C v. C
Read the full judgment text of FCMC 10998/1999 on BabelCite. This Family Court judgment was delivered on 1 March 2002 before HH Judge Saunders.
Matrimonial proceedings – ancillary relief – presumption of advancement – resulting trust – family trust – maintenance – capital division – The parties married in Australia in 1990 and separated in 1999. The husband claimed properties held in his name were held on trust for his father. The court held the presumption of advancement applied, making the properties the husband's own assets. The husband's interest in a discretionary family trust was considered a resource. Maintenance and capital orders were made based on the husband's income and assets. – Presumption of advancement rebutted? No. – Family trust assets considered as resource. – Maintenance and capital orders made.
Legal issues: Ownership of properties (Trust vs Advancement) · Discretionary Family Trust Interest · Ancillary Relief Orders
Outcome: Maintenance and capital orders made; costs awarded to Petitioner.
Cited by 1 case · Cites 2 cases
|
FCMC010998/1999 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES FCMC 10998 of 1999
Coram: HH Judge Sauders Date of Hearing: 20, 21 & 22 November 2001 Date of Judgement: 1 March 2002 ----------------- Judgement ----------------- Introduction: 1. The parties were married on 23 May 1990 in North Rockhampton Australia. There are two children of the marriage, both boys, now aged 9 and 5. The papers in the case have been divided into three bundles: A# contains the pleadings and affidavits, and some of the other exhibits; bundles B# and C# contain the exhibits. I have used these expressions when referring to the papers. Unless otherwise indicated all references to money in this judgement are to Hong Kong dollars. Although a decree nisi has been made I will, for convenience, refer to the parties as husband and wife. The husband's father features in the proceedings in a substantial way. I shall refer to him as "C Snr". 2. Unhappy differences arose between the parties, first, in May 1997, when the husband left the matrimonial home and stayed away for about a year. He returned home but the problems resurfaced and in September 1999 the wife left the matrimonial home with the children. She has not returned, and in November 1999 issued a petition based upon unreasonable behaviour. 3. The husband filed an answer and cross petition, but the matter of the divorce was compromised and on 21 September 2000 a decree nisi was made on an undefended basis. The marriage is therefore one of about 10 years in total during which the parties lived together for about 8 years. 4. Following the receipt of a Social Welfare report, by consent, custody of the children of the marriage was granted to the wife, reserving reasonable access to the husband. In March 2000, by consent, the husband was ordered to pay maintenance pending suit to the wife for herself and the children in the sum of $10,000 per month. There have been problems in payment and it was necessary for a judgment summons to be issued to secure payment. The major issue: 5. Now the parties come to resolve outstanding issues of ancillary relief under the provisions of the Matrimonial Proceedings and Property Ordinance Cap 192 (MPPO). 6. Apart from the usual issues that arise in such cases, there are two major issues raised. First, the husband is the registered proprietor of a number of properties, including the former matrimonial home. It is his case, disputed by the wife, that he holds all of the property he has in trust for his father and that he has, in fact, no assets at all. He even says that the car that is in his name in Hong Kong is beneficially owned by his father. 7. The second issue is as to how the court should deal with an interest the husband has in a discretionary family trust established by his father. The family history: 8. After the parties were married they remained in Australia. From May 1990 to March 1992 the wife worked as a waitress in a Chinese restaurant in Brisbane. There is no evidence as to just where the husband worked during this period, but no suggestion that he did not work and provide for the family in the usual way. For a period of 6 months between April 1991 and March 1992 the husband stopped work and undertook a marketing course. During that period the wife was the sole income earner for the family. She stopped work when she became pregnant with the first child and became a full time housewife. 9. For a period from early 1995 to April 1996 the husband operated a cafe. He was also involved in a restaurant with his brother but the evidence as to this was not at all clear. The wife says that she worked with him but did not receive any income. She was however able to draw freely on the parties joint bank account. There is no suggestion that she did so other than to support the family. She ceased work on becoming pregnant with the second child in April 1996. 10. In August 1996 the family returned to Hong Kong and the wife returned to work, this time as a sales assistant in a shop. The husband appears to have worked as a real estate salesman until November 1999, but again his evidence on this aspect of the marriage is not clear. The law as to resulting trusts and the presumption of advancement: 11. The two relevant principles are the presumption of a resulting trust to the real purchaser and the presumption of advancement. I can do no better than to set out these principles from Snell's Equity 13 ed, 2000, by John McGhee, paras 9-07,9-11 & 9-13:
12. These are presumptions which are rebuttable by evidence of the actual intention of the purchaser. To rebut the presumptions, the acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration: see Snell, para 9-16. The court must consider all the circumstances of the case, so as to arrive at the purchaser's intention; it is only where there is no evidence to contradict it that the presumption of a resulting trust, or of advancement, as the case may be, will prevail. The solicitors for both parties cited a number of authorities. But both were agreed as to the principles to be applied, namely those that I have set out above. I accept Mr Clements's submission that most of the cases cited are really nothing more than examples of the application of the appropriate principles. 13. Mr Wong relied heavily on the decision of Pang J in Overseas Trust Bank Ltd. v Lee See Ching, John MP 820/1992. That is a case where the father of the defendant kept a highly detailed diary of his activities. It was a contemporaneous record of his state of mind. That C Snr did not keep such a diary is of no assistance to the husband. There is virtually no contemporaneous record of the state of mind of either C Snr or the husband. 14. In the course of the judgement the learned judge said:
