C v. C

Case No.CACV 88/1989

Court

Court of Appeal

Date09 May 1990

Judge—

Case Document

100%Judiciary

CACV000088/1989

Civil Appeal No. 88 of 1989

Headnote

(1)	Upon the construction of section 7(1) Matrimonial Proceedings and Property Ordinance (Cap 192) the Hong Kong court should take advantage of the guidance provided by English authority upon the construction of the nearly identical English legislation.
(2)	Guideline advice contained in a group of English cases, notably Preston v Preston [1982] Fam 17 dealing with the position of very wealthy parties summarised and applied.
(3)	Where available assets were largely the product of a husband's professional and entrepreneurial activities, it was necessary to assess and quantity the wife's "reasonable requirements", her total claims when effect was given to all the circumstances in section 7(1), in order to determine her lump sum entitlement.
(4)	This quantification having been made by the court, on facts appeal allowed.

IN THE COURT OF APPEAL	1989, No. 88
	(Civil)

BETWEEN

	C	Petitioner (Appellant)

	AND

	C	Respondent (Respondent)

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Coram: Hon Fuad, V-P, Clough and Hunter, JJA

Date of Hearing: 27 - 30 March, 3, 4, 6, 10 and 11 April 1990

Date of Handing down Judgment: 9 May 1990

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JUDGMENT

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Hunter, JA :

1. This is an appeal from a decision of Mortimer J given on 27th January 1989, and perfected by Order dated 28th April 1989, whereby he made various Orders regulating the financial position of the appellant and the respondent, whom for convenience I shall continue to call husband and wife, after divorce. The most contentious aspect of the judge's provision was his order that the wife paid to the husband a lump sum of HK$19 million. This part of the final order the husband now challenges on appeal.

2. The parties' marital history was summarised by the judge thus.

"The parties were married in 1957. The husband was aged 27 and the wife 23. After 29 years the marriage broke down. They parted finally on 10th February 1987, but effectively the marriage had broken down after August 1986. The husband petitioned; the wife cross-petitioned; and a decree nisi was granted on his admitted adultery. This was made absolute on 12th August 1987."

3. During the marriage the husband had pursued a successful career as a solicitor and entrepreneur which had brought him great wealth. Much of this wealth was put into the wife's name, and a substantial part was the subject-matter of dispositions made by her consequent upon the breakdown of the marriage. Also at the end of the marriage the wife had benefitted substantially from her father's estate. The result was that out of the total assets assessed by the judge at $90.338 m, $60.424 m was controlled by the wife and $29.914 m by the husband. This meant that in form the applicant was the husband for the setting aside of certain dispositions by the wife, which in the event was unopposed, and for lump sum provision for himself which was. The interests of the two sons of the marriage did not fall to be considered. They were adults, and very well qualified, established and endowed.

4. The court is empowered to order a lump sum by s 4(1)(c) of the Matrimonial Proceedings and Property Ordinance, MPPO, Cap 192, but before exercising such power it has to discharge the duty imposed by s 7 (1) to "have . regard to ... all the circumstances of the case" including the circumstances set out in paragraphs (a) to (g) inclusive. This is the first time that this court has had to consider the impact of this section in relation to very wealthy parties, where the usual constraints of insufficiency or of illiquidity of assets do not apply. The judge was persuaded that authority was of little assistance. Mr Singer QC for the wife argued for equality and a 50:50 division. Mr Ching QC for the husband argued for no fixed proportion although when pressed in evidence the judge regarded the husband as asking for not less than a 60:40 division. In the event after considering the provisions of section 7 and without further explaining his reasoning, the judge awarded what was the equivalent of a 55:45 division.

5. Mr Ching has invited our attention to a small number of decisions of the Court of Appeal in England where the problem of very wealthy parties has been considered under the parallel English legislation which was first section 5 of the Matrimonial Proceedings and Property Act 1970 and is now section 25 of the Matrimonial Clauses Act 1973. Mr Ching invited us to follow and apply the guideline advice offered by this authority, subject only to such qualification as was necessary by reason of major difference between our section 7 and England's section 25. In answer Mr Singer made two major submissions. First we were invited to construe section 7 for ourselves in the light of our perception of Hong Kong's need, and to ignore all English authority. Secondly he subjected the English authority to a critical analysis with a view to persuading us that it was unpersuasive, inconsistent and in certain respects erroneous. Collectively the authorities constituted, he suggested, a shaky jerry built edifice where each decision took the court farther from the words of the section. His main purpose was to show that the court should obtain no assistance from the pattern of awards in these cases which fell within the range of 25% - 35% of total assets.

