M v. M
Read the full judgment text of FCMC 5111/1999 on BabelCite. This Family Court judgment before H.H. Judge Bruno Chan.
Matrimonial law – Ancillary relief – Maintenance – Custody – Access – Costs – Conduct – Asset distribution – Tax implications – International travel – Marriage breakdown – High standard of living – Nevada proceedings dismissed – Wife needs home – Husband employer housing – Assets split – Maintenance US$6,500/$1,500 – No costs order
Legal issues: Distribution of Assets · Maintenance Quantum · Access to Child · Costs · Conduct in Nevada Proceedings
Outcome: Divorce granted. Custody awarded to Wife. Ancillary relief awarded. No order as to costs.
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FCMC005111/1999 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES SUIT NO. 5111 OF 1999 --------------------
-------------------- Coram: H.H. Judge Bruno Chan in Chambers Date of Hearing: 24th-26th August, 6th-9th, 13th-14th and 28th September 1999 Date of Handing Down of Judgment: 22nd October 1999 _______________ J U D G M E N T _______________ 1. This is the Petitioner Wife's application for ancillary relief for herself and the only child of the marriage against the Respondent Husband. Although the parties are now divorced, I shall for convenience purpose refer to them as Husband and Wife in this judgment. 2. Both parties are American citizens who were married on 3rd September 1989 in California, USA. After the marriage they came to live in Hong Kong where the Husband accepted a job. Their child, a son, who is now 7 1/2, was also born in Hong Kong. In April 1996 the Husband accepted another job in Australia and the family moved to live there for about 2 years until March 1998 when they returned to Hong Kong and have since remained. 3. The Husband is employed as a vice president of Citibank in Hong Kong and earns a fairly good salary with various perks and benefits common to expatriates in senior position in Hong Kong including bonuses, housing, medical etc. The Wife was during the marriage and still is mainly a full-time housewife and mother, although she did have a part-time job for a short period of time between late 1998 and early 1999. 4. There were marital problems during the marriage and in about September 1998, after having sought advice from a solicitor, the Wife showed the Husband a draft divorce petition which she proposed to issue unless something was done to repair their marriage. As a result the Husband began to seek counseling and the Wife agreed not to file her divorce petition. On 13th February 1999, the family went to Nevada, USA where they have a condominium for a short holiday over the Chinese New Year. However on 24th February 1999, the day before they were due to return to Hong Kong, the Wife was served with divorce proceedings taken out by the Husband in Nevada earlier on the same day together with an ex-parte order granting him interim custody of the son and joint preliminary injunction restraining either party from dealing with their assets. Despite the interim custody order in his favour, the Husband never took de facto custody of the son and in fact allowed the Wife and the son to leave the U.S. together to return to Hong Kong. 5. The Nevada proceedings no doubt came as a great surprise to the Wife who immediately upon returning to Hong Kong sought legal advice to counter that proceedings in Nevada and also launched her own proceedings in Hong Kong, initially in the High Court by making the son a ward thereof on 1st March 1999 so that he could not be removed from the jurisdiction without leave of the Court, which was soon followed by the issue of her petition for divorce on 26th May 1999 based on the Husband's unreasonable behaviour under the present proceedings. In her petition the Wife also sought custody of their son and full ancillary relief. 6. Proceedings between the parties soon became fast and furious in both Hong Kong and Nevada with various applications for prohibition orders and injunctive reliefs. Eventually the Husband's divorce proceedings were dismissed by the Nevada Court for want of jurisdiction as the parties were regarded as non-residents there, and the parties were subsequently able to compromise on the warship and the divorce proceedings in Hong Kong, and on 8th July 1999 the decree nisi of divorce was granted to the Wife with the questions of custody access and ancillary relief adjourned to Chambers for trial. In the mean time the parties also agreed that the Husband would pay to the Wife HK$44,000 per month by way of interim maintenance pending the final determination of the proceedings. I gave the parties an early date in end of August 1999 for the hearing as the Husband was shortly due to be relocated by his employer to the branch office in Singapore, whilst it was the Wife's intention to return to the United States with the child after the divorce. 7. Both parties have filed substantive affidavits and there were exhaustive requests for further and better particulars and discoveries from both sides. The parties also gave evidence at length at the hearing and were extensively cross-examined. 8. Although custody and access were still in dispute at the start of the trial, the parties were able to resolve the matters in the course of the hearing by agreeing that the Wife is to have custody care and control of the child with certain defined access to the Husband, the terms of which I shall set out at the end of this judgment. There is however serious dispute as to whether the Husband should have access to his son outside the jurisdiction of the Wife's home state after her return to the United States as she is concerned that he may not return the son to her once he leaves the country. The other main issue is of course the Wife's claims for ancillary relief for herself and the son which I shall now deal with first. 9. In deciding ancillary relief claims, I am guided by the matters as set out in Section 7 of the Matrimonial Proceedings and Property Ordinance. The parties' financial situation and assets are fairly straightforward and well documented, and at the outset of the hearing they agreed in principle to distribute equally between themselves their assets which consist mainly of bank savings, retirement funds, some stocks and shares and the house in Nevada, the total gross value of which was at the start of the matrimonial proceedings in the vicinity of about US$1.7 - 1.8 million. In fact in the course of the hearing on 8th September 1999 when the value of the assets had dwindled down to US$1.37 million due to legal costs of the on-going trial, the Husband in an attempt to settle the Wife's claims offered her some of his Proctor and Gamble stocks and the Nevada Property which together with her own funds would amount to half of the then assets value at US$685,000, plus monthly maintenance for her at the rate of US$5,500 for 2 years, then US$2,750 for a further 3 years, and monthly maintenance for the son at US$1,500 plus education and medical expenses as long as they are covered by his employment contract. 