15. That is plainly right, but it is a statement that must be carefully considered, and applied with caution. Where, as here, the husband seeks to rebut the presumption, in order to remove property from the ambit of matrimonial legislation, a self serving statement, made only in evidence after the issue has arisen, that no gift was intended, will carry no weight at all. On the other hand, the statements of the husband, if made prior to the issue between husband and wife arising, will be relevant to determining the donor's and the donee's intention. If actions of the husband, performed after the issue between husband and wife has arisen, are inconsistent with a trust in favour of the father, they will be relevant and will carry weight against the husband. But his actions, after the issue have arisen, if consistent with a trust in favour of the father will carry no weight at all for they are entirely self serving. The same principle must apply to the statements and acts of C Snr. 16. In the course of argument Mr Wong, for the husband, began a submission to the effect that the property was held by the husband for C Snr only for tax planning reasons. The submission echoed an assertion made by the husband in para 15 of his 7th affidavit (A# p 212). It also echoed an assertion made by C Snr in his 2nd affidavit (A# p 221-2) that all of the property in the trust is in fact owned jointly by him and his wife. I cautioned Mr Wong to be careful before he proceeded with the submission as I was concerned that he may not be fully alive to the consequences of such a submission. He appeared to have abandoned it in the course of the hearing, but it was repeated in the written submissions in relation to the family trust. 17. It is clear that a person may not rely upon his own illegal act to rebut the presumption, either of a resulting trust or of advancement. Thus where a man puts property into his wife's (or indeed his son's) name, he cannot be heard to say that he did so only to evade taxes: Re Emery's Investment Trusts [1959] Ch. 410. Thus it is clear that if a person seeks a taxation advantage from a transaction he must accept all of the consequences of the transaction by which he removes property from his own possession, including the matrimonial consequences, be those his own or his son's. If that consequence is that the property ceases to be his, both at law and in equity, then he must accept that result. As to the family trust, it is simply not open now for C Snr to deny its existence and assert that the property is that of himself and his wife and that the named beneficiaries have no interest in the trust property. To do so would be a fraud on the Australian tax authorities. 18. It is with these principles in mind that I now turn consider the various items of property and the claim that they are held on trust by the husband for C Snr are made. The property at issue: (i) The matrimonial home: 19. The former matrimonial home in Australia is located at 12/28 Holmstead Road, Eight Miles Plains, Queensland 4113, a suburb of the city of Brisbane. The property is in the joint names of the husband and wife. Both parties accept that the downpayment for this property was made by the husband's father. During the course of the time when the parties lived in this property mortgage payments were made from their joint bank account, to which each had contributed. Mortgage payments were also made from the proceeds of rental received by the husband from the Evergreen property to which I shall later refer. 20. The husband now accepts that the presumption of advancement applies to this property and has abandoned an assertion made in the affidavits that as some mortgage installments have been paid, subsequent to the separation, from rentals from property which he says he holds on trust for C Snr, then C Snr has in interest in the former matrimonial home. 21. The property has, for a time after the parties returned to Hong Kong, been tenanted, but it is now empty. There is an arrears in the mortgage installments. When I asked the husband why he had not taken steps to let it he said that having a tenant was too much trouble. In his submission Mr Wong asserted that both parties had a responsibility in the letting of the property. While that may be strictly correct it is plainly a completely unrealistic position to take. 22. Until the time at which final submissions, in writing after the hearing concluded, were made, the husband had consistently asserted that the wife had no interest in the property. The husband has family living in Brisbane who are well able to assist in dealing with tenants. They have managed to do so perfectly well with other family property. It is a simple matter in Australia to instruct estate agents to find a tenant and to manage a property for an overseas owner. The prime responsibility for letting the property lies with the husband and he has completely failed to discharge that responsibility, primarily, I suspect, because he wishes the bank to force a sale and thereby defeat the wife's claim. If there is any loss as a result of his actions he may be required to account to the wife for that loss. 23. In the light of the husband's abandonment of the trust argument in relation to this property I find it to be owned beneficially by both husband and wife. It is agreed that it presently has a net equity in the order of A$35,000. (ii) The Evergreen River properties: 24. The husband was the registered proprietor of three properties known as "Units 2, 4 & 6 Evergreen River Park, 308 Handford Road, Taigum, Queensland Australia". Again, these properties are located in a suburb of Brisbane. 25. The properties were acquired in about June 1992 in the following way. C Snr, his wife, and family (including the husband), had emigrated to Australia in 1987 through an investment program designed to encourage emigrants. C Snr had been required to deposit a sum of A$500,000 to gain this status. There was no evidence as to how this sum was invested. Prior to the marriage the husband had studied conveyancing practice in Australia, apparently with the intention of becoming involved in some way in real estate investment. 26. Through friends, C Snr had been introduced to real estate agents in Brisbane who proposed an investment involving buying land, building houses and selling them for profit. The husband had undertaken a course in real estate and was interested in that type of business. A company, EPD Pty Ltd (EPD) was formed and a sum of A$300,000 was paid by C Snr to his Brisbane solicitors, Shun Wah, Galvin & Fong, being a sum for subscription to shares in the company. The solicitors trust account receipt (Ex CSK-2 B# p 288) shows that the sum was received from C Snr and his wife and is marked "For MC". The shares were taken up by the husband. The properties were built but it appears that all did not go to plan. In August 1995, for reasons which were not clearly explained in the evidence, the husband ceased to be a shareholder in the company and became the registered proprietor of three units built by the company on the land, Units 2, 4 & 6, as described. 