M v. M
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FCMC 5793/2006 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 5793 OF 2006 ------------------------ BETWEEN
---------------------- Coram: Deputy Judge C.K. Chan in Chambers (not open to the public) Dates of Hearing: 26-30 May, 9 & 18 September, 18 November 2008 and 5 January 2009 Date of Handing Down Judgment: 16 January 2009 ----------------------------- J U D G M E N T ----------------------------- 1.This is a trial on the petitioner wife (hereinafter called “the wife”)’s application for ancillary relief against the respondent husband (hereinafter called “the husband”). Issues 2.After 9 days of hearing, these are the main issues of the case:
Brief History 3.This is a brief history of the case. 4.The wife is now aged 44, previously a kindergarten supervisor by occupation. 5.The husband is also aged 44. He is a commercial airline pilot of an airline based in Hong Kong. 6.The parties began cohabitation in 1988 and married in 1990. 7.This is the second marriage of the wife. In her previous marriage, she had a son, G. who has been treated as a child of the new family. G is now aged 22 and has become independent. There are two other children born during this marriage and they are A. and J. A is now aged 18 and J aged 16. Both of them are boarding students in Australia. A is due to enter university this month and J is due to complete his secondary education sometime in December 2009. 8.By consent, a joint custody order on J was granted with care and control be given to the husband. Although A is already an adult, the Court may still need to consider her maintenance because it is most likely that she will continue her full time tertiary education in the coming academic term. Both A and J are now financially supported by the husband. 9.The parties separated on 18 May 2006. There was an allegation by the husband that the wife had maintained an adulterous affair with a Mr. D. (“D”) which led to an argument at the Hong Kong Country Club on the previous evening. The parties broke up after that incident and they have never resumed cohabitation thereafter. 10.The wife issued a petition for divorce based on the husband’s behaviour on 18 May 2006, which was later not defended after certain amendments were made to the particulars. A decree nisi was granted on 17 October 2006. As the parties failed to reach an agreement on the wife’s ancillary relief application at the FDR hearing, the case was transferred to my court for a final hearing. Agreed Items 11.At the beginning of the trial, there were quite a number of issues in dispute. However, during the course of the trial, the parties managed to reach agreement on some of the items and it would be helpful if I should list them out at this stage:
Missing Jewellery from the Family Safe 12.I now turn to the main issues of this case. 13.The first issue is about some missing jewellery from the family safe. 14.It is the wife’s case that during the marriage, she was given various items of jewellery or watches as gifts which were locked up in the family safe located inside the master bedroom of the former matrimonial home. After the parties’ separation on 18 May 2006, the wife alleged that the husband had taken away 2 of the items, namely an Ebel watch and a ruby/diamond engagement ring which were valued at $100,000 and $168,000 respectively. 15.On the other hand, it is the husband’s case that it was the wife who had removed those 2 items. In the letter to his solicitors dated 23 May 2006 (p. 27 in Correspondence Bundle I), the husband wrote:
16.Apart from saying that the wife has taken those 2 items, it is also the husband’s case that as to the rest of the jewellery, some of them were gifts from his mother with the intention that they should be given to A in the future. 17.According to the wife, the parties’ relationship had been in trouble for quite some time. On 17 May 2006, they met the husband’s father (“Dr. M”) at the Hong Kong Country Club. The topic of divorce was raised which was followed by heated argument between the parties. The wife said they later went to Dr. M’s home at Shouson Hill to discuss the matter further. At the father’s home, the husband was still in a furious mood as he was accusing the wife to have an adulterous affair. He even threw a glass of wine on her causing her concern of her own safety. The wife said she was too afraid to go back to the former matrimonial home and so she took a taxi and went to lodge with a friend that night. 18.On the next day, she tried to go back to the former matrimonial home but found the entry code of the lock being changed. She called the husband but was told that her bank accounts, credit cards, mobile phone and club membership had all been cancelled. In her 8th Affirmation, the wife said this to describe her then situation:
19.Facing with such a desperate situation, the wife immediately sought assistance from her solicitors and legal proceedings for divorce and for non-molestation were issued forthwith. 20.The wife eventually managed to return to the former matrimonial home to get back her belongings. It was not too clear of the exact date of her re-entry but it should be shortly after the separation. According to the wife, when she returned to the former matrimonial home, she was watched closely by the husband and one of his colleagues. She checked the family safe in which all her jewellery were stored but found that it was empty. When the husband later transferred all the family jewellery to his solicitors for safekeeping, the wife said an Ebel watch and a ruby/diamond engagement ring were missing. During her evidence, she also mentioned that she once saw some silver ingots, valuable watches and gold coins being stored in the safe as well. She said the husband must have taken them. 21.The wife also said she later found that the daughter, A was having a necklace which was converted from this ruby/diamond ring and so she presumed that the husband must have given this ring to the daughter at a later time. 22.The husband presented a different story on the wife’s re-entry to the former matrimonial home. In the husband’s 6th Affidavit, he said the wife had in fact removed a gold ruby and diamond ring and an antique fob watch from the family safe. Although the description may not be exactly the same, I suppose these 2 items are the Ebel watch and the ruby/diamond engagement ring as mentioned by the wife in the preceding paragraphs. 23.Furthermore, the husband also alleged the wife of keeping the following jewellery of the family:
24.The wife denied she has the above jewellery. She said when she returned to the former matrimonial home, she was given a bag of some costume jewellery which did not include the above items. She said those jewellery she got are not expensive items. Discussion 25.As the evidence of the parties is diametrically opposite, it is a matter of whose evidence is to be believed on a balance of probability. 26.During the wife’s evidence in court, she said when she returned to the former matrimonial home, she was watched closely and was prevented from going to the family safe. She said the safe was placed in the dressing room inside the master bedroom. Just before the master bedroom, there was a study room. She said she was not even allowed to pass the study room and so she could not get to the safe. 27.However, in her 6th Affidavit sworn on 17 March 2008, the wife said in paragraph 5 (p. 421 of Pleadings Bundle II) that:
28.This is a complete departure from what she said in court, namely that she had been prevented from even entering the master bedroom, not to mention the checking of the safe. The wife could not give a satisfactory explanation for this inconsistency. 29.On the other hand, there is evidence to suggest that the husband had made his complaint as early as 23 May 2006, which was 5 days after the removal of the missing jewellery. On that day, the husband wrote to his solicitors informing them the wife had removed jewellery from the safe (as set out in paragraph 15 above). The husband’s solicitors then wrote to the wife’s solicitors on 24 May 2006 putting forward the allegation of the wife’s removal of the jewellery and enclosed therewith the husband’s letter dated 23 May 2006. As to this allegation, the wife had never raised any objection until about 1 year later, i.e. on 18 May 2007 when her solicitors wrote and denied the taking of those jewellery on behalf of the wife. (p.415 of the Correspondence Bundle II) 30.On a balance of probability, I find the evidence of the husband more credible and is therefore accepted by this court. I find it as a fact that on the day of the wife’s return to the former matrimonial home, the wife had removed some jewellery from the family safe including the Ebel watch, the ruby/diamond engagement ring and the items as listed in paragraph 23 above. 31.The next question is how we should deal with those family jewellery. I can see that the biggest problem is how to divide them up between the parties in view of the fact that there is no proper valuation of those items. In this regard, I do see that the parties had at some stages tried to put a value on each individual item or even present some documents from a jewellery shop which can hardly be described as a proper valuation report. I can not accept those figures are the present value of the jewellery in question. Under these circumstances, what I think is the fairest way to deal with the matter is to allow each party to keep whatever jewellery is presently in his or her possession. By this way, each party will be able to keep some of the jewellery which are roughly equal in numbers. As to whether they will also be roughly equal in value, I am afraid that can not be ascertained under the present circumstances. 32.As a last point on this issue, I understand that it is the husband’s case that some of the jewellery are gifts from his parents with a view to be passed on to the children. That may or may not be the case. But even if it is the case, that does not change the fact that they were gifts to the parties and so form part of the family assets which are to be fairly distributed between the parties upon divorce. Loans from the Husband’s Parents 33.The next issue is the loans from the husband’s parents. 34.It is the husband’s case that over the years, the husband’s parents have been extremely generous to him and his family by providing various loans so that they could maintain a rather comfortable lifestyle. Some of the loans have been repaid but some have not. The outstanding loans are listed out in a letter dated 18 June 2006 (‘the outstanding loans”) which was prepared by the husband’s father, Dr. M:
35.In the letter, it was not stated what exchange rate Dr. M has adopted but he gave a total figure of HK$ 4,219,370. But that figure can not be right anymore because of the recent decline in the value of the AUD and GBP. Assuming we adopt a more recent exchange rate of 1 : 5.4 for AUD and 1 : 11.7 for GBP, the sum still owing would be about HK$ 3,764,860. 36.Generally speaking, the wife does not dispute the fact that the husband’s parents have been extremely generous to the family but all the payments were gratuitous in nature except 2 items, the loans for the purchase of landed property at Reigate, UK and the Babington Path Property in Hong Kong (i.e. the former matrimonial home). According to the wife, both loans have been fully repaid and there is nothing owing to the husband’s parents. As to the other payments, they were simply gifts from the parents to a beloved son. The wife said all these “loans” are now being pursued by the husband’s parents is a deliberate attempt to reduce the net distributable family assets and also her share in them. 37.Dr. M was called to give evidence in court. According to him, he and his wife (“Mrs. M”) have given financial assistance to the husband on many occasions. Despite being the husband’s parents, all those loans were meant to be repayable, some with and some without interest. Although all the loans are to be repaid only when the husband is able to do so, that does not mean that they are gifts to the husband. 38.Dr. M further said he is now 70 years of age and is seriously thinking about retirement. Therefore, he needs the husband to repay those loans. For this purpose, Dr. M and his wife had even issued legal proceedings in the High Court on 17 September 2007 for the repayment of the loans. A copy of the Writ of Summons can be seen at p. 934 of Pleadings Bundle IV. In the Writ, the Plaintiffs are Dr. M and Mrs. M. The Defendants are the husband and the wife. Dr. M and Mrs. M are claiming for a sum of HK$4,219,370 with interest as from 18 June 2006. It was a Writ with a general indorsement and so the basis of the claim could not be readily seen from the document itself. According to Dr. M, the case is still pending and further actions may be taken after the conclusion of this trial in the Family Court. Discussion Rushcutter’s Bay 39.The first on the list is the sum of AUD 65,400 being outstanding interest on a loan to the husband for purchasing a property in Rushcutter’s Bay, Sydney in 1986. This is what stated in Dr. M’s letter dated 18 June 2006:
The Court’s View 40.First of all, from the description above, one can see that the real nature of this sum of AUD 65,400 was not actually a loan, but interest on a loan. There does not seem to be any contemporaneous evidence to support the agreement on this interest by the husband. On the contrary, the above wordings do suggest that the charging of this interest was arbitrarily decided by Dr. M. He decided the period of interest to be charged, i.e. 10 years (but actually it should be at least 11 years if the charging period was from 1986 to 1997). He decided that the interest rate should be 6% per annum. The arbitrariness of the interest can also be seen from the fact that it was allowed to be outstanding for so long (22 years) while the principal of the loan has been repaid long ago. 41.Even though I accept that the husband may have received some financial assistance from his parents in the purchase of the Rushcutter’s Bay property, I am not satisfied that Dr. M, nor his wife Mrs. M should have any legally enforceable remedies on their claim for interest against the husband. 42.One must remember that Dr. M and Mrs. M are the husband’s parents. The Rushcutter’s Bay loan was financial assistance to a son who was in his early 20s at the time. I find it more probable than not that this was purely financial assistance from two loving parents, instead of being a legally enforceable loan with interest as claimed by the husband and Dr. M. As the husband is not under a contractual duty to pay this interest, and the fact that it has been outstanding for so long, I will not take this interest into account when I decide on the ancillary relief application. Commercial Pilot Training in Australia and the UK 43.It is the husband’s case that Dr. M has given him a loan of AUD 45,000 so that he could complete his training as a commercial airline pilot in Australia in 1990. 44.After his not so successful aviation career in Australia, the husband moved with his family to the UK in early 1990s where he received further training in order to obtain his commercial pilot licence there. He received further loan from Dr. M in the sum of GBP 36,000. 45.This is how Dr. M described the loans in his letter:
46.The husband said his whole family did benefit from these 2 funds and so they should be repaid to Dr. M from the family assets. 47.Again, the wife does not dispute that the husband were given those funds by Dr. M, but they were in the form of parental assistance instead of repayable loans. The Court’s View 48.Like the financial assistance rendered in the purchase of the Rushcutter’s Bay property, there is no contemporaneous document to evidence these so called loans. 49.There was submitted a copy letter dated 17 May 2001 from the husband (p.926 of Pleadings Bundle IV), which was purportedly prepared to record the outstanding loans owed by the husband. 50.I note that it was a document prepared in 2001, which was more than a decade after the first advancement in 1990. There is also no signing or acknowledgment by any of the parties in the letter. Even in the document itself, it is quite clear that the figures were all “approximate amounts”. 51.On a balance of probability, I do not accept there has been such a contractual loan in existence between the husband and Dr. M. for these 2 sums of money. I am prepared to rule that they were parents to child financial assistance. As there is no legal obligation for the husband to repay these sums and the fact that they have been outstanding for so long, I am not satisfied that these 2 sums of money should be repaid from the family assets. Rental for Ranfurley Road 52.The husband claims that from January 1990 to December 1992, he owed his parents a total of AUD 15,600 as outstanding rental for the family’s occupation of his parents’ house at Ranfurley Road, Sydney. He said this sum should be repaid from the family assets. Dr. M testified to support the husband’s claim. 53.This is what Dr. M wrote in his letter concerning this item:
The Court’s View 54.Again, there is no tenancy agreement to prove the existence of a binding contract between the husband and his parents for the payment of this rent. Even if there is any (which is not the case here), any claim for arrears of rent would certainly be time barred. Therefore, the only conclusion that can be drawn is that there was no legal obligation on the husband to pay this “rent” for the use of Ranfurley Road property. It is also unreasonable for Dr. M to ask for the repayment of this sum from the family assets after 16 years. 55.In short, I am not satisfied that this so called “rental” should be paid out of the family assets. Living Expenses in Preswick and Private School Fees 56.This is what Dr. M said in his letter dated 18 June 2006:
57.It is the husband’s case that while he was having commercial airline pilot training in the UK in the early 1990s, his parents had lent him some money for his accommodation and living expenses there. They also paid for the private schools of the children. He now said those money should be repaid from the family assets. 58.Bearing in mind that:
I am not satisfied that these sums of GBP 10,800 and GBP 54,000 were made in the context of a contractual loan which has any binding legal effect on the parties. I also do not think it is fair, after 15 years of their advancements, that a portion of the family assets should be carved out to pay this sum back to Dr. M. $1,000,000 Loan in March 2004 59.According to the husband and Dr. M, on 1 March 2004, which was the 40th birthday of the husband, the husband had received a loan of $1,000,000 for the payment of deposit in the purchase of the Babington Path Property. In evidence, Dr. M also said when he lent this money to the husband, he had to take out a loan from the bank and did pay interest on it. Therefore, he would also expect the husband to pay interest to him. 60.The wife does not dispute there was such a payment, but she said it was meant to be a birthday gift on the husband’s 40th birthday. Furthermore, when the husband repaid 2 respective sums of $2,823,406.86 and $1,397,000 to Dr. M on 7 September 2005 (p.940 of Pleadings Bundle IV), all outstanding liabilities towards Dr. M and Mrs. M had been repaid. The Court’s View 61.In considering this loan of $1,000,000, I note that in Dr. M’s affidavit, he enclosed a copy of the cheque which was given to the husband on 1 March 2004 (p.924 of Pleadings Bundle IV). On this document, there were also contemporaneous handwritten notes of Dr. M which said:
62.One can see that although the payment was described as a “loan”, the husband was allowed to repay at his leisure. Despite the said description, I think this payment has all the hallmark of a parental gift, instead of a contractual loan. This is in fact consistent with all the other payments made to the husband, which were somehow all described as loans, but were all invariably allowed to be outstanding indefinitely. 63.The fact that Dr. M did take out a loan from the bank before he made this advancement to the husband is neither here nor there. I think it is beyond dispute that Dr. M was and still is quite a wealthy man. There is no reason to believe that he could not afford this $1,000,000 at the time of payment. He might not have the ready cash of $1,000,000 in hand but that does not change the fact that he was not too serious in demanding the loan’s repayment. If one looks at the circumstances of this loan, and also the other loans objectively, the only reasonable conclusion to be drawn is that the repayment of this loan, just like the other loans, would never be insisted upon by Dr. M. 64.Of course, I am also aware that there were 2 loans to which the wife raised no objection. They were the Babington Path loan and the Reigate loan. It is common ground that the husband did repay these 2 specific loans. 65.From the bank account record of Dr. M (p.940 of Pleadings Bundle IV), the husband did repay the respective sums of $2,823,406 and $1,397,000 by depositing the same into Dr. M’s HSBC account on 7 September 2005. I was told that the husband was able to realise a profit in selling the Reigate Property and so he decided to repay the loans to his parents. 66.However, I do see that Dr. M wrote these notes on the bank statement to describe them as “$2,823,406.86 – Full repayment for Babington Path HKD loan” (emphasis supplied) and “$1,397,000 – Full repayment for Reigate loan” (emphasis supplied). His descriptions of the payments as “full repayment” is indicative of the fact that everything owed for the purchases of the Babington Path Property (which would include the $1,000,000 if it were indeed a loan) or the Reigate Property have been fully repaid. 67.Under these circumstances, I will treat this $1,000,000 as a father-to-son advancement instead of a repayable loan. In case I am wrong in this conclusion and the $1,000,000 was indeed a loan from Dr. M to the husband, I am satisfied that it has been fully repaid when the husband made the respective repayments of $2,823,406.86 and $1,397,000. Therefore, I am not satisfied that this sum should be set aside from the family assets for repayment to Dr. M. Entrance Fee to the HK Country Club and the Hong Kong Club 68.The husband is now claiming that Dr. M has lent him the total sum of $270,000 as entrance fees to the Hong Kong Country Club and the Hong Kong Club. He now says that this sum should be paid back to Dr. M from the family assets because all the family members did have the use of the club facilities. 69.The wife’s case is that Dr. M is a member of both clubs and it has all been his wish that the husband can also join him as a member of these 2 prestigious clubs. Since the husband’s entrance to the clubs were at the instigation of Dr. M, the wife said that there is no reason why she has to repay part of the entrance fees to Dr. M. The Court’s View 70.It is common ground that the husband joined the Hong Kong Country Club in August 2002 and the Hong Kong Club in January 2005. 71.On 6 August 2002, Dr. M wrote this memo to the husband in respect of the Hong Kong Country Club membership (p.925 of Pleadings Bundle IV):
72.In the letter from the Hong Kong Club dated 18 January 2005 informing the husband of his election as a member (p.922 of Pleadings Bundle IV), Dr. M scribbled the following notes:
73.By a fair reading of the above 2 letters, I have no doubt in my mind that these are not real loans the repayment of which are to be insisted upon by the lender. After all, the wife has only enjoyed the benefits of these 2 clubs for a relatively short period of time (3 years for the Hong Kong Country Club and 1 year for the Hong Kong Club) while the husband will continue to enjoy the benefits for decades to come. I do not think it is fair for the wife to repay any part of these 2 entrance fees. Reigate Property 74.This is the last item in Dr. M’s letter. He described the item as:
The Court’s View 75.This is a claim for interest on loan which has been repaid. 76.Apart from the fact that there is no formal record of the parties’ agreement on interest, as I pointed out in preceding paragraphs, I am satisfied that the Reigate loan has been repaid in full and that should have included all outstanding interest, if any. In short, I am also not satisfied that any part of the family assets should be used to repay this interest. Conclusion on the Loans 77.Based on the above reasons, I am not satisfied that the so called loans from Dr. M and Mrs. M (apart from the Reigate and Babington Path Property loans which have already been repaid in full) to the husband were contractual loans which have a legal binding effect on the husband. Instead, they were just parents to son advancements at times of financial difficulties. In view of the nature of these advancements and the fact that they are allowed to be outstanding for so long, I do not think it be fair for them to be now repaid from the family assets. 78.Before I leave this issue, I also would like to say something about the allegation by the wife that the claim for the repayment of these so called “loans” is a deliberate attempt by the husband to reduce the total family assets so that her share of it would also be reduced. 79.By looking at the nature and details of all these outstanding “loans”, the following prominent features can be readily discerned:
80.I must say I share the same feeling of the wife. 81.We are all indebted to our parents, one way or another. The husband may feel that he should have a moral obligation to repay his parents for their kind and financial assistance during all these years. The husband can pay whatever amount he deems fit to his parents to show his gratitude, but I am afraid he has to repay it from his share of the family assets after its fair division according to the established legal principles. I do not think it is right for the wife to bear the responsibility to repay all these “loans” which were in fact some parent-to-child assistance made years ago, some before the marriage, or may be even before the meeting of the parties. Should Interim Maintenance be Repaid? 82.I now turn to the husband’s claim that the interim maintenance he has been paying to the wife at the monthly rate of $26,000 should be repaid to him. In this regard, the husband has issued a summons dated 6 June 2007 (p.406 of Pleadings Bundle II) asking the court to vary the interim maintenance order made by consent on 19 October 2006. 83.According to the husband, after the parties’ separation in May 2006, he has been paying interim maintenance to the wife and the latest amount he has been paying is $26,000 per month. However, it is also the husband’s case that the wife has been maintaining an adulterous relationship with D. He said during the parties’ separation, the wife has moved in to live with and being maintained by D and so she had no actual needs of interim maintenance from the husband. He now asks for the interim maintenance’s repayment or at least part of it. 84.The wife denies she had maintained an adulterous affair with D before the parties’ separation. She said she did come to know D shortly before separation but their intimate relationship only developed after the separation. She agrees that during part of the separation period, she did move into D’s flat but she has always maintained separate finances with D. She had paid $10,000 as her contribution to the rent. In any event, their intimate relationship has ended just before this trial although she and D remain to be friends. Discussion 85.During the trial, much time has been spent on the wife’s relationship with D. After hearing the parties’ evidence, I come to the following views:
86.Under these circumstances, the husband’s application for the repayment of the interim maintenance is refused. His summons for variation of the interim maintenance order also be dismissed. Total Value of the Family Assets Value of Babington Path Property 87.The Babington Path Property is the single most valuable asset of the family. There has been much debate on its present market value. 88.Before the start of the trial in May 2008, the parties once agreed the market value of the property be set at $18,000,000. However, at the beginning of the trial, the wife asked for a revaluation of the property and therefore, an up-dated report was called for. On 29 May 2008, an up-dated report was prepared and the property was valued at $18,500,000, which was not too far away from the original valuation. Unfortunately, the trial could not be finished within the original allotted time and had to be part-heard to September 2008. During the adjournment when the court started to prepare its judgment, the husband asked for a further revaluation because of the rapid deterioration of the market. In order to be fair to both parties in view of the recent rapid decline in property value, I granted the application for the preparation of a most up-dated report, which was ready on 12 December 2008. The value is now assessed at $14,500,000. I accept this as the most up-dated market value of the property. 89.Before I leave this topic, I think I also have to deal with the last summons issued by the wife on 18 December 2008 in which she asked for “Further directions regarding the value of the former matrimonial home”. 90.At the return hearing on 5 January 2009, Mrs. Casewell, solicitor for the wife submitted that despite of the up-dated market value of the Babington Path Property being assessed at $14,500,000, the court should stick to the original valuation of $18,500,000 at the beginning of the trial. She said it is the intention of the husband to keep the property and so the valuation, which is based on a sale, should not apply. She also said the property market is at its lowest at the moment and it would be unfair to the wife if such a low valuation should be adopted. 91.I think there is no dispute that the wife is entitled to receive a fair share of the total family assets which is to be determined in accordance with s.7 of the MPPO and established legal principles. In ascertaining this fair share, the family assets have to be valued and a fair share of that value should be given to the wife. In this regard, I think it is only fair that the most up-dated valuation should be adopted. Friends Provident Fund 92.The husband has established and maintained a trust fund (“the Friends Provident Fund”), which has a present value at $262,219.12. 93.It is the husband’s case that the purpose of this fund was for the future education of A and J. Therefore, the value of this fund should not be put into the family pot for division between the parties upon divorce. 94.The wife disputes that was the purpose of the fund. She said the fund was purely an investment of the parties. Furthermore, she said there was really no such need for the establishment of an education fund for the following reasons:
The Court’s View 95.I think the answer to this issue can be very short. How one calls this fund (whether it is an education or investment fund) is really not that important. The fund was created out of the family wealth and so clearly it is part of the family assets. Of course, proper provision for the future and educational needs of the children are important considerations of the court in deciding on ancillary applications, but I do not think there is any risk that they would not be provided for, bearing in mind of the education allowance provided by the husband’s employer and his decent income from the airline. Bank Accounts 96.There is some dispute between the parties on how to calculate the bank balances. 97.It is the wife’s case that on the day of separation (i.e. 18 May 2006), the husband had net balance of $1,475,487 in credit in his bank accounts. However, when it comes to trial, the net balance has been reduced to $288,350 in debit. In other words, over a period of about 2 years, the husband had dissipated $1,763,837 from his bank accounts. She asked this sum to be added back to the assets under the husband’s control when this court calculates the total assets of the parties. 98.During his oral evidence, the husband gave an explanation on the reduction of his bank balances. Counsel for the husband has very helpfully summarised the husband’s explanation in Annex B of his final submission. The husband’s explanation included:
99.In addition to the above, there were also interest payments made to Dr. M as follows:
100.From a pure arithmetical sense, I think the husband can give an explanation on the reduction of his bank balances by providing the above figures. However, I must point that I have already ruled that the so called “loans” from Dr. M were in fact an advancement or a gift and therefore, the husband should not use family assets to repay Dr. M. under these circumstances, it is only fair that the repayment of $379,740 should be added back as assets under the husband. 101.Furthermore, it is my view that the proper time to consider the question of costs is after the conclusion of the ancillary relief trial. Therefore, the husband’s actual payment of legal costs at $603,309 should also be added back for the calculation of total family assets. The Calculations on Total Family Assets 102.Based on the above reasons, I am prepared to find that the parties have the following total family assets:
The total family assets are valued at $10,036,598 ($9,264,774 + $711,999 + $59,825 = $10,036,598) with $9,976,773 held under the name of the husband and $59,825 under the name of the wife. The Law on Ancillary Relief 103.The jurisdiction of the Court in granting financial relief for a party is governed by section 4 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) which provides:
104.Apart from the granting of financial relief, the court has also power to grant a property transfer order or a sale of property order under ss.6 and 6A of MPPO:
Section 7 Considerations 105.In deciding on how to exercise its power in this regard, the Court is bound to consider Section 7 of MPPO whichprovides:
Conduct 106.For conduct to be taken into account, it has to be conduct of the parties which it would be inequitable to disregard (per Cheung JA in DD v LKW [2008] HKEC 379, at para. 69(6)3) reciting the principles as laid down in Miller v Miller and McFarlane v McFarlane [2006] 2 WLR 1283). 107.Applying the test to the facts of this case, I do not think there is such conduct for the court to take into account. 108.The wife may feel that the claim for repayment of the “loans” to Dr. M may be a deliberate attempt to reduce the total family assets for distribution and therefore, this conduct should be taken into account when the court decides on the ancillary relief application. There is some force in this argument. But I think one must also not lose sight of the fact that Dr. M had really been most generous to the family in the past 2 decades and the wife did benefit tremendously from such generosity. Therefore, after taken into consideration of all the circumstances of this case, I have decided not to take this conduct into account in the distribution of the family assets. 109.At one stage, the wife tried to draw the court’s attention to the husband’s remarks which was taped during their telephone conversation on 23 May 2008. I have read the transcript (which can be found at p.984 of the Correspondence Bundle IV) and I found they were just heated exchanges commonly found in acrimonious litigation. It is regrettable that they were perceived by the wife as a threat but I do not think they can be regarded as conduct serious enough for it to be taken into account in an ancillary relief application. Income, Earning Capacity, Property and other Financial Resources The Wife’s Financial Position 110.In her evidence, the wife said she used to work as a kindergarten supervisor earning a monthly income of about $7,000 just before trial. But according to her tax return (exhibit P7), her annual income from 1 April 2007 to 31 March 2008 was $123,080, averaging out to be about $10,000 per month. According to her, she is no longer working in that capacity at this moment. She has an intermediate qualification in tourism but she did not have much experience in this field. She is not too optimistic that she would be able to find a high pay job after her return to Australia upon the conclusion of this litigation. 111.I accept that the wife is now aged 44 and does not possess very high academic qualifications. For most part of her married life, she was a housewife travelling with the family from place to place. All these mean she may have difficulty in starting a new career at this stage of life. Taking into account of her age and background, I am prepared to find that she would only be able to command a modest amount of income should she choose to enter the labour market in Australia. For assessing her earning capacity, I am prepared to find that she would have an earning capacity of about $7,000 per month, which is a figure similar to what she used to command when last working in Hong Kong. 112.As to her properties, I have already ruled in paragraph 102 above that the wife was in possession of assets in the sum of $59,825 under her name. There is no evidence that she is in debt and so I will find that she has assets in that amount. 113.During the trial, there has been some suggestion by the husband that the wife may have the prospect of an inheritance, which was denied. The husband failed to discharge the burden of proof by producing any credible evidence in that regard. I do not accept the wife has such a prospect of inheritance. The Husband’s Financial Position 114.The husband’s financial position is more controversial. 115.The husband is a commercial pilot of the airline based in Hong Kong. According to his latest tax record for the year between 1 April 2007 and 31 March 2008 (Exhibit R1), his annual income amounted to $2,863,800. This means he had an average income of about $238,650 per month. 