Ysg (Yx) v. Lyag

FCMC 15288 / 2015

[2022] HKFC 202

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO.15288 OF 2015

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J U D G M E N T
(LEAVE TO APPEAL AND STAY)

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The Application

1.On 2 June 2022 the Court handed down its Judgment and Order on the parties’ respective claims for ancillary relief.  

2.By Summons dated 30 June 2022 the Petitioner/Wife now applies for leave to appeal the Judgment/Order. 

3.The Order directed the sale of two landed properties in Singapore, referred to in the Judgment and here as “C Property” and “K Property”, with the net proceeds of sale to be distributed equally between the parties (paragraphs 1 and 2).  It awarded three lump sums to the Wife (paragraph 4), with the third sum to be linked to the sale of the K Property (paragraph 4(c)).  The Order further provided for ongoing periodical payments of maintenance for the two children of the family, N and C, in the sum of HK$140,000 per month (HK$70,000 per child), with such maintenance to be reduced to HK$10,000 per child during their respective national service with the Singapore military (paragraphs 6 and 7).  Paragraph 11 of the Order granted the parties liberty to apply in respect of the implementation of the Order, including in relation to the sale of the Singapore properties.

4.The Wife now seeks leave to appeal paragraphs 1, 2, 4(c), 6, 7 and 11 of the Order.  She also seeks a stay of paragraphs 1, 2 and 4(c). 

5.The Grounds of Appeal read as follows:

“1. The Learned Judge misdirected himself on the principles of fairness and reasonableness as set out in LKW v DD (2010) HKCFAR 537 by failing to recognise the Petitioner’s financial needs and personal circumstances in calculating that the Petitioner was only entitled to 50% of the total assets.

2. The Learned Judge erred on various findings relating to the Petitioner’s case of “black hole”, thereby reaching the incorrect conclusion that the Petitioner’s case was not made out.

3. The Learned Judge erred in failing to ensure that the Petitioner’s ongoing needs would be at the standard enjoyed by the family before the breakdown of the marriage pursuant to section 7(3) of the Matrimonial Proceedings and Property Ordinance, Cap. 192, and subsequently failing to give weight to the Petitioner’s evidence as to her needs. In addition, the Learned Judge failed to provide sufficient or adequate explanation in concluding at the Duxbury figure for the Petitioner’s needs. The Learned Judge further erred in finding that the Petitioner had an earning capacity of relevance to the Petitioner’s qualifications and lifestyle at all or in the alternative, that the Petitioner was able to find relevant employment in the financial services industry. The Judge also erred in accepting the Respondent’s claims with regard to his earning capacity, and that the Petitioner’s potential salary could equate to the Respondent’s current salary.

4. The Learned Judge erred by ordering the sale of the C Property and the K Property being the only assets that the Petitioner had an interest in, and failed to take into account the Petitioner’s intentions and needs relating to her housing and that of the Children.

5. The Learned Judge further erred in calculating the Children’s needs, and that further reducing the Children’s maintenance, the burden of any shortfall will be borne by the Petitioner, which was in turn, not factored into the Petitioner’s needs.  In addition, the Learned Judge failed to take into account that the Petitioner will continue to incur fixed costs for the Children even when they are serving their National Service, and in any event, the sum of HK$10,000 per month is grossly insufficient to meet the Children’s needs whilst in National Service.”

6.The Husband’s reply to the Wife’s application refers to the fact that both Singapore properties have been put on the market and that it is likely both will sell for more than the values assigned to them by the Single Joint Expert who was called at the Trial and whose evidence – and valuations – was accepted by the Court.  The Wife has written to the Court to object to this as impermissible post-Judgment factual evidence, and for the purposes of this Judgment, I have disregarded it. 

Background

7.The background of the parties and their children and the issues arising for the Court’s consideration has been set out at the beginning of the Judgment: §§1 – 17.  In brief, this case involves a marriage of some 14 years producing two Children, one of whom is now an adult and completing his service with the Singapore military.  During the marriage, the parties, and the Children, enjoyed a very comfortable lifestyle due primarily to the Husband’s high-level positions with leading international investment firms.  The parties have lived in Singapore, Japan and now Hong Kong. 