27. Subsequently Unit 2 was sold to a Mr & Mrs. So and the undisputed evidence was that the proceeds were paid directly to the husband. There was dispute as to how he applied the proceeds. There is no evidence of the sum being paid to his father, or of any consultation with the father as to how the proceeds might be used. The husband did subsequently take some involvement with his brother in a restaurant business in Brisbane but that too was in dispute and the evidence does not establish, even on the balance of probabilities, just what the husband's arrangement was with his brother. Although I am not able to determine precisely how the husband dealt with the proceeds I am satisfied that none were returned to his father. 28. It is right that, as submitted by Mr Clement, there is no evidence from the husband as to just where those funds went, other than the vague assertion that they have been lost. But there is no evidence that those funds now exist in any other form. 29. Unit 4 was sold in about April 2000. The net proceeds of sale were A$99,000. The husband said that he had "successfully persuaded my father to lend the sale proceeds to me" and that that was the source of funds from which he paid the maintenance pending suit. He said also that it was his father's wish that the sale proceeds should be used as lump sum payment to the wife to procure a long term settlement of the family dispute. 30. Unit 6 is still owned by the husband. It has an agreed value of A$115,000. However by a document (Ex CMY-3, B# p 48) he has purported to transfer this property to his sister CKS, the consideration being expressed as "the natural love an affection borne by the transferor for the transferee". There was no evidence at all from the sister as to this transaction. The transfer document is signed by the husband's brother who apparently holds a power of attorney for him. There is no evidence from the brother or from C Snr as to the circumstances in which this transaction arose. This transfer was executed on 15 May 2000, 6 months after the wife issued the petition for divorce. 31. The relationship of father and son is sufficient to raise the presumption of advancement against the father, and, in the context of this case, also against the son when he asserts that the property is not his. The onus usually falls on the donor, in this case C Snr, to rebut the presumption, but in this case, with the husband seeking to say that property in his name is not in fact his, the onus falls on the husband to rebut the presumption. 32. C Snr asserted, both in his affidavit and in oral evidence, that he did not intend to benefit his son. But just as subsequent declarations as to intent may not be used by the father against the son; (see Snell para 9-16 and Shephard v Cartwright [1955] AC 431), neither should either the father or the son be able to use them against the wife. 33. There is no evidence of any assertion by C Snr at or about the time of purchase of the shares in EPD that the husband was to hold them in trust for his father. He had solicitors at the time who, plainly from the terms of the trust account receipt, knew that the source of funds for the husband's acquisition of the shares was money from C Snr. Yet no declaration of trust was prepared. 34. C Snr says, in his 2nd affidavit, that he "did not know English" and had to rely on (the husband) to help (him) in handling conveyancing matters. It is not without significance that the solicitors who act for C Snr in Brisbane are themselves Chinese. There is no suggestion that C Snr could not communicate directly with them. There is no declaration of trust and no contemporaneous record that C Snr needed to have his son involved for this reason. He was familiar with the concepts of trusts, having three years previously established a family trust to which I shall later refer. Were there any intention that a trust was intended I am confident that the solicitors involved would have advised C Snr and the husband to execute appropriate documents. 35. The evidence was that the husband received personally the proceeds of sale of Unit 2. There is no suggestion that he accounted to his father for any part of it, or that he consulted the father before using the funds. That he used it for his own purposes is entirely consistent with a belief that he owned the property in his own right and with no obligation to his father. Equally he has received and used the rental proceeds of Units 4 & 6. Again he has not accounted to his father for any of those proceeds. This too is entirely inconsistent with an assertion that he holds the property on trust for his father. 36. As I have said, Unit 2 was sold to a Mr & Mrs. So and the evidence was that the proceeds were paid directly to the husband. That is entirely inconsistent with an assertion made in a letter from the company (Ex CSK-2 B# p 284), that the withdrawal of funds was to finance C Snr's "new venture in Hong Kong". In any event the assertion of C Snr's intent in the company's letter, being plain hearsay, and not only subsequent to the event, but made in the light of the issues raised in the proceedings, is of no evidential value at all. Perhaps more importantly, there was no evidence from C Snr of any "new venture in Hong Kong" to which the funds were to be applied. The husband accepted that the proceeds of the sale of Unit 2 were paid to him. That he did not account to his father for the sum but applied it for his own purposes is entirely consistent with his absolute ownership of the property. 37. There is no evidence at all that the father was consulted in any way of the attempt by the husband to sell Unit 6. If there were a trust, as alleged, the logical step to have been taken would have been to convey the land to the father. There was no suggestion that if the land was to be conveyed to the sister it should be conveyed subject to a proper declaration of trust, an obvious step that would be required, the family having been well and truly warned by these proceedings of the risk of proceeding with apparent gifts without accompanying declarations of trust. No explanation was offered as to why the land should be conveyed to the sister and not the father. There is no suggestion that the brother, who signed the transfer document as the husband's attorney, was not acting with the full knowledge and consent of the husband. There was no affidavit from the brother as to the circumstances in which he came to execute the transfer document. There was no affidavit from the sister as to the circumstances in which the transaction has come about. There was no affidavit from C Snr as to the circumstances in which the transaction has come about. The husband's unilateral dealing with that property is yet further evidence of him treating the property as his own. 38. There is simply nothing in the evidence that I can find to suggest other than that C Snr intended a gift to his son of the sum advanced to enable him to subscribe for shares in EPD. 39. For these reasons I find that the husband has failed to rebut the presumption of advancement and that the whole of the interest he has had and still has in EPD or the property acquired from it is his own and consequently property to which I may have regard in determining the entitlement of the wife under matrimonial legislation. 