10. The Wife was willing to accept US$685,000 as her half share of the assets but insisted that it be in liquid form as she would need all the cash to purchase her accommodation in the United States. Regarding monthly maintenance, she counter-offered US$5,000 net of tax for herself without any limitation as to duration at this stage, and US$2,000 for the child plus education and medical coverage. 11. It was quite apparent by then that the parties were not so far apart as to justify incurring further costs which was already quite substantial and was being run up at an alarming rate. To wit, between 8th September 1999 when the Husband's offer was made and the last day of the hearing on 28th September 1999, the parties ran up a further 200 pages of correspondence between solicitors, no doubt all for good reasons and part of further attempt to negotiate, yet there was no settlement and the hearing had to continue to its bitter end. 12. One of the reasons for the matter to turn out to be so much more complicated and contentious than anticipated, apart from the bitterness, animosity and total distrust the parties have for each other, which is not uncommon in divorce proceedings, is because the Wife intends to argue that the Husband's conduct in bringing the proceedings in Nevada which turned out to be totally fruitless but expensive, costing the parties more than US$140,000 in total legal costs, should be taken into account when assessing her claims. Furthermore, the fact that the Wife and the son will be living in the United States after the divorce, the expenses for rehousing them as well as their future needs and living expenses obviously vary in different parts of the United States, and as such the implication and impact of U.S. tax on the maintenance payable and the possible liquidation of some of the parties' retirement funds and stock options, which may attract further tax and penalties, all but add to the difficulty of the case. 13. I shall first consider the Wife's income, earning capacity and other financial resources. It is not in dispute that she was a full-time housewife and mother during the marriage except for a few months in late 1998 when she had a part-time job as an achivist, and that she was, and still is, wholly dependent on the Husband. Prior to the marriage she was a successful sales executive for a large printing and publishing company in California earning an annual salary of more than US$66,000 plus allowance for entertaining clients and travelling. She says as she is now aged almost 46 and unfamiliar with new technology, and as she has the care of a small child, she does not think she can go back into the workplace at her former level. 14. The Wife also complains that due to the rush of the ancillary relief hearing, she has not been given the opportunity to seriously consider her plan as to future employment and to research into the job market situation in the U.S.. She says during the initial period of her settlement in the U.S., she believes at best she can only do some part-time work to earn some pocket money as she needs to focus on helping her son to adjust to their new environment and his new school. One of her initial plans is to go back to university to study law which she is interested in, or interior decoration which she is good at. She hopes to be able to eventually go back into the workplace on full-time basis but until then she will have to continue to rely on the Husband financially. 15. The Husband does not dispute that the Wife will initially be dependent on him but insists that it should only be for a limited duration in view of her good earning capability and his generous offer to let her have half of their gross assets, most of which were accumulated by him during the marriage. There is no doubt that the Wife is a highly intelligent, capable and articulate person as evidenced in the way she answered questions put to her in particularly during cross-examination. She had had a good career prior to the marriage and although she has been out of the workforce the past 10 years, I believe that given time and re-training, she should be able to have a second career in perhaps law or interior decoration in which she is interested. However, given her present age and with a small child to look after, I agree with her concern that she may never be able to reach the former level no matter what sort of job she is to have, not just because she has been out of touch with new technology the past 10 years as she has alleged, as I believe she has the intelligence and ability to learn and master any technological aspect that comes with the job, but rather it is the uncertainty as to how much time she will need to re-establish herself in the workforce and how much income she will then be able to earn that makes it difficult to determine for how long she should be dependent on the Husband. 16. The Wife says she needs a lump sum of US$650,000 to purchase a house for herself and the child in California, a further sum of US$93,720 to meet various interim expenses such as storage, relocation, house set-up expenses, the purchase of a car and various household appliances, and monthly sums of US$5,000 - 6,000 net of tax for her maintenance and US$2,000 for the maintenance of the child. She also wants the Husband to be separately responsible for the child's education and medical expenses. Apart from an undertaking given by the Husband that he would be responsible for the child's education and medical expenses as long as they are covered by his present employment, the other items of the Wife's needs are in heated dispute as to their quantum. 17. One of the most contentious issues is the Wife's claim of US$650,000 to purchase a house in California. She has chosen California to be her future home state because it is where she used to live and work prior to the marriage and it is a place she is familiar and has some connection with. It is also close to the State of Oregon where her mother resides. She in fact made a trip to California over last summer to research on the costs and suitability of housing and schooling in various locations of that State and has produced documents to show that the appropriate figure for a suitable house of 2,500 sq. ft. with 3 bedrooms and garden in a decent neighbourhood which also offers good school and job opportunity, such as the town of San Anselmo in the South Bay area which has a middle-class professional neighbourhood, is about US$650,000. 