116.However, according to the husband, the economic tide has changed and he would not be able to command such a high income this year because part of his previous income was made up of bonuses, gratuitous award and over time flying, all of which will not be available this year. 117.By a close study of his tax return, I do accept that part of his previous year’s income was made up of payments of a gratuitous nature, which amounted to a sum of $374,821. I am prepared to take that out from the computation of his future income, which means the husband is having an annual income of about $2,488,979, i.e. about $207,414 per month. Furthermore, I will also bear in mind that part of that annual income is made up of allowances for A and J’s education in Australia ($474,714 for the year) and therefore the actual monthly take home salary of the husband is about $167,854 only (which is inclusive of his housing allowance). 118.In his evidence, the husband mentioned that he is now working under great pressure and he even commented that his future employment might not be secured in view of the economic down turn and his age. That worry is understandable but there is no evidence to suggest that he would be made redundant in the near future. After all, I think the husband is still in his prime years in the airline industry and for the purposes of this application, I will treat him as having the income as described in the preceding paragraph. 119.As to the husband’s properties, I have already ruled in paragraph 102 above that he has assets of $9,976,773 under his name. 120.Finally, I will also bear in mind that the husband does have a generous father, Dr. M, whom I believe will retire soon but is still in a position to assist the husband in case that he or the children are in future need. Of course, I am not saying for a moment that Dr. M will have a duty to maintain the husband or the children, but the fact that the husband having such a caring parent will at least ease some of his concerns of future uncertainties. Financial Needs, Obligations and Responsibilities The Wife’s Position 121.In her 6th Affidavit dated 17 March 2008, the wife listed out her monthly expenses as follows (at p. 423 of Pleadings Bundle II):
122.During cross examination, counsel for the husband did not put up serious challenges to the figures as put forward by the wife. Instead, the main focus of the husband centred on whether the wife was still living with and being maintained by D. It was one of the main argument of the husband that since the wife was living with D, her proposed expenses on rent does not really exist. 123.In the final submission of the wife’s counsel, the position of the wife is that the above figures are reasonable estimates of the wife’s needs. However, for the purposes of a clean break, she is prepared to accept a monthly sum of $26,000 which is the interim maintenance that the husband is currently paying. 124.In considering whether the wife’s claim for her future needs is reasonable, one has to strike a fair balance between the parties. In the husband’s latest Form E (which will be discussed in more detail below), the husband said his current personal expenses amount to $93,379 per month. If one takes out the items for tax and interim maintenance payable to the wife, the husband is still spending $32,586 on himself each month. Furthermore, the husband is also spending about $80,000 per month as general expenses on his accommodation. Bearing all these circumstances in mind, I think there can be no complaint on the wife’s monthly needs of $26,000. 125.Therefore, judging from the background of this family and the facts of this case, I am satisfied that the monthly sum of $26,000 is a fair assessment of the wife’s future needs. The Husband’s Position 126.In his updated Form E, the husband said he has the following outgoings (p.546 –547 of Pleadings Bundle III):
The total of all the above monthly expenses is $242,026. 127.There are some queries on whether it is necessary for the husband to keep such a big flat (i.e. the Babington Path Property) for his accommodation in Hong Kong. It is true that he is an airline pilot based in Hong Kong. But the fact is that both A and J will pursue their full time studies in Australia until they complete their tertiary education. In other words, for most part of the year, only the husband will reside at the property which measures about 2,800 sq ft. Therefore, it is the view of the wife that the Babington Path Property should be sold and the proceeds be divided up between the parties. 128.It is my view that where a person should spend his income or in what forms he should keep his fortune is a matter of personal choice. If the husband decides to spend a high percentage of his monthly income in keeping his big apartment, that is totally acceptable provided the wife’s reasonable needs can be well catered for. Again, if the husband wants to keep all his capital in the Babington Path Property, that is also acceptable provided that the wife’s fair share of the family assets will not be diminished. 129.During the course of the whole trial, I can see that the husband has been quite adamant in keeping the Babington Path Property (which was purchased in his sole name) by buying out the wife’s fair share in it. Although on the face of it, the husband is not in such a position in view of his present financial situation, I do not rule out the possibility that he could raise further finances through the bank, or more likely with the assistance of Dr. M. Therefore, I am inclined to allow the husband to buy out the wife’s fair share in the property by paying a lump sum to the wife. The Future Needs of the Children 130.Both A and J are full time students in Australia and they will remain so in the 4 to 5 years to come. At one stage, the husband tried to claim that he needs to set aside $2,500,000 to cater for their future needs. 131.During the course of the trial, I think it has been quite clear that some of the figures provided by the husband may not be too accurate. In any event, I am satisfied that the bulk of the children’s educational expenses will be covered by the education allowance provided by the husband’s employer. In this regard, I note from the husband’s latest tax return (Exhibit R1), the husband has received a total sum of $474,714 from his employer as education benefits, that is an average of about $240,000 for each child. Since it is common ground that it is quite unlikely for the children to pursue their studies in courses like medicine, I think an annual budget of that amount, whether for secondary or tertiary education, will at least cover most of the children’s education or living costs. Having said that, I am also aware that this family has led a rather comfortable life in the past and so I think it is also reasonable for the husband to set aside an additional monthly sum of $20,000 (i.e. $10,000 each) for the children’s future needs, which is well within his financial ability. Standard of Living Previously Enjoyed 132.As one can see from the history of this family’s finances, the family has enjoyed a rather comfortable life style, partly due to the good income of the husband as an airline pilot and partly due the generosity of the husband’s parents. The family was housed in a self-owned apartment measuring 2,800 sq. ft. with 2 car parks. They had 3 cars and 2 prestigious club memberships. The children received private education and they travelled frequently for holidays. Age of the Parties and Duration of the Marriage 133.Both parties are aged 44. 