40. In reaching my conclusion on this aspect I have placed no weight on the evidence from LYC, called by the wife. The statements she swore to are sufficiently vague that no proper inference can be drawn from them. The assertion, allegedly made by the husband that "his father gave him a sum of AUD300,000 to do the real estate business, the investment in EPD Pty Ltd" is not sufficiently clear to discount the inference that the sum may have been given to him to invest on the father's behalf. But at the same time, that that inference is open is not a sufficiently positive factor that the statement could weigh on the husband's side of the scales. I disregard it entirely. (iii) The husband's attempt to dispose of Unit 6: 41. By an injunction made on 11 July 2000 the husband was restrained from further dealing with Unit 6. No formal application has been made pursuant to s 17 MPPO to defeat any claim that the sister may have pursuant to the transfer of the property to her. It has not been explained to me quite why this is so, although I suspect that the husband and his advisers recognize the reality of the situation, which is that it is highly unlikely that the disposition would withstand examination under s 17 MPPO. 42. Although executed and stamped no attempt has been made to register the transfer. Queensland uses a Torrens system of land registration and the transfer, not having been registered, the legal estate in Unit 6 remains with the husband. 43. The transfer was executed on 15 May 2000, 6 months after the petition and for no valuable consideration but as a gift to the sister. The same solicitor has purported to act for both the husband and his sister. The transfer was executed after the issue between the husband and wife arose. It is entirely unexplained. There was no proper consideration for the transfer. It is difficult to imagine a more obvious attempt to defeat the wife's claim. But as no formal application has been made and the sister has not had the opportunity to be heard I cannot make any order under s 17. It is, I think, sufficient if I say that on the information presently before me I would have no hesitation in setting aside the disposition should an appropriate application be made. 44. For the purposes of the determination that I have to make as between the husband and the wife I propose to treat Unit 6 Evergreen as still being the property of the husband. (iv) The Kingswood Villas property in Hong Kong: 45. The husband has an interest in 2 properties in Kingswood Villas Tin Shui Wai. He is the joint owner, with C Snr, of Flat G, 11th Floor, Block 9, Kengswood Court, Kingswood Villas, Tin Shui Wai (Ex 6 C# p. 587 et. seq.) In addition he is the joint owner, together with his brother, CSL and C Snr of Flat H, 13th Floor, Block 3 Maywood Court, Kingswood Villas, Tin Shui Wai. The first of these properties was acquired in October 1998, with title being taken in January 1998, the second in April 1997, with title being taken in September 1998. 46. In his 1st and 3rd affidavits, he says that the deposits for the purchases were paid by C Snr but there is no documentary evidence to support the assertion. He says that the mortgage installments are paid by C Snr, but again there is no documentary evidence from him to support the assertion. C Snr made no reference to these properties in an affidavit filed in September 2000, and that was an affidavit which purported to set out the assistance that he had given to his son. In August 2001 C Snr made an affidavit referring to these properties in which a bundle of financial information was exhibited (Ex CLS 4 C# p 663 et. seq.). But I have been quite unable to relate the entries in the bank account exhibited which are said to be the mortgage repayments on the properties to the mortgage repayment schedules exhibited. 47. However, as I understood her case, the wife did not really dispute the assertion that C Snr provided the downpayment and made the mortgage payments. Her case was that this was yet another example of gifts by C Snr to his sons. 48. In this affidavit the father says that he added the names of the husband and his other son for two reasons:
49. Both properties are tenanted and the rent is paid to the husband. C Snr says he treats the rent so paid as a loan to the husband but there is no document in existence that arose before these proceedings began to that effect. 50. C Snr does not explain just how it would be that it would be easier to obtain a mortgage loan from a bank by adding his sons name to the property. He is a man of substantial means himself and at the time of these purchases (October 1997 and April 1997 respectively) prospective buyers of property were having no difficulty in getting advances from Hong Kong banks. As to the disposal of the properties quickly, presumably at a profit, I see nothing in that reason to defeat the presumption of advancement. There was nothing in the submissions to assist me in this respect. 51. There is nothing in the contemporary records made at the time of purchase from which it might be said that C Snr either required the assistance of his sons in getting a mortgage or that he did not intend that either of his sons would benefit personally from the taking of title to the two properties. Indeed, that they should benefit personally is entirely consistent with the way in which he has assisted his children. 52. There is simply nothing in the evidence upon which I can say that C Snr did not intend his two sons to benefit personally by including them as purchasers of the Kingswood Villas properties. 53. Again, the presumption of advancement has not been displaced. I am satisfied that when the properties were acquired in 1997 C Snr intended that both of his sons should be absolutely entitled to the interests they took in the title to the properties. 54. Both properties are now said to be in a negative equity situation, but the reduction in interest rates means that the mortgages will be repaid much sooner than was originally intended. On the agreed values and current mortgage levels the total sum in which the properties are in negative equity, in so far as the husband's share is concerned, is $388,000. (v) The husband's car in Hong Kong: 55. After the breakdown in the marriage the husband purchased a car for $159,000. The deposit came from the sale of a car he owned and the balance was financed through hire purchase. Payments of the hire purchase were made from his Hongkong Bank Powervantage account, the source of deposits being rental income from the properties in Kingswood Villa. It was asserted that as a result of this C Snr had some form of beneficial interest in the car. I have rejected the proposition that the husband holds the Kingswood Villa property on trust for his father. The assertion in relation to the car must fall with that finding. 