18. The Wife says she has placed strong emphasis on good schools being available in the area of her choice as she believes that her son is a gifted child who should be attending really good school with appropriate program for gifted students which is mostly available only in good private schools in the United States. 19. The Wife argues that there is sufficient assets between the parties to enable the court to give her a lump sum of US$650,000 to purchase a suitable accommodation for her and the child without relying on mortgage, which she says she cannot obtain as she has no credit history in the United States where she has not resided the past 10 years, nor should she have to rent as it would not commensurate with the life style which the family has enjoyed during the marriage. 20. During the parties' stay in Hong Kong, their living accommodation has always been provided by his employer as part of the Husband's employment terms. According to the Wife, their standard of living and lifestyle was always good, with their first home a brand new 2,300 sq.ft. flat with floor to ceiling views of the Repulse Bay. Later whilst their son was still a baby, they moved to a free standing 2 storey 4,300 sq.ft. house in Discovery Bay with 5 bedrooms and large lawns. When they moved to Australia, their home was even bigger with 7 bedrooms and 6 additional living areas and extensive gardens. Their current home at Turtle Cove, Tai Tam is a 5,500 sq.ft. rented house overlooking a private cove and swimming beach with views of Stanley. The parties are members of private clubs including the American Club and the Royal Hong Kong Yacht Club, with frequent holiday trips and domestic help. It is no doubt one of high standard of living common to senior officers on expatriate terms in Hong Kong. 21. It is however a lifestyle which, the Husband argues, the parties cannot afford to have after the divorce and when the Wife moves back to the United States. The Husband has in fact produced hundred of pages of information relating to housing, schooling and price index of various towns and cities in the United States which he obtained from the Internet to show that the Wife's choice of housing location in the Bay Area of California is one of the most expensive in the United States and that she deliberately made that choice so as to extract more money from him. 22. I do not think there is any dispute that California is one of the most expensive place to live in the United States. It is however also where the Wife used to live and work for years before the marriage and it is natural for her to go back there after the divorce. It was the place where she had looked at during the summer and researched through enquiries with estate agents and discussions with friends who have resided there. She has no connection with the other states except Oregon where her mother resides and Nevada where their condominium is situated. She has decided against both places with legitimate explanations. It is virtually impossible and unrealistic for her to embark on a statewide research on the many other towns and cities in America referred to in the Internet documents produced by the Husband. She has decided on California for good reasons and I do not think the Husband is entitled under the circumstances to dictate where she should make her future home after the divorce. It is of course another matter whether she should spend US$650,000 for such a home as well as monthly maintenance of US$5,000 - 6,000 net of tax for herself plus US$2,000 for the child, and if so whether the Husband can afford to do so. To answer this I must now examine the Husband's financial situation. 23. The Husband is now aged 43 and had worked for Procter and Gamble in the United States for many years before coming to work in Hong Kong. He has since March 1998 been employed as a bank vice president of Citibank. His base salary for last year was US$250,000 per annum plus additional benefits including housing allowance, living cost allowance, dental and medical credit plus bonus which he says was about US$240,000 including a one time signing bonus of US$120,000. As he has now been relocated to Singapore, the Husband says, the details of his new pay package have yet to be finalized, although he has for the moment been given a schedule of his remuneration and benefits which is exhibited to his Affidavit of Means (P.606 of the Bundle). According to this schedule, the Husband says although he gets a monthly base salary of US$20,833.37 and living cost allowance of US$2,572.03, as he is subject to heavy taxes of various forms including federal tax, state tax, etc. which will be deducted from his salary paid at the New York head office, whilst his living cost allowance will be reduced due to the smaller size of his family after the divorce, his actual net take home salary will in fact be only US$12,859.57, and that his housing allowance will be provided only for an overseas posting, and in his case, for his accommodation in Singapore. 24. The Wife is skeptical about what in fact the Husband's salary package will be in Singapore. She argues that since the Husband has admitted that there is a promotion element in his relocation to Singapore, she finds it difficult to accept that his actual income would become less than it was in Hong Kong. She says that from the salary statements exhibited by him it can be seen that his net salary until March 1999 was US$15,200, but reduced thereafter to around US$13,900 after he started to make monthly contribution to the Citibank Savings Incentive Plan, but as this scheme is now terminating, there should be no further monthly deduction for this purpose. Furthermore, although he now appears to be claiming another monthly deduction of US$1,291 for FICA Social Security Contribution, there is no evidence from his salary statements that this is a monthly deduction, but in fact is only an annual deduction on the first month of each year plus deduction from his bonus. She therefore argues that even after taking into account the reduction in the cost of living allowance in Singapore and based on his net income received for August 1999, and in the absence of any more compelling evidence from the Husband other than his own assertion, the court should accept US$14,500 as his monthly net base income from which her maintenance can be paid, without even touching his cash bonuses or stock incentives. 