134.The parties started pre-marital cohabitation in 1988 and got married in 1990. They separated in 2006. I take the view that it was a 18 years’ marriage as the pre-marital cohabitation should also be counted (GW v RW [2003] 2 FLR 108). Contribution to the Family 135.The husband has always taken the role as the breadwinner and the wife being the homemaker. There is no dispute that the husband has contributed more financially but if one considers the overall contribution to the welfare of the family, I would take the view that they have made more or less equal contribution. Recent Case Law 136.The leading Hong Kong authority in ancillary relief application is the case of DD v LKW [2008] HKEC 379. After a careful and comprehensive consideration of some similar UK cases, Cheung JA said this in paragraph 64 of the judgement:
137.Apart from giving a detailed discussion on the interaction between the 3 principles of needs, compensation and sharing, His Lordship has also given the following guidance (at paragraph 69 of the Judgment) to Family Court Judges in the determination of future ancillary relief cases:
Ancillary Relief in this Case 138.Both parties want a clean break and it seems that there is no serious objection to adopt a starting point of equal division. 139.In addition to having half of the net total family assets, the wife would also ask for periodical payments at $26,000 per month which should be converted into a lump sum so as to achieve the purpose of having a clean break. 140.It is quite clear that the husband is having a highly paid job while the wife’s future earning capacity is very limited. Therefore, by applying the principles of compensation and sharing, it is only fair that the wife should also be allowed additional future maintenance. As both parties prefer a clean break, an additional lump sum in lieu of continuous periodical payment is warranted. However, there is no evidence of a Duxbury calculation so as to assist the court in this conversion exercise. Doing the best as I could under the circumstances, I think it is fair for the husband to provide an additional lump sum of $936,000. This would be enough to cover the wife’s monthly needs of $26,000 for at least the next 3 years and beyond ($26,000 x 12 x 3 = $936,000). By arriving at this figure, I have already taken into account all the circumstances of this case, in particular, the higher earning capacity of the husband, what the husband said about the insecurity of his employment under the present economic climate, and most importantly, his actual and potential liability towards the future maintenance of the 2 children. Lump Sum Payment by the Husband 141.I have already ruled in paragraph 102 above that the net total family assets amount to $10,036,598. Half of that amount is $5,018,299. The wife now has $59,825 under her name; therefore, she would be entitled to have a payment of $4,958,474. Since I have also ruled that the husband should pay a further sum of $936,000 as her future maintenance, the total amount she would receive from the husband is $5,894,474. With this payment, the wife will get about 59.33% of the net total family assets (($59,825 + $5,894,474)/$10,036,598 x100% = 59.33%) while the husband will get 40.67%. 142.I understand that the husband would need time to raise the cash by refinancing the mortgage on the Babington Path Property or through other means; I think it is fair to allow the husband 2 months to raise the necessary funds. I have thought of ordering interest during these 2 months but I have decided against it mainly because it is my view that even if I should allow the sale of the property, at least 2 months would be needed to effect such a sale. However, in order to provide for the maintenance of the wife in the mean time, I would order the husband to continue with the present monthly payment of $26,000 until the full payment of the lump sum. Order 143.Subject to the undertakings as outlined in paragraph 11 (1) and (2) above, I now make the following orders in respect of the wife’s application for ancillary relief:
Costs 144.On the issue of costs, I note that the award in favour of the wife is higher than the open offer made by the husband. Prima Facie, the wife is the winner of this litigation and should therefore be entitled to the costs of this application, including all costs previously reserved. As the husband failed in his summons for variation of the interim maintenance, the wife shall also have the costs of that summons. There shall be a certificate for counsel. The quantum of the costs shall be taxed, on a party and party basis, if not agreed. As to the wife’s own costs, they shall be taxed in accordance with Legal Aid Regulations. 145.As the wife also failed in her summons for further directions on valuation, there shall be no order as to costs in respect of that summons. 146.This costs order will be in the form of an order nisi which will become absolute after the expiry of 14 days from the handing down of this Judgment. S.18 Declaration 147.I am satisfied with the arrangement for the welfare of the children and a declaration under s.18 of the MPPO to that effect is hereby granted.
Representation: Mr. Michael Poll, instructed by Messrs. Boase, Cohen & Collins, for the Petitioner (except on 5 January 2009 when the Petitioner was represented by Mrs. Casewell of Messrs, Boase, Cohen & Collins) Mr. Robin Egerton, instructed by Messrs. Hampton, Winter & Glenn, for the Respondent (except on 18 November 2008 when the Respondent was represented by Ms. Hewitt of Messrs. Hampton, Winter & Glenn and on the last hearing on 5 January 2009 when the Respondent acted in person) |
Further hearings and rulings under FCMC 5793/2006