56. For the foregoing reasons therefore I find that the former matrimonial home, the husband's interests in the proceeds of sale of Unit 4 Evergreen, his ownership of Unit 6 Evergreen, and his interests in Kingswood Villas are all assets personally owned by him and assets which must be brought into the balance sheet between husband and wife in ancillary relief proceedings. The husband's other resources: (i) The husband's income and expenditure: 57. For quite some time after the petition was issued the husband appears to have been unemployed. He said in his first affidavit that he had been employed as a property agent by Midland Realty until November 1999 but had since been unemployed. It was on this basis that he said he was unable to pay maintenance pending suit. But in March 2000 he consented to an order for $10,000 a month maintenance pending suit. It has been necessary for the wife to take judgment summons proceedings to extract any money from him and those payments he has made have come from the capital sum made available from the sale of Unit 4 Evergreen. 58. The husband is now employed as an insurance salesman with American International Insurance Company (Bermuda) Limited (AIA). His income for the 5 months June 2001 to October 2001 averaged $13,200 a month. But by October he had increased that to a sum of $18,000 and I am satisfied that that is in an indication that, if he puts his mind to the task, he is well capable of earning that sort of income on a regular basis. 59. But this is not the only form of occupation he has. He says the he "assists" his brother on a voluntary basis for which he receives no income. His evidence in this respect was vague but on cross examination he acknowledged earning at least $2,000 a month from this work. The income arises in this way. The husband's brother imports and sells, in Australia, mobile phones and parts. These are sourced in southern China and are collected by the husband who makes regular trips across the border for the purpose. The husband then sends the goods to his brother in Australia who sells them. The brother remits funds to the husband from time to time to cover the cost of the goods and the husband's expenses. If there is a surplus the husband retains the surplus. It is this sum that he acknowledged amounted to some $2,000 a month. 60. But as with the rest of his case there was paucity of information to support his contentions in relation to income and expenditure. First he disclosed this occupation only in an affidavit made in February 2001. At that time it was put to the court on the basis that he merely "helped" his brother and made no income. It was only through cross-examination that he disclosed that his expenses were covered and he made a profit of about $2,000 a month from the exercise. Second he supported his position with no documentary evidence nor with any affidavit from his brother. He was reluctant in disclosing detail and was constantly required to increase his estimates of the sums involved as the cross-examination went on. I am satisfied that he has not fully or properly disclosed the extent of his income from this source. I am satisfied that it is more than he discloses. 61. As an insurance agent he is not required to work in the confines of an office or to work during traditional office hours. Accordingly he is ideally placed to supplement his income by the venture with his brother. The increase in his income from AIA in November reflects his ability to earn. 62. In addition to income from those sources he collects, for his personal use, the rent from the two Kingswood Villas properties. There appears no reason why that should not continue. There is no suggestion that C Snr is not perfectly content with that arrangement. 63. He now lives with his father and pays him a sum of $3,000 a month, which is not unreasonable. Of his expenses, by far the largest is his vehicle at $4,500 a month. That is an expense which will greatly reduce when the hire purchase agreement reaches its end. It was not exhibited but, if it is the usual three year agreement, it cannot have very much longer to run. The car is under hire purchase so this expense is, to a large extent, creating a capital asset for him. 64. His other expenses, other than credit card payments are reasonable. He claims $3,000 for credit card expenses but a review of the statements shows that the great bulk of the expenses are for the motor vehicle, an expense already claimed. The remaining credit card expenses appear to be primarily for meals out of home, also an expense already claimed. The claim for credit card expenses largely duplicates expenses already accounted for. (ii) The Family Trust in Australia: 65. The husband's interest in the family trust falls into a special category for it is a discretionary interest. 66. In June 1989 a family trust called "The LSC Family Trust' was established. The trustee is a company called "TG Pty. Ltd." (TG). The specified beneficiaries of the trust are C Snr and his wife, and by definition, the husband and any brothers and sisters he has, together with C Snr's grandchildren. 67. A copy of some of the annual returns of TG (which had not been exhibited but were produced at my request during the course of the trial) shows that the company has 2 shareholders, the husband's parents. The directors are the parents and the husband's sister and brother. The husband was a director, but resigned shortly after he left the parties matrimonial home in 1997. 68. It has been extraordinarily difficult to get information from the company as to the true position of the trust. Although the husband acknowledges that the trust's affairs are administered by his family he says that he has been unable to persuade them to provide any better information for these proceedings. The companies accountants say that they await the supply of information from the directors before the accounts can be completed. 69. So it seems that C Snr is able to make an affidavit supporting his son's position as to interests in certain property, in order to assist his son to defeat any claim the wife may have in relation to that property, but he and his family are unwilling to co-operate in the completion of the accounts of the family trust, an area that may assist the wife and be to the husband's disadvantage. I am satisfied that the family are deliberately manipulating the situation and giving to the court only the information they consider will help the husband. The failure to provide proper information cannot be excused in the way the husband suggests. The husband must accept that situation and I will draw such inferences as I consider appropriate, both from, what information there is, and from his and his father's failure to provide the information. 