25. There is no dispute that the Husband's base annual income will remain the same at US$250,000 in Singapore, giving him a monthly sum of US$20,833.33. The issues are what sort of tax deduction that would be made from the base income so as to arrive at his net take home pay per month, and what would be his future cash bonuses. 26. I don't think that the Husband has been less than frank about his income or misleading as to the amount of tax deductions as alleged by the Wife. In fact I find him to be a truthful witness and that he has made full and frank disclosure, not just of his income but also of his assets. I think with the uncertainty over details of his pay package due to his relocation to Singapore, he may have been over cautious as to his tax deductions and I agree with the Wife that the evidence before me suggests that FICA Social Security Contribution is more likely one of annual rather than monthly deduction which will probably come out of his annual bonuses instead of his monthly base salary, and I accept the Wife's argument that his net take home pay will likely be about US$14,500 per month in Singapore. 27. It is more difficult to determine the Husband's cash bonus as it is linked to both his and the company's performance. As the Husband has worked for Citibank only since March 1998, there is not much information or record to give an average figure or to provide any good indication thereof. His total bonus for last year at US$240,000 gross is misleading as US$120,000 of which was an one-off signing bonus and should not be included as part of his future annual bonus. Adding to the difficulty is the uncertainty which follows relocation to the new office in Singapore. It would however be reasonable to expect that with a satisfactory performance this year in Hong Kong and with an element of promotion in his relocation to Singapore, the Husband should get a bonus not less than that of last year excluding of course the sign-on bonus. 28. As aforesaid the parties' assets are clear and straight forward and have been properly disclosed and identified since the start of the proceedings, with the most up-to-date schedule being annexed to the Wife's closing submissions. They include personal and joint funds in bank accounts, investment and retirement funds, stocks and shares, the Nevada property and some insurance policies. It was said that at one time in early 1999 there were about US$1.7-1.8 million in total assets. The parties are agreed that the total value is now down to only US$1.37 million due to legal costs being incurred in both the United States and the Hong Kong proceedings. The parties have agreed in principle that these assets, whether held personally or jointly, and whether accumulated by each of them before or after the marriage, should be shared between them equally. However as some of these assets may not be readily liquidated without attracting substantial taxes and penalties, the issue is how they should be distributed in order to meet the parties' future needs, which I shall next consider. 29. There is no question that the parties' funds in their bank accounts can be easily liquidated. However they are being quickly swallowed up by legal costs while the other assets which are still of significant worth and from which the Wife expects to look to meet her claim for a lump sum, apart from the Nevada property, are mainly the Husband's investments and retirement funds which will have significant tax implications upon their liquidation at this stage. 30. It is accepted by the Wife that the Husband's Merrill Lynch Retirement fund of US$36,000 and his Proctor and Gamble Stocks of US$705,000 will attract a 10% penalty for early redemption plus the rate of tax of the redeemer which, in the case of the Husband, will be 45%, and will therefore have the effect of reducing the value by half. As for the Husband's other Proctor and Gamble Investment accounts and his La Suisse Space Insurance Policy, the Wife also accepts that there will be a 28% capital gain tax on their liquidation or surrender, but she insists that as she needs cash to purchase her accommodation, it is up to the Husband to decide which assets to give her and to deal with the tax implications, as long as she gets her share in liquid form and net of tax. 31. The Husband argues that their hard-earned assets, most of which were accumulated by him before or during the marriage, should not be wasted this way and has offered to let the Wife have some of the Proctor and Gamble stocks and the Nevada property which together with her own funds would make up half of the total gross value of the assets to enable her to purchase, not the type of expensive house she has in mind, but a suitable accommodation in some less expensive place in the United States. The Wife insists that such assets for her be in liquid form in the net amount of US$685,000. She accepts that although it is ideal to achieve tax efficient use of the family's resources, in the event of their divorce it is inevitable that the parties will have to take decisions that in the ordinary course of events they would wish not to have to take, and that the court has to weigh in the balance the needs of the Wife and son in respect of accommodation as against the unfortunate but realisable sale of assets. The purely practical consideration, Ms. Irving for the Wife submits, is that the Wife and child need accommodation, whereas the Husband has accommodation provided by his employer. 32. She further points out that the Wife's evidence is that she wants to get established in her new life so that she can get work and not be a drain on her husband but that this will take an unknown period of time. If the court finds this evidence credible, she says, the sooner she is able to get settled and get back on her own feet the better. Realistically, this is more likely once she has an established base behind her, she says, and that there is no evidence that the Husband is likely to lose his job, and whatever risk there might be must be balanced with reality, and weighed against the great booster for the Wife in having a settled base for her and the son. 33. One of the most important considerations in dealing with distribution of the parties' assets upon their divorce is to ensure that everyone concerned has a home. In Martin v. Martin [1978][Fam 12, [1977] 3 All ER 762, CA, the English Court of Appeal made the following observations when Stamp LJ said:-