6. Mr Singer's first submission ignores history. From as early as the Divorce Ordinance of 1932, the original Cap 179, where section 29, dealing with what was then called permanent alimony, precisely followed section 190 of the Supreme Court of Judicature (Consolidation) Act 1925, the Hong Kong legislature has followed the example of the English Parliament. Thus section 5(1) of the English Matrimonial Clauses Act 1963, which by subsection (c) first empowered the court to order "the husband to pay to the wife such lump sum as the court thinks reasonable" was enacted in Hong Kong in identical terms in section 28(1) of the Matrimonial Clauses Ordinance Cap 179. Section 7 of the MPPO was taken almost verbatim from section 5 of the 1970 UK Act. The important difference is that between 1970 and October 1984 the UK statute required the court: -

"So to exercise those powers as to place the parties, so far as it is practical and, having regard to their conduct, just to do so, in the financial position in which they would have been if the marriage had not broken down and each had properly discharged his or her financial obligations and responsibilities towards the other."

This "target" provision, as it was conveniently called in argument, was omitted by the Hong Kong legislature from section 7(1). Part only of it, the reference to the "conduct of the parties" was adopted and inserted as part of the opening words of the section. In section 7(2) on the other hand the English target provision was included intact. This leaves no room for doubt that the omission was deliberate.

7. Subject to this change, the history of matrimonial legislation, and more particularly of that relating to financial provision, demonstrates a legislative intent in Hong Kong to use English experience and to follow England's example. This has inevitably and properly led to the repeated use in the Hong Kong courts of English authority and of English textbooks. I therefore have no hesitation in rejecting Mr Singer's first submission.

8. In order to consider Mr Singer's second submission, it is necessary to put into context the guideline advice which emerges from the English authorities namely: O-D v O'D [1967] Fam 83: S v S unreported in the Court of Appeal, but the first instance judgment of Balcombe J is reported in Times Newspaper 10th May 1980. Page v Page (1981) 2 FLR 198: Preston v Preston [1982] Pam 17, where Ormrod LJ took the opportunity to summarise the effect of the earlier decisions' at pps 24-25. More recently there is Gojkovic v Gojkovic (1990) 1 FLR 140 in the Court of Appeal, and two decisions at first instance referred to by Mr Singer, namely of Ward J in B v B (1990) 1 FLR 20, and of Stephen Brown J in Richards v Richards (1989) unreported.

9. It seems to me that the guideline advice or principles which can be extracted from these authorities can be summarised in this way: -