70. Only under the duress of direct orders, and at a very late stage, accounts for the family trust have been exhibited for the years ended 30 June 1999 and 30 June 2000 (A# p. 277-295). The accounts filed show that the trust owns a substantial property at Taringa, again a suburb of Brisbane, and land at Hill End, which I understand to be C Snr's family home. The evidence was that the Taringa property is some sort of shopping mall but the only evidence as to its extent was that the construction cost is shown in the accounts as A$3,900,000. So it is not insubstantial at all. The total value in the accounts of the trust's property is now A$3,555,000, but that is a depreciated book value and bears no relationship at all to current market values. 71. The liabilities of the trust include loans to beneficiaries of a little in excess of A$1,000,000, but the reality is that those loans, being to the husband's parents, (see Ex R3) are unlikely to ever be required to be repaid and will in due course be written off. Secured loans to banks amounted to A$2,600,000 at June 2000. 72. In the year ended June 2000 the trust received rental income of A$757,000, the great bulk of which came from the Taringa shopping complex. The net income was only A$41,700, but that was after a non cash expense of A$165,000 for depreciation. There is no sinking or depreciation fund in the balance sheet, and there is a separate provision for repairs and maintenance in the income and expenditure statement. Consequently the deduction in the accounts for depreciation represents a notional sum only and not an actual expenditure, and the cash available to the trustees for distribution is increased by that sum and was in reality around A$200,000. 73. The only evidence as to the beneficiaries of the distribution is a fax from the accountant's for TG, (Ex R3), (again not exhibited but produced during the trial at my request), which shows that the distributions were made in 1999 and 2000 to two companies, NST Pty Ltd, which appears to have a registered office at the home of the husband's parents, and VIE Pty Ltd, which appears to have its registered office at the home of the husband's sister, CKS. There is no evidence as to who the shareholders of those companies are, so the evidence concealed as much as it disclosed and the court was no better informed. 74. A distribution was made to the husband's sister, CKS in 1999. Also in 1999 a distribution was made to an entity described as "HV Trust", which appears to be located at the home of the husband's parents. The existence of this trust had not previously been disclosed and it was only in cross-examination that the husband revealed that he is a beneficiary of that trust. Even now there are no proper details as to this trust. Yet again the information put before the court by the husband conceals more than it reveals. 75. Significantly there is no evidence at all as to any distributions made by either trust in the tax year ended 30 June 2001. 76. The husband has elected to put no proper evidence before the court as to the value of the LSC Family Trust. He has entirely concealed the existence of the HV Trust. As to the LSC Family Trust would have been a simple and inexpensive step to have had an experienced real estate agent in the area give an estimate of the market value of the shopping complex. It is not necessary in matrimonial proceedings that properties are valued by registered valuers, often a prohibitively expensive exercise. It is quite sufficient for the court's purposes, especially with an interest as imprecise as that in a discretionary family trust, for values to be estimated by experienced estate agents, then sensibly agreed by the parties to save costs. 77. In the absence of evidence I am forced to draw inferences from the available facts. The accounts, as I have said, show that the trust received rental income in the June 2000 year of A$757,000, from the Taringa shopping complex. If that is an gross 8% return on the investment, a reasonable method of assessing a market value in the absence of special factors (of which there is no evidence), the market value of the Taringa complex would be in the order of A$9,000,000. The accounts show that the mortgages are reduced by about A$100,000 each year, so by now will be reduced to about A$2,500,000. 78. Applying this method I find that the net assets of the LSC Family Trust are at least A$6,500,000. 79. Mr Wong said in his final submissions that the family trust was "merely a vehicle for tax planning purpose (not tax avoidance) of his father's (that is C Snr's) or siblings' business in Australia." It was not explained why the husband should not also be included in those who received the assistance of the tax planning advantages of the trust. 80. I accept that a family trust is a legitimate method of tax planning. However, Mr Wong did not say just what the consequence was of the establishment and the existence of the trust and the husband's interest in it. In my view, just as the father must accept the consequences of any step taken that may give rise to the operation of the presumption of advancement, so must the father and the husband accept the consequences of legitimate tax planning steps. In this case the consequences are twofold. 81. First, C Snr has divested himself of the property. It is owned by the trustees and he cannot say that it is, in reality owned by him and his wife. Further the husband is one of a number of beneficiaries and it cannot be said that the husband has no interest in the trust property. The plain fact is that the husband is one of a number of discretionary beneficiaries of a fund that I find to be worth a net sum in the order of A$6,500,000 at least. It is right that there is no evidence that he has ever received any distribution from the fund, but he is the one who has determined whether there should be any evidence as to who has benefited from the trust and as to that there is proper evidence at all. The details supplied by the accountant in Ex R3 are both out of date and insufficient to determine who were the real recipient of the distributions. 82. Having regard to the way in which C Snr has been prepared to assist his son in the past there is no reason why he should not do so in the future. The LSC family trust is one vehicle from which that assistance may come. That such assistance might enable the husband to pay proper levels of maintenance for his wife and children, or meet a proper award under MPPO, is not a reason to stop the assistance. 83. Second, the interest the husband has in the trust is a factor that I may take into account when assessing the resources that he has or is likely to have in the foreseeable future, (see s 7(1)(a) MPPO). 