whereas Ormrod LJ in the same court agreed that:
34. In this case the Wife with a small child who is due to return to a place where she has not lived for the past 10 years and with uncertainty as to her job prospect has clearly demonstrated a greater need from the available resources for the security of a home whereas the Husband's accommodation will be taken care of by his employer. 35. It is also true that often on the breakdown of marriage the wife usually suffers more, as pointed by Latey J in S v S [1976] Fam 18, [1975] 2 All ER 19, said:-
36. The Wife in this case would be close to 50 or so before she could begin to forge any real career, no matter how capable or accomplished I may have found her, and that the only real security for her future is the home which she is going to purchase, a security which she would have had if the marriage had continued. 37. There is no dispute that the Husband's offer made to the Wife in gross term would not be sufficient for her to purchase the property of her choice and location. On the other hand, the Wife's request for US$685,000 in liquid form and net of tax would in all reality have meant taking the bulk of the assets in particularly after deducting for the parties' legal costs in the proceedings. 38. This has been a 10 years marriage which, even at this day and age of ever rising divorces, cannot be said to be a lengthy one. I also agree with the Husband that during the marriage the parties might have enjoyed a fairly high standard of living and lifestyle, it was one for corporate expatriate when abroad which does not compare to that of an executive in an equivalent position in the United States, and that I do not believe that in the United States either party had lived at the "top one percentile" level as alleged by the Wife, and that even if they had, it would be unrealistic in terms of needs and impossible in terms of resources now that they are divorced when there are 2 households to maintain. 39. I do recognise the Wife's contribution to the marriage when she gave up her home and a well paid job to come with the Husband to Hong Kong, and that she had played a good role as a corporate wife and taken good care of the family and their son, and whilst her future job prospect is uncertain, the Husband by contrast is just getting into the prime of his career with a senior highly paid position with salary and perks enjoyed by many senior executives, at least for the time being, on expatriate level. 40. There is of course always the risk that the Husband may lose his present job or his expatriate perks if he is to be relocated back to the United States. There is simply no hard and fast rule and the system, whether in Hong Kong or the United States, is certainly flexible enough for him to apply for the maintenance to be reduced accordingly. 41. As pointed out earlier in this judgment, while conduct is not in issue in general terms, although there were various complaints by the Husband of the Wife's greed and unyielding attitude which were responsible for these proceedings being dragged out, which is more a question of costs at the end of the day, it is the Wife who argues that the Husband's conduct in respect of the litigation in Nevada was designed to exert pressure on her to comply with his terms on the divorce, and as the Nevada proceedings which were dismissed by the U.S. Court but the costs of which have reduced the assets available for distribution by at least US$142,000, the Wife submits that I should take into account in these proceedings the costs of the Nevada proceedings. 42. The Husband has explained in his evidence that he took the Nevada proceedings on legal advice after he became desperate when the Wife threatened divorce and warned him as to what she would do as to his access or visitation to their son should she return to the United States or elsewhere. Mr. Clough submits on behalf of the Husband that his affidavits filed in support of his Nevada action were truthful documents and that the dismissal of his proceedings in Nevada should not impugn his honesty or motives in seeking the remedies he did, and that it would be contrary to the principles of comity to deduct from the family assets the costs of the Nevada proceedings and then apply the remainder in favour of the Wife as it would mean her seeking a double remedy as she proceeds in Nevada for costs and also in Hong Kong for the same costs to be accounted for in these proceedings. 43. With respect, this argument of the Wife seeking a double remedy cannot be right as the evidence at the hearing reveals that the Wife's application for costs of the Nevada proceedings has been refused by the U.S. Court. This may sound unusual but rightly or wrongly, unless she goes to appeal, this will mean the end of her claim for costs of the Nevada proceedings in the United States, nor can she do so directly in these proceedings. 44. Having heard the parties' evidence on this issue, in particularly that of the Wife in which she has admitted telling the Husband in late 1998 that she might take the son with her if the marriage did not work out, and having observed the Wife in Court whom I find to be an articulate and demanding person as evidenced by the way she discussed the family's finance with the Husband at the early stage of their marriage resulting in her gaining joint control thereof, and the way she approached the Husband's superiors upon the breakdown of their marriage demanding a meeting with them over her concern for her future needs and accommodation, I have no doubt what she told the Husband in late 1998 must have a serious impact on him and I am satisfied that he at that time did become genuinely concerned about his son's welfare, which together with the uncertainty caused by his relocation to Singapore, and that it was on legal advise that he brought the Nevada proceedings. The way that the Nevada papers were served on the Wife during their holiday may be open to criticism, and no doubt the Husband must have been advised of the advantages which he might be able to gain over his wife by taking proceedings in Nevada instead of in Hong Kong, which advice must have played a part in his decision, something which most litigants do, I cannot however say that it is a conduct which is so gross or wrong that it should be taken into account when assessing the Wife's claims. Not doubt she has been put to substantial expenses which could have been avoided, but I can say the same about some of the actions taken by both side in these proceedings as well which I will go into details when I come to the question of costs at the end of the judgment. 