1.	The court's first task is to consider "all the circumstances" and all the factors set out in paragraphs (a) to (g) of section 25(1) in England and of section 7(1) here.
2.	Until 1984 in England this had to be done with a view to satisfying what I have called the "target" clause. This aspect features significantly in all these cases, and I shall have hereafter to attempt to assess its importance.
3.	The arithmetical approach suggested as an appropriate starting point in Wachtel v Wachtel [1973] Fam 72 is wrong and quite inappropriate at this level of case. Mr Singer did not dispute this. He admitted that in the absence of any provision for community of property, which for a short time in England was considered as a possible effect of section 5, he cannot invite the court ot start from equality. Rather it was the result he invited it ultimately to reach.
4.	The inquiry can conveniently start at the evaluation under subsection (a) of "the income, earning capacity, property and other financial resources" of both parties. This usually involves the evaluation of the husband's contribution to the family fortunes which are under his control. But resources of both parties derived from any source, e.g. inheritance , have also to be considered.
5.	The next stage is to evaluate what Ormrod LJ more than once referred to as the wife's "reasonable requirements". Mr Singer's criticism of this phrase as an unjustified judicial gloss only has substance if it could be said that Ormrod LJ was seeking to substitute this phrase for the words of the section. It is quite clear that he was not and that he was simply using it as a convenient paraphrase of the effects of the section. He was in effect saying that the section requires that a monetary value has to be put upon the wife's total claims upon the available assets.
6.	In making this monetary assessment it has to be borne in mind that: "possible dispositions by will are not relevant matters for consideration under section 25. The scheme of the act is to give the court jurisdiction to make orders for the benefit of wives and dependent children" per Dunn LJ in Page at p 203. So in Preston it was held that a lump sum intended to provide income should be assessed on the basis not of the return on the capital sum, but upon the basis that the capital would be exhausted during the wife's lifetime. The court was thus accepting that for either party maintenance is assessed for no longer than what was once called "the life" of the other. This principle has consistently been applied in England since Preston, e.g. in Duxbury v Duxbury (1987) 1 FLR 7 and Gojkovic v Gojkovic at p 143. I can see no substance in Mr Singer's criticisms of it.
7.	In the words of Ormrod LJ in Preston p 25: -
	"Active participation by the wife either by working in the business or by providing finance, will greatly enhance her contribution to the welfare of the family under paragraph (f), and may lead to a substantial increase in the lump-sum over and above her 'reasonable requirements'. This, in effect, recognises that she has 'earned' a share in the total assets, and should be able to realise it and use it as she chooses: S v S"
	This does not downgrade the contribution of the lady who only fulfills the very important role of wife and mother, as Mr Singer suggests it simply recognises the different types of contribution which the award must reflect. All the cases are consistent in recognising the particular claim which can be advanced by the working wife. Again I can see no force in Mr Singer's criticism.
8.	Again in the language of Ormrod J in Preston at p 28: -
	"I think that on the true construction of section 25 there does come a point, in cases where the available resources are very large, as Mr Johnson submitted when the amount required to fulfil its terms 'levels off' and redistribution of capital as such, in some unspecified ratio begins, which is outside the section".
	This conclusion was particularly attacked by Mr Singer. But it seems to me necessarily to follow from the terms and effect of section 25 above considered, and from the fact, pointed out by Bagnall J in Harnett v Harnett [1973] Fam 156 that the legislature did not direct the court "to exercise its power so as to achieve a fair or just ... division of the capital and income resources of the parties". Any assessment based upon realities and requirements necessarily has a ceiling. The court's discretion under section 25 is wide but it is conditioned by the terms of that section, and is not unlimited in the sense urged by Mr Singer.
9.	"Where the court is dealing with very large resources the ambit of reasonable disagreement is very wide" per Ormrod LJ in Preston p 29. It follows that an appellate court will disturb a judge's assessment only if he misdirects himself or if his assessment falls outside such generous ambit and is clearly wrong.

10. In my view the courts of Hong Kong can and should derive considerable help from the much wider experience of the English courts in this field. The English courts seem to me faithfully and carefully to have construed their section 25 and I am unimpressed by Mr Singer's criticism. For my part I gratefully accept and follow the guidance of these decisions.

11. A much more difficult question remains, which is to assess the impact of the target provision in the English statute and its absence in Hong Kong. I think there is force in Ormrod LJ's suggestion in Preston p 26 that the target provision stemmed from dicta of Lord Merrivale in N v N (1928) 44 TLR 324 when he said: -

"I conceive that I must take into consideration the position in which they were and the position in which she was entitled to expect herself to be and would have been, if her husband had properly discharged his marital obligation."

When section 5(1) of the Matrimonial Clauses Act 1963 first empowered the English court to award a lump sum, it turned for guidance to the same source. Thus in Brett v Brett [1969] 1 WLR 487 Willmer LJ held that the same principles applied to the assessment of lump sum payments and said: -

"I do not propose to depart from Lord Merrivale's test, that is to say, the test of taking into consideration the position in which the wife was entitled to expect herself to be, and would have been, if the husband had discharged his marital obligation - the marital obligation being, of course, an obligation to maintain her on the scale appropriate to his station in life" p 493.

12. It seems to me that after Hong Kong adopted this provision in section 28(1) of the Matrimonial Clauses Ordinance, this statement represented the law of Hong Kong and provides the background to our section 7. The difference as I see it is this. In England from 1970 to 1984 a court was under a duty to exercise its powers with the object of seeking to achieve the result specified in the target provision. In Hong Kong the position is and has always been that the legitimate expectations of the wife have to be "taken into consideration" in assessing her section 7 position. I am minded to think that this puts a lower duty on the court and lowers the significance of this element. It may thus diminish a wife's claim and operate marginally in favour of husbands.

13. Beyond this very tentative conclusion I find it unnecessary to go because it seems to me impossibly difficult to assess what effect the presence of the target in England has had upon the awards in the cases above considered. From the language of the decisions it played a very significant part, notwithstanding the difficulty the courts felt in giving literal effect to the provision see for example Ormrod LJ in Preston p 25. but if it can be said to have produced a marginal increase originally, I am unable to detect any apparent sign of a decline in awards since the provision was removed from the English statute in 1984, cp Gojkovic. Abolition therefore has not detestably altered the pattern; non constat its original absence would have had no effect.

14. With these considerations and principles in mind I return to the facts. The judge's first task was to ascertain and value the total assets. Much was agreed, but certain disputes were left to him to resolve. Only the following have been challenged on appeal.