8.The Wife presented her case as needs-based, such needs being generously assessed.  She pressed for an award which would have enabled her to retain two landed properties in Singapore, together with lump sums for herself and capitalised maintenance for the Children.  It was a central element of her case that the Husband had not only failed in his duty of full and frank disclosure, but that he had systematically and surreptitiously diverted large amounts of his income to destinations unknown to the Wife and undisclosed by him.  Her estimates of this hidden money varied in the lead-up to the Trial, but at minimum, she put it at HK$100M. 

9.This “black hole” theory was rejected by the Court: Judgment, §§36 – 71. 

10.The Court found that the net assets should be evenly divided between the parties and rejected the Wife’s case that there should be a departure from equal sharing, taking into account all factors, including the disparity in earning power: Judgment, §§ 187 – 194. 

The Law

11.Section 63A of the District Court Ordinance empowers the Court to grant leave to appeal against a judgment and order, with or without conditions.  Subsection 63A(2) provides that leave to appeal shall not be granted unless the Court is satisfied (a) the appeal has a reasonable prospect of success or (b) there is some other reason in the interests of justice that the appeal should be heard.

12.The relevant test of whether an appeal has a “reasonable prospect of success” is whether the applicant has demonstrated that s/he has an arguable case with reasonable chances of success on appeal, being an appeal with prospects that are more than fanciful but which do not need to be shown to be probable: SMSE v KL [2009] 4 HKLRD 125.

Consideration

Ground 1

13.Paragraph 1 of the Wife’s Submissions argues that the Court failed to take into account or ignored her “long term intentions with the Singapore properties, including holding those assets” for the Children’s benefit.  It is her case that the importance of these properties was repeatedly stressed and should have been reflected in a departure from equality in her favour. 

14.I do not consider this Ground to be reasonably arguable.  The Judgment considered the history of acquisition of the Singapore properties – which represented the majority of the matrimonial pool – including the Wife’s contribution to the purchase price. The Court took into account the Wife’s wish to retain both the C Property and K Property: this formed a central part of her written and oral evidence and her submissions at Trial.  Having regard to the Court’s rejection of her hidden asset theory, the two properties represented more than half of the matrimonial pool of assets, and their sale was ultimately unavoidable, including given that both parties intend to remain living in Hong Kong for the foreseeable future. 

Ground 2

15.The Wife’s Submissions particularise the claim that the Court erred in rejecting the “black hole” theory, in five different points. 

16.First, she says that the Court erred in failing to take into account the highly acrimonious children’s proceedings which considerably delayed the financial proceedings. This is not correct.  The second basis for rejecting the theory explicitly referred to and made allowance for the fact that the parties’ focus for several years was primarily on the proceedings relating to the arrangements for the Children: Judgment, §60. 

17.Secondly, she says the Court failed to have regard to the fact that the Respondent delayed in providing disclosure of relevant financial information, some of which was only given in November 2021, despite having been requested by the Petitioner in her Questionnaires.  Again, this is not accurate.  The Judgment records the relevant sequence of events, including the Wife’s Discovery Summons of July 2021, which was eventually compromised in October 2021 (Judgment, §§38 – 47), and the important terms of that resolution, including that the Consent Order dated 20 October 2021 records in its Recital that the provision of further documents was “entirely without prejudice to either party’s contention as to whether the Petitioner’s Summons was necessary.”  The Husband maintained throughout that the disclosed material was not relevant to the Wife’s claim for ancillary relief.  Furthermore, the part of the Judgment now being questioned (§§59-61) gives multiple reasons for the conclusion that the Wife had failed to act with sufficient promptitude in advancing her theory of the missing money. 

