Cr v. Mrq
Read the full judgment text of FCMC 2706/2008 on BabelCite. This Family Court judgment was delivered on 3 November 2009 before Her Honour Judge Sharon D. Melloy.
Matrimonial Causes – Ancillary Relief – Short Marriage – High Net Worth – Marital Acquest – Matrimonial Home – Need – Compensation – Sharing – Lump Sum Award – Clean Break – District Court. The parties were married for approximately 2 ½ years with no children. The Wife is a Filipino celebrity and Beauty Queen, while the Husband is a wealthy Italian businessman based in Hong Kong. They enjoyed a very high standard of living during the marriage, including multiple homes and luxury travel. They separated in June 2006, with the Wife seeking a clean break and share of matrimonial assets. The court considered the computation of available assets, finding the husband worth in excess of HK$50 million but precise extent unknown due to disclosure issues. The concept of marital acquest was engaged but not accurately determinable. The properties Bellevue Villa and Rainbow Villa were treated as matrimonial homes despite investment nature, with 1/3 of profits attributed to marital acquest. Pre-marital assets were not quarantined entirely, but departure from equality was accepted due to the short marriage. The court awarded the Wife a lump sum of HK$5 million on a clean break basis, considering need, compensation for loss of opportunity, and sharing principles. The Husband was ordered to pay 2/3 of the Wife's costs on a party and party basis.
Legal issues: Computation of available assets · Concept of marital acquest · View of matrimonial home/s · Matrimonial vs non-matrimonial assets · Share of assets (Need, Compensation, Sharing)
Outcome: Husband to pay Wife lump sum of HK$5 million on clean break basis.
Cites 1 case
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FCMC 2706 / 2008 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER FCMC 2706 OF 2008 ----------------------
---------------------- Coram: Her Honour Judge Sharon D. Melloy in Chambers (Not open to public) Dates of Hearing: 22 – 23 June, 31 August and 17 – 18 September 2009 Written closing arguments submitted: 25 September and 30 September 2009 Date of Judgment: 3 November 2009 ---------------------- J U D G M E N T ---------------------- Introduction 1.This is an application by a Respondent Wife for ancillary relief where the parties were married for approximately 2 ½ years. There are no children of the family. 2.The Wife is from the Philippines where she enjoys some status as a celebrity. She is a Beauty Queen having won the Miss Philippines pageant in 19XX and subsequently coming runner up in the Miss Universe competition in the same year. On the back of this she has carved out a career which includes modelling, hosting television programmes and endorsing products such as shampoo and other beauty items. She has had one small movie part. The husband is a successful Italian businessman based in Hong Kong. He is a self made man and is by all accounts wealthy. He has a number of business interests including trading in watches and promotional items such as bags, hats etc, real estate investment and he also has an interest in several restaurants. The couple met in Manila and conducted a long distance relationship for approximately one year before marrying in December 2003. During the marriage they enjoyed a very high standard of living. They separated in June 2006 with each blaming the other for the breakdown of the relationship. 3.The wife seeks a clean break and a share of the matrimonial assets. The husband’s approach, initially at least, has been to offer the wife nothing, arguing that she is not entitled either legally or morally to a share of the asset base. The issues Financial resources
The law 4.Both parties referred me to Hong Kong’s leading case on ancillary relief namely DD v LKW (CACV no 91 of 2007). In that case the Hon Mr. Justice Cheung JA set out in clear terms the applicable principles to be generally applied in ancillary relief cases. These can be found at para’s 69 and 70 of the judgment. For ease of reference I will repeat some of the sections relevant to the circumstances of this particular case as follows:
5.It is accepted that in the circumstances of this case, given the shortness of the marriage, that there should not be an equal sharing of assets. The question then becomes how much is the wife entitled to, (if, on the husband’s case she is infact entitled to anything at all), and on what basis should the award be made? Short marriages 6.In support of the wife’s case Ms Rattigan referred me to the leading House of Lords decision in Miller v Miller, McFarlane v McFarlane [2006] UKHL, 24. I agree that the facts in Miller are very similar to the facts in this case. In both cases the marriage was short and the couple were in their mid to late 30’s, with the husbands being a little older than the wives. In each there were no children. In addition the wealth of the marriage was created solely, by the husbands’ efforts. In Miller, Baroness Hale said
On the award to the wife of approximately 1/6 of the assets she added:
7.I agree that the same approach may be taken in this case. 8.Therefore the wife says that similarly she is entitled to a share of the value of the matrimonial home/s and to a share of the marital acquest generally. 9.In response Mr. Erving, for the husband has referred me to the judgment at first instance of McCartney v McCartney where Barnett J, in taking what might be described as more of a needs based approach in the circumstances of that particular case, said as follows:
Open offers 10.The wife made an open offer as follows:
11.The husband replied in his open offer as follows:
The Wife’s case 12.As I have said the wife acknowledges that the marriage is short but makes a claim which “recognizes that marriage is a partnership of equals whatever its duration and whatever the respective roles of husband and wife”. She seeks a share of the value of the matrimonial home/s enjoyed by the parties during the marriage. She has also put her case on the basis of need by reference to the high standard of living enjoyed by the parties during the marriage. In addition she says that she should be compensated for the loss of opportunity that she might have enjoyed had she not married and continued with her career in the Philippines. Although reference is made to the marital acquest the wife acknowledges that her approach has been more broad brushed than specific. She does however claim a share of any wealth generated by the husband during the marriage, although the computation of that is somewhat difficult to ascertain. She claims a 50% share in the increase in value of the matrimonial home/s. The husband’s case 13.The husband argues that the wife is entitled to very little, if anything at all. He bases this on the shortness of the marriage and the fact that he was responsible for bringing all of the wealth into the marriage. (The wife had US$50,000 which she brought with her from the Philippines and which was transferred back to the Philippines once the relationship ended). He claims that his companies and other assets were all pre marital assets and that on that basis the wife is not entitled to a share. In addition he maintains that the wife has not made out a case on need. In so far as the matrimonial homes are concerned he argues that these were first and foremost investment properties and that consequently they cannot be accurately described as “matrimonial homes”. He says that they lie outside the scope of the legal definition of that term. He denies that the wife made any contribution to his business or that she should be compensated for any loss. He maintains that she has been unable to prove a loss in any event. Although he offered the wife HK$2 million in his open offer, in his closing written submission Mr Erving said, “the husband should not be required to pay the wife anything”. The Evidence 14.I must now turn to consider the issues, the law and the parties evidence as set out in the parties affirmations, their Form E’s and as given orally by them during the hearing. I have also considered the evidence of Mr T, a former Agent of the Wife, who agreed to give evidence on her behalf. For the avoidance of doubt, in so far as the matters set out in this judgment differ from the evidence of the husband or wife, that is because I have preferred the evidence of the other party or because I do not find the evidence given credible, or because I consider that the documents produced confirmed my findings of fact. The issues Financial Resources What is the computation of available assets? 15.It has been very difficult to accurately ascertain the husband’s current worth, or indeed his worth at both the time of the marriage and at the time of the separation. The husband puts a figure of HK$49.4 million on his current assets but the wife claims that it is likely to be much more than that, possibly nearer HK$81 million. The wife produced a schedule of assets at the final hearing in June as follows: The parties’ assets: Asset Schedule
16.Some of the difficulty is that the husband has taken a rather de minimalist approach to disclosure. In his Form E he puts his current value of his share holding in A Ltd (100% beneficial interest) at HK$6 million and in P Holdings Ltd (50% beneficial interest) at HK$7 million. This is later corrected to HK$9 million. He says that the valuation of the companies should be based on the latest audited accounts. There is no mention of any other companies. He says that he has HK$8 million in savings and that he is owed HK$18.5 million. He says that he has an income of HK$400,000 per month and outgoings of HK$150,000. These are not broken down in anyway. 17.Mr Erving insisted at the beginning of the trial that the accounts produced for P were infact consolidated accounts. During cross-examination the husband confirmed that this was not the case. In an answer to a question raised in a Request for Further and Better particulars he said that there were a myriad of interconnecting companies that had not been originally disclosed. He was asked to produce copies of the last two years audited or unaudited financial statements. None were provided apart from the accounts originally described as the consolidated accounts. Therefore even if one were to take the husband’s approach to valuing the companies, it is almost impossible to verify because of the lack of complete disclosure. 18.What we do now know, following the husband’s cross-examination is that these companies hold a number of restaurants, and other business interests. A is a vehicle for holding properties in Hong Kong. Likewise a second company called E Ltd. A Ltd buys properties, renovates and refurbishes them to a very high standard and then sells them fully furnished at a significant profit. E Ltd presently holds 4 ½ properties – 2 in Soho, 2 in Clear Water Bay and one in Kowloon Bay. Little is known about these properties. The husband also appears to have an interest in a number of restaurants through this corporate structure. There are also companies that trade promotional items and others that trade watches and costume jewellery. Another trades garments. None of this was clear from his initial disclosure. 