84. The way in which a court should deal with an interest in a discretionary trust, in ancillary relief proceedings, has received consideration of the courts in recent years. In many cases the position of the beneficiary under such as trust is that adopted by the husband here. They say that they receive nothing, and have no knowledge as to whether they will ever receive anything from the trust. Often, as has been the case here, there is a paucity of information concerning the affairs of the trust, or what information there is, is not only insufficient, if not misleading, but, as here, has had to be virtually dragged from the trustees. 85. The relevant cases are referred to in the recent decision of the Court of Appeal in FMFT v HKWE CACV 230/2000. I adopt the citation by the Court of Appeal from the decision of Waite LJ in Thomas v Thomas [1995] 2 FLR 668 at 669-670. The courts do not now act in total disregard of the potential availability of wealth from sources owned or administered by others. Not only may I frame an order designed, in an appropriate case, to give judicial encouragement to third parties to provide a beneficiary of a trust with the means to comply with the court's view of the justice of the case, but I may also have regard to the extent of the wealth to which the husband may have access even after the proceedings are resolved. C Snr has been generous to his son in the past. He continues to be generous as to his share of the Kingswood Villas rents. I have no reason to doubt that he will be generous to the husband in the future. I making the orders that I do I have had regard to the fact that the husband has not only a generous father but that he has an interest as a discretionary beneficiary in the LSC Family Trust. The matters in s 7 MPPO: (a) Income, earning capacity and resources: 86. I am satisfied that the husband is capable of, and probably does, earn, from his insurance business and the sale of mobile phones by his brother, an income in the order of $20,000 a month. As he becomes more experienced as an insurance agent his income is capable of growing. In addition he receives $10,000 a month by way of rentals from Kingswood Villas. He has a debt free property in Australia (Unit 6 Evergreen and rentals from that can further supplement his income. He is experienced in the real estate field and when the property market improves in Hong Kong may well look to that as a form of employment or even capital development. In addition he has available to him the support of his family through the various family trusts that are in existence. I cannot precisely define the extent of that support but it is sufficient that it be acknowledged as being available to the husband. 87. He has the real estate assets that I have set out above. He has an overdraft of $181,000, but that is entirely related to his life style after separation and the wife ought not to have to bear that in any way. Had he not been so determined to organize his affairs in such a way as to incur debt to defeat his wife's claim, for example by properly renting the Australia property, it is more likely than not that he would not have an overdraft. 88. The wife earns $8,000 a month and I am satisfied that is all that she can earn at the present time, although as time goes on she may be able to earn more. Her employment of a domestic helper is reasonable as that enables her to go out and work. There was a flow of large sums of capital into and out of her bank account but I am satisfied that those were not her funds, but funds provided to her by members of her family to enable her to justify to the Immigration department her ability to employ a domestic helper. They were not her own funds. She too has the support of her family but nothing like the extent of financial capacity that is available to the husband. 89. Other than her modest interest in the former matrimonial home in Brisbane she has no capital. (b) Financial needs and obligations: 90. The wife has the responsibility of bringing up the children and herself to support. It appears that the husband has a girlfriend but he has no other responsibility to anyone other than himself. (c) Standard of living prior to the breakdown: 91. The parties enjoyed a reasonable standard of living prior to the breakdown of the marriage. They were not poor, but despite the extent of C Snr's assets made available to them through the family trusts, they did not live a lavish lifestyle. The wife worked when she could, usually in family businesses, and would have expected to continue to work when the children were old enough to look after themselves. In Australia they would have been unlikely to have had full time domestic help, but that would not have prevented the wife from working. Part time domestic help would have been easily afforded by the family. In Hong Kong their standard of living was such that they would almost certainly have had live-in domestic help. (d) Age and duration of marriage: 92. The husband will be 35 in June 2002 and the wife is now 37. He has a girlfriend and has the prospect of remarriage which will mean companionship for him as he grows older. The wife on the other hand, with the responsibility of the children faces a bleaker prospect in that respect. The marriage is one of 10 years, not a short period. (e) Physical disability: 93. There are no factors in this respect in relation to either the husband or the wife or the children. (f) Contributions to the welfare of the family: 94. The greater part of the burden of bringing up the children has fallen on the wife. She has cared for them and looked after the home. There is no criticism of her role in that respect. It is a role that must not be underestimated for the family is the central feature of society and the role of a wife in caring for the family and looking after a home is every bit as important as that of a breadwinner. They are different roles, but complementary and equal in their status in a family. 95. The husband has contributed to the welfare of the family by the earning of income. He can also claim the contribution of the gifts made to him by his father, although they must be judged as gifts to him to provide a basis for the family to live as distinguished from a contribution arising from some special effort on his part. However he appears to have substantially wasted some of the capital that he has received from his father. He says that of the proceeds of sale of Unit 2 Evergreen nothing now remains. If that is so he must bear the responsibility for that as he decided on the investments and controlled how the business that was established was run. That detracts from this aspect of the contributions he has made. 96. The deposit for the matrimonial home came from the husband's father, but the property was purchased in their joint names. The father's gift is therefore appropriately seen as a gift to them both and the source cannot be claimed as a contribution by either. (g) Loss of benefits: 97. It is inevitable that in any divorce the parties will lose benefits. Some are simply the straight forward consequence of the breakdown of the marriage. But in some marriages these lost benefits take on a greater importance. An obvious example is the advantage of a secure civil service pension which is lost to the wife or husband of a civil servant on divorce. In this particular case the wife personally was not a beneficiary of the LSC Family Trust. But her husband is, as are the children, and the family, were it not for the divorce would have realistically looked forward to continued support from the trust, especially after the death of his parents. The trust is substantial and would have had the ability to greatly relieve both the husband and the wife of the financial burdens of life. The husband will retain that advantage, but it is lost to the wife. That is a factor that must be brought into account. The appropriate orders: 98. I have taken into account all of the matters I have set out above in arriving at the orders that I consider appropriate. I am satisfied that the husband is in a position to afford to pay proper maintenance for both the wife and the children of the marriage. 