The husband has not been taking up his full financial responsibility in raising the daughter in the past 4 years. The wife had to resort to her savings and assistance from her family. I have no doubt that the husband should pay a lump sum for this. Taking a board brush approach, I assess it at $480,000, on the basis of $10,000 per month.

122.The husband therefore has to pay a total sum of $2,580,000 ($2,100,000 + $480,000). I am satisfied this is a fair outcome and the husband’s resources are sufficient to meet the awards.

Orders

123.For the reasons aforesaid, I make the following orders:

1.  Within 7 days of the decree absolute, the husband do pay the wife a lump sum of $2,100,000;

2.  The husband do pay the wife a monthly sum of $49,000 for the maintenance of the daughter, the first payment to be made within 14 days of this order and thereafter on the 1^st day of each and every succeeding month until the daughter reaches the age of 18 years or upon completion of her full time education, whichever is the later;

3.  The husband do within 14 days of this order pay the wife a lump sum of $480,000 for the benefit of the daughter; and

4.  The interim maintenance order of 10 October 2019 is discharged.

Costs

124.The wife is on any view the winning party. There is no reason why costs should not follow the events. For the reason that the husband is guilty of deliberate non-disclosure, the wife is entitled to seek costs on indemnity basis. She has requested her costs to be assessed summarily so that further proceeding and costs may be avoided. This is a sensible approach. I make an order nisi that the husband do pay the wife the costs of the ancillary relief proceeding (including all costs reserved), to be assessed summarily. I understand the Statement of Costs has already been served on the husband. The husband may lodge and serve his objections within 21 days. The wife may lodge and serve a reply thereafter within 7 days. The summary assessment will be dealt with by way of paper disposal.

Section 18 (MPPO) Declaration

125.Lastly, I make the section 18 declaration.

(I. Wong)
District Judge

Mr Billy Ko of Withers, Solicitors, appeared for the petitioner

The respondent, in person, did not appear at trial

[1] Paras 11, 30 and 34

Cites 9 cases

Cases cited in this judgment

Gordon Baker v. The Queen

[1995] 2 FLR 829

Court of Appeal

Ejb v. Cjb