(1)	Missing jewellery

	The husband alleged that he had bought for the wife four valuable pieces of jewellery which the wife had failed to produce. In respect of three of these pieces the judge found in his favour. He rejected the wife's explanations in evidence, concluding that she knew more than she was willing to say. This jewellery, had therefore to be brought into account at a valuation. It is the judge's values which are criticised.
	The husband gave evidence, which was accepted, as to the purchase and cost of each item. Upon the basis of this evidence, the husband's valuer first assessed the quality of the piece and then estimated what its current value would be. The wife's valuer offered an opinion only in one case; his figure being higher. The judge declined to apply the principles of Amory v Delamirie (1721) 1 Stra 505. Instead applying some other unspecified principles he reduced the husband's valuer's figures to something he called more realistic. I cannot agree with this approach. The Amory v Delamirie principle operates at two different levels: deliberate destruction and non-production: Hong Kong and Shanghai Banking Corp v Chau Yiu Wah [1988] 1 HKLR 457, 469 and 510. At the lower level it justifies the drawing of an adverse inference against the non-producing party. This was such a case. The husband's valuer did not follow the stringent Amory and Delamirie approach of attributing the highest possible value. He reconstructed the position as best he could in the absence of the actual pieces. I can see no good reason for rejecting this approach or far the judge's substitution of his own somewhat arbitrary values. For the judge's total value of $1.4 m I would substitute a valuation of $1.98 m.
(2)	Principal jewellery
	The value and destination of this jewellery gave rise to a deeply emotive dispute. Much of it had been bought with an eye to investment. Both parties wanted the whole. The wife persisted in this attitude in face of a warning from Mr Ching that she could be creating an income problem because she "could not eat the jewellery". Ultimately agreement was reached that the jewellery should all go to the wife at an agreed total valuation of $12.5 m.
	When however the judge brought this jewellery into account in his asset assessment he deducted from $12.5 m a total of $4 m. This was made up of three categories of pieces, namely

	(i)	Four items which had a connection, two close and two somewhat remote with the wife's family, valued by the judge at $1.89 m.
	(ii)	Two items which the judge mistakenly thought it was agreed should go to the sons. In fact other diamonds were so earmarked. These, the wife only expressed a desire to give to the sons. The judge's valuation was $1.5 m.
	(iii)	An unspecified number of items worth individually less than $100,000 each, put at $0.6 m.

15. The judge derived these figures from values listed by the parties but which were not in fact spoken to by either valuer by reason of the total agreed value.

16. The judge was not directly invited to deal with this jewellery in this way by Mr Singer. We have read the transcript of his submission. It seems to me that both here and below Mr Singer had to accept that at the first stage of asset identification and valuation the agreement bound. What he was seeking to suggest to the judge was that at the second stage of his enquiry, when he fell to consider the effect of the wife's possession of this jewellery, its convertibility, and its income generating capacity, he might properly conclude that the wife could not readily be expected to realise some part of it.

17. Very unfortunately in my view the judge never reached any second stage in his enquiry. He later considered all the paragraphs in section 7 (1) and referred to the parties' reasonable financial needs and requirements. But he attempted no quantification. This I think is because he was wrongly persuaded to the conclusion that this was not required under section 7(1) and that he was simply engaged in what Ormrod LJ called "a re-distribution of capital as such" with a view to doing "justice" between the parties. This approach enabled him to make what was tantamount to a "free" distribution of these excepted items of jewellery to the wife, and exclude them from further consideration in his capital distribution. In this respect I think he erred in principle. The second or quantification stage in this inquiry is essential. At the first this deduction was wrong.

18. The remaining criticisms of the judge's findings can be dealt with more briefly. Over about a twelve month period after the parting, the wife lost rather more than $1 m gambling in Macau, and between $0.5 m and $1 m speculating on the Hang Seng futures exchange. On the basis of this financial irresponsibility the judge brought into account $1 m of the Macau losses, but no part of the futures losses. I find this distinction unconvincing, and think he should also have brought in a proportion, say $0.4 m of the futures losses.

19. Against what was in effect an agreed value of the wife's interest in her father's estate of $11 m, the judge deducted $1 m for future costs and contingencies. This was attacked as too generous, and the supporting evidence was indeed tenuous. But from my part I do not think it unreasonable for these contingencies so to be assessed

20. Finally it is said that the judge took insufficient account of the wife's admitted misconduct in the course of the proceedings. I think that this was quite sufficiently reflected in the stringent Costs Order the judge was invited by the wife's advisers to make and made, which taxed at over $3 m.