99. In assessing the total capital available to the husband I disregard the fact that he has already drawn on the proceeds of sale of Unit 4 Evergreen to pay maintenance to the wife. To do otherwise would mean that the wife is paying maintenance to herself from a fund in which she is entitled to share. The husband's ability to earn income has been sufficient for him to meet the maintenance pending suit ordered from his own resources without depleting the fund in which the wife can share. 100. The negative equity in Kingswood Villas falls into a special category. In many cases it would be treated as simply a liability and taken into account in adjusting the balance sheet between the husband and wife. But negative equity is an amorphous concept, and unlike a true liability, such as a mortgage. Negative equity is not a debt, nor even an actual loss, but a loss only when it crystallises. So long as the property is not sold there is no loss. If the property is retained until the value restores, then there is no loss. The C family is a family which can plainly afford to wait until such time as the value restores in the property. They show no intention to sell the property and the fact that the father can afford to pay the mortgage installments while allowing the husband to collect the rent is a clear demonstration of the family's ability to wait until no loss is to be suffered. 101. For these reasons I make no adjustment in the balance sheet between the husband and the wife for the Kingswood Villas negative equity factor. 102. The total capital available to the husband and the wife is therefore as follows:
103. The husband is ordered to pay to the wife periodical payments of maintenance to the wife for her own maintenance in the sum of $3,000 per month and for the children of the marriage in the sum of $3,500 per child per month until the children attain the age of 18 or cease full time education, whichever is the later. The next payment must be made on 1 April 2002, and thereafter on the first day of each month until further order of the court. The payments are to be made by direct credit to a bank account to be nominated by the wife to the husband. 104. As to capital, Mr. Clement pressed to me the recent decision in White v. White [2000] 3 WLR 1571. But this is not a pure White situation. The marriage is of much shorter duration and the contributions to the welfare of the family are quite different. 105. Looking at the matter broadly, and having regard to all the matters I have set out I fix the wife's interest in the parties capital at the sum of A$80,000, a little less than 30% of the total capital I have assessed. As all of the property in which there is an equity is in Australia I have couched the order in terms of Australian dollars. 106. There are a number of ways in which the wife's entitlement may be met. The husband may elect to sell Unit 6 Evergreen and pay the sum of A$80,000 to the wife. If he does, she must transfer to him her interest in the matrimonial home. She may ask him to reduce the mortgage on the former matrimonial home to give an equity equivalent to the sum of A$80,000 and transfer his interest to the wife, she then being responsible for the balance of the mortgage and meeting the installments by renting the property. She may consider that, in the long term, landed property in Australia, with a low mortgage and a rental income to meet the mortgage is better for her and her children. Such an arrangement would be to the husband's advantage as it would reduce the capital that he is required to fund. For my part I consider that the most appropriate method of dealing with the issue. 107. However there may well be other combinations of arrangements that will appeal to the parties. There may well be factors of which I am unaware that would impact on the orders to be made. There may be stamp duty advantages in Australia if the matter is dealt with by orders of the court rather than agreement. The parties may need to take advice from Australian solicitors in that respect. 108. Rather than make orders immediately I would prefer that the parties consult as to the means of meeting the order and endeavour to reach agreement. If they are unable to agree then I will make appropriate orders, after hearing the parties. 109. Accordingly, leave is reserved to apply. 110. In the course of the proceedings a peripheral issue arose vaguely as to a sum of $200,000 which it was said was lent by C Snr to the wife in September 1997 quite a long time prior to the final breakdown in the marriage. I wish to make two comments in respect of that sum. First it is yet another example of the way in which C Snr exercises his generosity to his family. It reinforces the view I have taken on the trusts argument. Second, as C Snr has never suggested it ought to be repaid until after the petition was issued, and even now has, despite early threats by the husband in the course of these proceedings, taken no steps in relation to that sum, it is a sum that I have entirely disregarded in reaching my decision. The payment of the sum is not an amount that the husband is entitle to set off in these proceedings. 111. The wife has substantially succeeded in her claim. There will be an order nisi that the husband must pay the wife's costs, both parties costs being taxed on Legal Aid Regulations. 112. At the conclusion of the hearing of the evidence in this matter there was insufficient time for me to hear oral submission and I asked for written submissions. The final submission was received by me on 12 December 2001, but as I was due to go on leave on 17 December 2001 I was not able to consider those submission until my return during January. I regret that as a result this judgement has been delayed.
Representation: Petitioner: Richard Clement: (Massie & Clement) Respondent: Andrew Wong: (Norman M K Yeung & Co) |
Cases cited in this judgment
Other judgments that cite this case