45. Both parties have set out their future living expenses in details in their affidavit. As neither have actually lived in the place where they will be making their home, or in the case of the Wife not for the past 10 years, it is inevitable that their estimation could only at best be based partly on second-hand informations from friends who have lived there but whose needs and requirements may be somewhat different, and partly on personal experience in Hong Kong, the costs and standard of living of which may also be different from California or Singapore. Moreover, I would not be surprised that the parties might have also been over generous with some of their estimations, perhaps a case of better to have a surplus due to over estimation than the regret of facing a deficit later on. 46. Furthermore, I believe that the Wife has approached the exercise of estimating her expenses in California on the basis of the same high standard of living which she had been able to enjoy in Hong Kong which, as pointed out by the Husband, is both impractical and unrealistic. 47. As in many other families with limited resources, the standard of living of the parties will just have to come down on the breakdown of their marriage, as their remaining assets and the Husband's income simply cannot afford to maintain 2 households at their high expatriate lifestyle as before. It is in fact a situation that the Wife has readily accepted when she admits that she will have to find a job to eventually maintain herself, that her future residence will no longer be the kind of mansion-like houses that she used to live in Australia or Hong Kong, and that there will be no full-time domestic help in the U.S. Surely then it would not be appropriate for her to adopt the same Hong Kong lifestyle as a basis for her other expenses such as household, clothings, entertainment or holidays. 48. In fact the Wife has on cross-examination agreed that she can cut down some of such expenses by US$1,300 to US$1,400 in total. She has also admitted that she is merely asking the Husband to bear 2/3 of her monthly expenses, the balance of which she will rely on working part-time and/or borrowing from her family. 49. I do not think it is practical or realistic for the Wife to reply on borrowing, at least not on a long term basis, in order to maintain the kind of lifestyle that she prefers. I think she will just have to make the necessary adjustments to her needs and requirements after settling down in her new home and environment and be flexible in the circumstances. I am not saying this just to the Wife but also to the Husband, and I am mindful that the Wife will also have a small child to care for with all sort of additional or extraordinary expenses incidental to a fast growing child, but I believe that the Wife can further come down with some of her expenses such as household maintenance, costume and jewellery, dry cleaning, personal grooming, health and gifts, and that she should do without provision for future legal costs, at least not on monthly basis if just for registering, or domesticating, using her own word, the various orders made in these proceedings in California. 50. Furthermore, as admitted in her evidence, the Wife will also try to work on a part-time basis to subsidize her income, and although it is impossible at this stage to assess what kind of income such work will bring her, with her ability and intelligence, I believe she will be able to find ways to generate some income, albeit limited at the initial stage of her re-settlement. 51. There is of course still the issue of tax implication on the maintenance payable to the Wife who has asked for such sum to be net of tax. She has produced a letter from her tax expert (page 479 of the Correspondence Bundle) which says that under US taxation, the alimony payment made is a tax deduction to the provider and is taxable income to the recipient for the U.S. Federal Tax and most State Tax. It gives an example that if the provider is in the 45% tax bracket, as is the Husband in this case, and the recipient is in the 33% bracket, as is the Wife, for every US$1,000 of alimony payment the recipient will receive a net sum of US$670 while it would cost the provider a net of US$550. On this basis the Wife submits that to provide her with net US$6,000 per month will only cost the Husband approximately US$4,925, which is a net annual cost of US$59,100 to him, and not US$200,000 as alleged by the Husband that he would have to earn in order to pay what the Wife is asking. 52. With respect, I am unable to follow the logic of the Wife's submission as to how it would cost the Husband less to provide more to her, as it is clear from the said letter that the US$1,000 would still have to come from the Husband in order to give the Wife a net sum of US$670 after her paying 33% tax on the US$1,000. As far as I can gather from the letter, and there is no other evidence from the parties which can assist me on this issue, the benefit to the Husband is that as the Wife enjoys a lower tax bracket at 33% as against his 45%, the maintenance or alimony payable by the Husband to the Wife will be taxed against her under her tax bracket of 33% instead of 45% as against him, with a tax saving of 12% to him on the alimony payable by him which he may be reimbursed or compensated later by the Inland Revenue. As I have pointed out earlier, the evidence on this matter is indeed unclear and doing the best I can, I believe that a periodical payment at the rate of US$6,500 per month gross would in the circumstances be a reasonable sum at this stage to meet the Wife's needs and expenses, and also help to take care of her tax liability on the maintenance. The situation can be reviewed later after the Wife has settled down and the Husband's pay package and tax situation in Singapore become clearer. 53. As for the son's expenses which the Wife puts at US$3,399 in total but which the Husband offers only US$1,500, the main issue is whether the son should attend private school which in the United States naturally means much higher school fees. The Husband for obvious reason does not dispute that his son is gifted and that he should go to the best available school, but he disputes that it means private school. He says he himself went to public school in the United States when he was at the same age of his son and he simply does not agree that expensive private school is the only option. However the son's present school fees at Hong Kong International School is covered by his employer and the Husband has offered to undertake to be responsible for the son's education expenses, and that I assume either private or public school, as long as they will continue to be covered by his employer. Under his present employment contract, there is no reason or evidence before me why such expenses, as well as his son's medical, will not be covered after his relocation to Singapore. 