21. It follows that the judge's findings at the first stage have to be qualified by adding back into those assets which were or ought to be in the wife's control a further $5 m. This brings the true total to $95.338 m and the wife's total to $65.424 m.

22. This total falls into three broad categories.

(1)	About $14 m was the total value of the wife's inheritance, principally her interest in her father's estate.
(2)	$10 m was the value the judge, gallantly attempting the near impossible, put upon the chances of recovery in some extremely complex hostile litigation then being conducted in the name of both parties, but hence forth to be conducted for the sole benefit of the husband. I gratefully adopt his figure, but unlike all the other figures in the case it has to be recognised as extremely speculative.
(3)	The balance represented the total of the husband's financial contribution to these family assets from his professional and entrepreneurial activities. Had these assets in the more usual way remained in his name or under his control, the question would have been: What was the proper lump sum to award to the wife? Since control has largely passed to the wife, the question is reversed, namely, What are the proper lump sums for her to retain and to repay? Both questions give rise to the same issue and require next a quantification of needs, of "reasonable requirements" in the broadest sense of that phrase, of the claims of both parties to these assets in the light of all circumstances and of the considerations specifically named in section 7(1).

23. Here there was much common ground. Both parties were in their 50's, and neither suffered in the judge's view any relevant disability. The husband had effectively retired from his practice but retained a residual earning capacity. Much more significantly the standard of living set and enjoyed by the parties during the marriage was agreed to have been of the highest. They wanted for nothing. It was against that very high standard that the wife's reasonable requirements fell to be assessed. They were quantified by her in her evidence in terms of income at $900,000 pa. Putting her inheritance on one side, the wife did not fall into that special category who have actively participated in the creation of wealth by working or by the provision of capital. But during nearly 30 years of married life she had made a major contribution to the family welfare in her role of wife, mother and hostess.

24. In these circumstances it seems to me that the wife required: -

(1)	A suitable home
(2)	A capital sum which
	(a)	would produce over her life time an income sufficient to enable her to maintain the standard of living set by the marriage;
	(b)	provide a cushion sufficient to cover periodical capital requirements and indeed emergencies;
	(c)	properly reflect her contribution to this family over 30 years.

25. Of these the wife had:

	(i)	A suitaole home. By agreement the old matrimonial home in Wong Nei Chung Gap Road valued at $4.175 m was to be conveyed to her by the husband, and the judge separately so ordered.
	(ii)	Her inheritance of about $14 m. Much of this is now illiquid, and the income is only a somewhat derisory $252,000 pa. As the winding up of her father's estate proceeds, greater income and freer capital is bound to be created. At its lowest, this fund provides a considerable capital cushion.

26. The crucial question then is what further sum should the wife receive by way of retention. In assessing it regard must be had to a number of special factors beyond the general considerations above noted. It is the fund to which she must initially look for the production of the bulk of her necessary income. Secondly she cannot take advantage of any liquidity problem created by her taking of the jewellery, but I think that two pieces, the presents from her mother on marriage, out of the so-called family jewels should be regarded as non-convertible. Thirdly the fact that part of her fund is notional, and that she had incurred substantial past and future liabilities in costs, cannot be directly reflected, but equally cannot be wholly ignored.

27. I think that the appropriate sum for the wife to have by way of retention in addition to the flat and to her inheritance is the sum of $17 m making a total of $35.175 m. Rounding this up to $35.424 m, this leaves a balance of $30 m which ought to be returned to the husband by way of lump sum award.

28. For my part therefore I would allow this appeal and vary that part of the judge's order which directed the payment of a lump sum to the husband by increasing the amount from $19 m to $30 m.

Fuad, V-P :

29. I agree and have nothing to add.

Clough, JA :

30. I agree. Although we are varying the order of Mortimer J made in the exercise of his statutory discretion, there is nothing I can usefully add to the judgment given by Hunter JA which I gratefully adopt.

31. In handing down this judgment we made an order nisi that the Respondent pay the appellant costs of this appeal.

Representation:

Charles Ching, QC, Miss Jacqueline Leong (M/s Helen A. Lo & Co) for Appellant/Petitioner

Peter Singer, QC, Keith Yeung (M/s Hampton, Winter & Glynn) for Respondent

Cites 1 case

Cases cited in this judgment

Chan Lai Shing 對 the Hong Kong and Shanghai Banking Corp

[1988] 1 HKLR 457

High Court CFI12 Dec 2025