18.Thirdly, the Wife complains under this Ground that the Court “failed to consider Petitioner’s accounts of Respondent’s deposits and withdrawals during the marriage, including the period before 2011” and that it “also erroneously misconstrued Petitioner’s MPS application which was to justify maintenance, not to justify black-hole in Respondent’s assets”.  Both of these points allude to §62 of the Judgment.  With respect, this submission misunderstands the point being made, which was, to be clear, to emphasise that the Wife’s theory of systematic syphoning off or diversion of funds, and her late presentation of it, was inconsistent with the fact that she and the Husband held joint bank accounts into which his income was received and out of which expenses were met.  It is settled law that MPS applications are decided on a broad-brush basis, but allegations of material non-disclosure by a paying party may be and often are made in support of such applications.  The absence of any reference in the Wife’s 6^th Affidavit (for the MPS Summons) to marriage-length diversion of money was a relevant point to make among the many reasons to reject her “black hole” theory. 

19.Fourthly, the Wife says the Court erred in rejecting the charts she produced at the Trial.  I disagree.  There were multiple reasons for rejecting them as deficient and unreliable, including serious and material errors summarised in Judgment, §§65 – 67.  As noted in §68, the Wife did not call a forensic accountant.  All indications from the lead-up to the Trial were that she (and her legal team) was aware that this would be necessary, or at least highly desirable, in order to present her theory properly, but an application to do so was made very late and only informally and when it was refused, was not taken further (see Judgment, §61).  The charts themselves were only produced at the Trial. 

20.Fifthly, the Wife says “it was well within the judge’s discretion to accept within the range of figures the size of the black hole”.  This presupposes a finding that there was a black hole.  I found otherwise, for the reasons set out in Judgment §§55 – 71. 

Ground 3

21.This Ground asserts that the Court erred in three respects. 

Ground 3(a)

22.First, as to the assessment of her needs, the Wife says that the Court erred in “dramatically reducing” her needs and that this was “distinctly unfair” having regard to various matters, including the Husband’s “extravagant lifestyle”. 

23.This is not a reasonably arguable Ground.  Her needs were considered carefully and with regard to all relevant factors including the standard of living the parties enjoyed during their marriage.  The analysis is at §§147 – 161.  It included consideration of an appropriate proportion of the general expenses attributable to the Children, including having regard to the fact that the older child, N, was 19 at the time of the Judgment and living in Singapore, where he is undertaking his national service.  I do not accept that there was any flaw in the analysis and assessment of needs, generously assessed.  

Ground 3(b)

24.Here, the Wife complains that there was no proper explanation of the conclusions on the Duxbury analysis.  The relevant part of the Judgment is at §§177 – 182.  The key point here is that, although the Court rejected the Wife’s case that she would adopt a very conservative, risk-averse investment strategy, aka the ‘prudent investor’ rate of return or “Bharwaney Portfolio”, the Judgment (§182) assumed that the Wife would do so, for the purposes of calculating the Duxbury sum.  In other words, the Court erred (if at all) in favour of the Wife’s case on this point. 

Ground 3(c)

25.The Wife then says that the Court’s finding on her earning capacity was flawed.  She says that the Court found, wrongly, that the Wife had the potential to earn a reasonable salary in the financial sector and could reasonably expect to command the Husband’s level of earnings.  Additionally, she reads into the Judgment a finding (which she says is also flawed) that I considered that any shortfall in her capital award could be met by her earning a salary. 

26.None of this is correct.  The passage in the Judgment where the conclusions on her earning capacity are to be found bears repeating, with emphasis:

“133. The Wife has the potential to earn a reasonable salary in the financial sector, but this will require some retraining and updating. She seems to have very little motivation towards that direction, and indeed baulked at the suggestion she should do so.

134. I do not accept the Husband’s argument that I should conclude that the Wife has an earning capacity of not less than HK$1.2 million per annum.  My view is that if she was to return to work she could not reasonably expect to command more than a third of that sum, at least initially.  I note the Husband’s current earnings are approximately that amount i.e. HK$400,000 per annum, albeit that is his base salary.”

27.In other words, the finding that the Wife had the potential to return to remunerative employment was heavily qualified.

28.Nor was the finding as to her capital award based at all on her returning to work.  The Court was required, by Section 7, MPPO, to consider all the relevant matters set out therein, including the Wife’s capacity to return to work, but the finding that she would need a Duxbury sum of between HK$75,000,000 and HK$80,000,000 (§182) assumed that she would not do so (see the second sentence of §132).  I noted both parties’ evidence and submissions on this important issue, including that the Wife had not worked in the finance industry for the best part of two decades and she may well find it difficult to return to it (Judgment, §§126 – 131). 