54. With this major item of expenses out of the way and since there is no tax implication on child's maintenance under the US tax system, there seems to be little difference between the parties over the son's monthly expenses. I find most of the listed expenses normal, although some items such as toys and games and extra-curricular expenses are somewhat on the high side, again the result, I believe, of the Wife's approach of using the Hong Kong high standard as the basis for her estimation, and I simply find it difficult to accept why it is necessary for her to set aside US$323 for Counseling for her son when there is no evidence that it is necessary. As for summer camp expenses at US$2,400 for 6 weeks, it should be reduced by half as it has been agreed that the son is to spend part of his summer vacation with his father and that summer camping may not be an annual event, whilst his medical expenses will be covered by the Husband's employment. In conclusion, I find the Husband's offer of US$1,500 per month coupled with his undertaking to be responsible for his son's education and medical expenses fair and reasonable in the circumstances. 55. Having dealt with the needs and expenses of the Wife and son, I shall now turn to the Husband's. In his 1st Affirmation of Means, the Husband explained that as he had yet to establish a permanent base in Singapore, he was unable to accurately assess his expenditure there, but based on his family's historical expenditure and discussion with Citibank's Human Resources people, he estimated that his monthly expenditure in Singapore would be in the region of HK$50,000 ((US$6,410) without giving any breakdown. Later in his 3rd Affirmation, the Husband put his monthly expenses much more higher at HK$79,459 ((US$10,187), and this time with a detailed breakdown. 56. As before, the Husband's accommodation and household utilities charges in Singapore will be covered by his employer. As in the Wife's case, the Husband's expenses are only estimation without the benefit of actual personal experience. Most of the items appear normal and reasonable, a few however questionable, such as counseling at HK$7,200 per month is certainly expensive. I appreciate that the Husband has been attending counseling as a result of stress caused by the breakdown of the marriage. With the proceedings now over and the parties go their separate way and lead their separate life, surely the need for counseling should gradually be reduced. As for provision for future attorney fees of HK$16,667, what I have said about the Wife's case on same item applies here. It simply does not make sense to allow provision for future litigation as part of normal regular living expenses. No doubt the parties in this case have demonstrated a propensity to litigate, perhaps it is part of the American culture, or perhaps it is just this couple, but it is certainly not acceptable in matrimonial proceedings in this jurisdiction. 57. There is also an item of HK$15,650 being airfare to visit the child in Hong Kong and hotel expenses on average of 11/2 visit per month. This may be a fair estimation at the time when it was made in July 1999, but now that the child is going to live in California, certainly it will not be realistic or practical for the Husband's visits to be as frequent as 1 1/2 trips per month. Whilst accepting that the airfare and hotel expenses for visiting the son in California may be higher, the overall figure should be lower since the frequency of such trips will be much less. In conclusion, I have adjusted the Husband's estimated expenses in Singapore at around HK$55,000 ((US$7,000). 58. Having considered all the relevant factors and the evidence before me, I have come to a conclusion that it would be most fair and reasonable that the assets be distributed between the parties as follows:- The Wife should be given the following:-
59. I know that these assets will not give the Wife US$685,000 net as she has asked for, but it does represent about half of the total value of the parties' assets, and more importantly, which I believe will give her sufficient cash to purchase a decent house of reasonable size in the location of her choice. It may not be the kind of house she has in mind, but as I have already pointed out in more than one occasion in this judgment, it is unrealistic to use the Hong Kong lifestyle as reference, nor do I believe that all houses of her choice of size and location would cost US$650,000, or that she must have a 2,500 sq.ft. house for only a household of 2. Given more time I believe that the she should be able to adjust and to purchase an appropriate house for herself and the child within the budget allowed under the terms of my order. 60. With her share of the household furniture and chattels in the matrimonial home which the parties have chosen between themselves, the assets I have awarded the Wife should also take care of her other capital expenses including purchasing a car and other household appliances as well as any house set-up expenses. 61. I appreciate that the Husband may well feel that the Wife has received more than what she deserves, but as I have already said earlier in my judgment, I accept that she has a greater immediate need for a house for herself and the child with a much more limited and uncertain future earning prospect, whilst the Husband's position as to his assets is really more for long term investment which, in view of his much greater earning capacity and good prospects of annual bonuses, stock options and promotion will no doubt grow and expend in the near future. I am convinced that this arrangement represents the most fair and reasonable distribution of the parties' assets in the circumstances, one that will also take care of their present and future needs, as well as a proper recognition of the parties' contribution to the marriage. 62. As regard maintenance, the Husband should pay the Wife US$6,500 per month gross for herself and US$1,500 per month for the child on his undertaking to meet his medical and education expenses as long as they are covered by his employer. This is certainly well within the Husband's means taking into account of his bonuses. I know that the Husband has urged that the Wife's maintenance be limited as to its duration and has in his offer proposed full maintenance for 2 years, then reduced maintenance for additional 3 years. In view of the Wife's expressed intention to seek work so as to become eventually financially independent, I agree that the Husband's maintenance for the Wife should not be for life but the Wife's future situation is so uncertain that it is impossible for me at this stage to say when her maintenance should cease, nor would it be right for me to speculate in the circumstances. Certainly the picture will become clearer after the Wife has settled down and her situation can be looked at there and then. 63. Before I deal with the question of costs, there is one more important issue between the parties. With custody of the son having been agreed to be given to the Wife, quite correctly so, the parties are also agreed as to the Husband's terms of access to the son when he visits him in the U.S.. The Husband however would also like to be able to being the son out of the country during his long school holidays including bringing him to stay with him in Singapore or travelling to other places. The Wife does not agree to the son being removed out of the United States to a place where there is no treaty or legal means such as the Hague Convention between the U.S. and the destinated place for the return of the son because she fears that the Husband may not return him to her. 64. The Wife has said in her evidence that her fear was prompted by the Husband's action in bringing the Nevada proceedings when he obtained interim custody of their son on ex-parte basis, which fear has since been further magnified after she has discovered that Singapore is not a signatory member of the Hague Convention and that she has read from various documents or articles on the risks of children of divorced couples being kidnapped by the non-custodial parents which she says would put her case in the high risk profile. 65. The Husband argues that as he has agreed that the Wife should have custody of their son, there is no reason why he would kidnap him. He says it is either a case of paranoia on the part of the Wife, or her deliberate attempt to alienate him from his son. 66. Having heard and observed the parties throughout the proceedings, I am convinced that the Husband, as is the Wife, is a loving and devoted parent who has only his son's best interest at heart. As I have said earlier before, I believe that his Nevada action was caused by his genuine concern for his son. It is his same genuine concern for his son's welfare that he has recognised that his son would be better off living with the Wife after the divorce rather than subjecting him to a full-blown custody dispute. I believe it was never his intention to keep the son from the Wife, as his action has clearly demonstrated in Nevada after the court papers were served on her. There is simply no evidence before me to suggest that the son would be at risk of being kidnapped by his father if he leaves the jurisdiction of the United States, or this jurisdiction for that matter. I will therefore allow the Husband leave to bring the child out of his place of residence for visiting purpose upon his usual undertaking to return him to the Wife at the end of such visit or in any event when called upon to do so. 67. I may also add that in the event the Husband returns to base in the United States, depending of course on where he is to live, he should have generous access to the child including staying access. If he is to live nearby, this would mean every weekend or alternate weekend. If he lives far away, this would of course mean less frequent access. There is no hard and fast rule, it all depends on the circumstances and common sense, but there should be no mistake or misunderstanding that it is important to the child's proper development, and hence in his best interest for the non-custodial parent, i.e. the Husband to maintain a close contact with the child and that includes frequent physical contact as well as other means including telephone, letter, electronic means, etc. and that there is also a duty on the part of the custodial parent, i.e. the Wife to encourage and facilitate such contacts. 68. Finally, I shall deal with the question of costs. I am given to understand that the total costs of the parties in these proceedings amount to more than HK$2.5 million, whilst the Nevada proceedings cost more than US$140,000, which bring the total costs of the proceedings between the parties upon the breakdown of the marriage to more than HK$3.7 million. It seems to me that legal costs of this magnitude in this case is simply not acceptable, in particularly when the parties at some stage of the proceedings were already trying to negotiate for an overall settlement, and were in fact in agreement in principle as to some of the major issues at the start of the hearing, yet the trial had run its full length to some 10 days, with 6 bundles of more than 2,000 pages of documents prepared, most of which were seldom looked at or touched upon at the hearing, such as the parties' e-mail correspondence with each other, most of which are irrelevant, and bank statements or documents of the parties' assets which were never challenged. but which were nevertheless included or produced probably because it was what the parties wanted. The extent of discoveries undertaken by both sides against each other before the trial was also so extensive that was hard to justify at the end of the day. I have no doubt that most of the blames lie fairly and squarely on the parties who, as I have observed throughout the hearing, were so distrustful of each other and so litigious in attitude, that the preparation and conduct of the proceedings had probably long gone out of the control of their lawyers, which is wholly unfortunate and totally unsatisfactory. With a little more patience, trust and co-operation between the parties, most of these costs could have been avoided, not to mention their time and the court's time. For these reasons, I think it is only fair that the parties bear the fruit of their own conduct, i.e. there be no order as to costs including all costs reserved. This is of course an order nisi only. 69. The summary of my order is as follows:-
Representation: Ms. Irving instructed by M/S Hamptom, Winter & Glynn for the Petitioner. Mr. Clough instructed by M/S Deacons, Graham & James for the Respondent. |