Ground 4

29.The Wife’s Submissions on this Ground make three points. 

30.The first is that the order for sale of the two Singapore properties failed to acknowledge that the Wife’s future living arrangements are contingent on where the Children’s future education will take place, and at the same time they need their base in Singapore.  The second is a repetition of Ground 1, namely that the Court failed to heed the Wife’s wish to retain the Singapore properties as part of her pension and her legacy for the Children.  Thirdly, the Wife says that the Court failed to take into account the Singapore government’s cooling measures in accepting the SJE’s value of the K Property. 

31.None of these points has merit.  For the Court to have ruled that the two Singapore properties should somehow be retained by the Wife so that they could be held for the benefit of the Children would not have sufficiently provided for the present and future needs of the parties and the Children.  The Wife presented her case on the basis that she would remain living in Hong Kong for the foreseeable future and asked for her housing costs and other general and personal expenses to be assessed on that basis.  Having rejected the Wife’s case that the Husband had very substantially more assets than he said he had, it necessarily followed that in order to achieve an appropriate division of assets and provide for both parties’ needs, and those of the Children, the sale of the Singapore properties was necessary.  The Wife’s desire to retain them was not ignored, it was simply not possible to fashion an award which acceded to it. 

Ground 5

32.This Ground is presented in two parts.  First the Wife says that the assessment – she refers to it as “reduction” – in the Children’s expenses will require her to bear the “shortfall” from her capital.  This is flawed.  The Children’s reasonable expenses were assessed (Judgment, §§162 – 164) by reference to the standard of living and the parties’ capacity to meet those expenses on an ongoing basis. 

33.Part two of this Ground challenges the finding that the expenses for each child would be considerably reduced when they attend mandatory national service in Singapore.  The Wife’s submissions in this respect are difficult to follow, given that it must necessarily be the case that most of the child-specific expenses attributable to N had been either eliminated or considerably reduced after he left for his two years of national service in Singapore.  No details were provided by the Wife as to N’s financial needs during his national service.  In those circumstances, while the Court disagreed with the Husband’s argument that all maintenance should cease as the Court lacked jurisdiction to make an order that it continue (Judgment, §§166 – 173), it accepted there was a significant difference in the quantum of the expenses attributable to the younger child, C, who will be in Hong Kong for several more years before his national service, and the older child, N who has already commenced his compulsory service with the Singapore army.  Absent evidence or submissions from either the Wife and the Husband as to the extent of such reduction, the Court determined that at least some provision should be made for this and lighted on the figure of $10,000 per month.  As noted in §175 of the Judgment, when N completes his national service, adjustments will have to be made to the ongoing maintenance for him, to include further education costs. 

Stay

34.The power to order a stay pending appeal is given by O.59 r.13, RHC.  The principles governing the exercise of this power were addressed by Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.  Good reasons must exist for a stay to be granted.  These include whether the absence of a stay (or its existence) would render an appeal nugatory, and the overall merits of the appeal. 

35.I have found that none of the proposed Grounds of Appeal have merit.  For completeness, I should add that in my view there is insufficient basis to suggest that the refusal of a stay would render any further application for leave to appeal or, if leave is granted, the appeal itself, nugatory.  Inter alia,assuming the two Singapore properties have been placed on the market pursuant to the Order, they cannot be sold without the cooperation of both parties, as they are in joint names. 

36.In these circumstances, I refuse the Wife’s application for a stay of the relevant parts of the Order.

Conclusion

37.None of the proposed Grounds of Appeal advanced in the Wife’s Summons are reasonably arguable.  The Summons is dismissed, with an order that the Wife pay the Husband’s costs. 

38.The Husband asks for a Summary Assessment under Order 62 rule 9A.  I have considered his Statement of Costs dated 14 July 2022.  I will allow $20,000 for solicitors’ costs and disbursements and $80,000 for counsel fees, totalling HK$100,000. 

Ms. Sasha Allison instructed by PC Woo & Co for the Petitioner

Mr. Richard Todd instructed by CRB for the Respondent