19.The wife claims that the husband is a man of great wealth and says that this is amply demonstrated by his ability to invest Euro 3 million through one of the companies in an investment fund, which, by his own admission was a speculative investment. Counsel points to the fact that under cross- examination the husband was unable to identify the reason for large withdrawals from his personal bank account, including US$260,000 in January 2009. His credit card expenditure is also indicative of significant wealth. He said during his cross-examination that he presently holds HK$7 million in his personal account (as opposed to HK$1.5 million referred to in the schedule above). 20.I accept that the husband is a man of wealth and that his companies are doing well. For the purposes of the trial I accept that the husband is worth in excess of HK$50 million and that the precise extent of his wealth is unknown. Although Mr Erving denied on the part of the husband that he was running a millionaires defence, it seems to me that that was precisely the husband’s approach. 21.In contrast the wife owns a small property in the Philippines in which she lives, which is worth approximately HK$550,000. She has limited savings and a company called H Inc. She puts her total asset base at approximately HK$2.7 million. To what extent, if at all, is the concept of the marital acquest engaged in this case? 22.Case law indicates that this is one approach that may be taken when considering what award to make in short marriages. However in order to do this accurately it is necessary to know the asset base of the husband as at the date of the marriage and at the date of separation/divorce. It is not possible to accurately determine the marital acquest in this case, based on the disclosure provided. I have also noted, as stated above in the Wife’s open offer, that for the purposes of computation the Wife does not wish to include any specific increase in the value of the Petitioner’s shareholdings during the marriage. 23.In general terms Ms Rattigan said in her closing as follows:
24.The Wife asks that this be taken into account in general terms. She does not wish it to be simply ignored. I accept that the Husband’s companies appear to have done well during the course of the marriage and that this is something that I should quite rightly take into account. How should the concept of the “matrimonial home” be viewed? 25.The wife also seeks a 50 % share of the increase in value of the matrimonial home/s, in which she says the parties lived during the marriage. 26.The husband has argued that the properties cannot be viewed as “matrimonial homes” in the true sense of that term, because although the parties lived in various properties from time to time, they were essentially investment properties and the intention had always been to sell them once the renovation/refurbishment had been completed. 27.Although that may be the case, it does not seem to me that that should preclude a property from being regarded as a matrimonial home. A matrimonial home is often an investment as well as a “home”. Indeed it can often be the central most important investment that any couple makes. The fact that in this instance the husband had a business, in which he invested in and then sold on properties, does not in my view preclude any such property from being regarded as a matrimonial home if, as in this case, they actually lived in that property as man and wife. 28.The parties married in December 2003. The wife came to Hong Kong in February 2004. Initially the parties lived in a property known as Bellevue Villa. This had been purchased in 2002, prior to the parties meeting. It was sold on the XX March 2005. Therefore the parties lived in Bellevue as man and wife, for approximately 1 year. It is suggested that the parties travelled a lot during that year. Although that may be the case I accept that this was their base in Hong Kong. It was their “matrimonial home” for that period of time. They then lived in rented accommodation whilst another property namely Rainbow Villa was renovated. This property was purchased in June 2005 and the parties lived there until they separated in June 2006. 29.Bellevue was purchased for HK$13.5 million and sold for HK$30.5 million. Its net profit is put at HK$9.38 million. This money was held by A and used in part to purchase Rainbow Villa. Rainbow Villa was purchased for HK$23 million and sold after the parties separated in August 2007 for HK$40 million with a net profit of HK$4.78 million. (It is noted that the husband received HK$13.675 million into his HSBC account on the XX August 2007 from the sale of Rainbow Villa’s by way of a shareholder loan repayment and to that extent he has realized some of his initial investment). Notwithstanding that I accept that the net profit generated from both properties stands at a total of HK$14,166,316. 30.In the husband’s closing he argues as follows:
31.As I have already indicated I do not accept the argument advanced that these properties are not matrimonial homes. Although the profit generated is held by A, this is a company, which is the husband’s alter ego, and thus it is a financial resource, which quite rightly forms part of the matrimonial pot. However I accept, given the timing of the transactions, that it is impossible to attribute the whole of the profit to the marital acquest. Given that Bellevue was owned by the husband (through A) for three years and the parties lived in the property for only one year it seems to me to be reasonable to attribute 1/3 of the profit to the marital acquest. Similarly the husband, through A, purchased Rainbow Villa’s whilst the parties were married. A owned it for approximately 2 years and the parties lived in it whilst they were together for 8 months. On that basis i.e. that the parties were together for 8 months of a 24-month period it again seems reasonable to attribute 1/3 of the profit to the marital acquest. I accept that this is a rough and ready approach, but given the circumstances here it seems to me to be a reasonable one. Thus approximately HK$4.67 million can be said to form part of the marital acquest arising out of the sale and purchase of the parties’ matrimonial homes in Hong Kong. (1/3 x HK$14,166,316 = HK$4,674,884). The wife is entitled to 50% of this or approximately HK$2,337,442 - say HK$2,350,000. 32.There was some argument about a property in Italy which the wife understood was owned by the husband and which she also considered to be a matrimonial home. I accept that this is not a property, which is owned by the husband, and therefore it is not an asset capable of forming part of the matrimonial pot. On the husband‘s case this was a property, which he rented as a holiday home. It was used exclusively by him and the wife. He renovated it. It is therefore indicative of the high standard of living enjoyed by the parties during the marriage. To what extent are the assets in this case to be regarded as matrimonial or non-matrimonial assets? 33.The husband argues that all of the assets held by him are pre marital assets and therefore that they should be regarded as non-matrimonial assets and accordingly be excluded from the matrimonial pot for redistribution purposes. 34.Guidance on this point has been helpfully provided by Nicholls J, also in Miller v Miller, McFarlane v McFarlane [2006] UKHL, 24, quoting from White.
35.In this case the Wife says that she accepts that given the fact that the family assets were largely brought into the marriage by the husband and more or less solely created by his endeavours, that she is not entitled to a 50% share. She accepts that this is a good reason to depart from the yardstick of equality. She does not accept, given the other factors, that she is entitled to nothing at all. I agree. 36.Helpful guidance on this point has also been provided by Rayden, at paragraph 16.74, which states:
5) Given my findings in 1) – 4) above what share of the assets is the wife entitled to bearing in mind the principles of need (generously interpreted), compensation, sharing and the s.7 factors?
37.The wife has advanced an argument for a share of the husband’s assets partly on the basis of need. The wife says that she needs a bigger apartment, a better quality car and some capital so that she is able to enjoy a higher standard of living. 38.In her affidavit she said that she would like to move to a bigger apartment namely OS. This is a two bed roomed apartment in a nicer part of town than her current apartment. She estimates the cost of a new apartment at between HK$2.3 – HK$2.9 million. She presently lives in a one bed roomed 500 square foot apartment. She says that she would like to be able to continue to afford to run her Nissan SUV. Whilst married she drove a Mini Cooper, BMW 5 series and an Audi 6. The cost of upgrading the car has not been quantified. She would also like to be “able to afford the odd international holiday each year that I once enjoyed”. I accept that this is reasonable. 39.The Wife also states that it will cost her approximately HK$43,000 per month to live more comfortably. This is based on her living at OS. The difficulty with the Wife’s case on income was that it really did not stand up to detailed scrutiny. 40.She said in her Form E that she had a total income of HK$33,690 per month and outgoings of HK$25,613. In her affidavit of the 12 March 2009 she said as follows:
41.She adds that her present outgoings are just under HK$14,000 per month. 42.The case was adjourned twice so that the Wife might have an opportunity to review her own disclosure and in particular to explain the deposits and withdrawals from her own bank accounts. Her tax returns put her earnings as follows:
43.But, a closer analysis of her bank accounts showed that in 2008 she received just under 5 million pesos from the GMA network (television network) and from guesting or hosting work. In addition she received just under 800,000 pesos from real estate investments. She said that she had not declared a further 1 million pesos for an L advertisement. It was put to her that her income for last year was nearer 6 million pesos (or just under HK$1 million). I accept on the evidence that this must be the case. 44.The wife said that she needed c HK$43,000 per month to live in a lifestyle to which she would like to become accustomed. On her own evidence she has infact been earning well in excess of that last year. All in all I did not find the wife at all credible in so far as her past earnings are concerned. Bearing in mind that she says that she is presently only spending HK$14,000 per month it is not clear where the excess has gone, save for the fact that she has made some bad investments and that she has some limited savings. 45.The Wife also argued that although she has tried to re establish her career and has been reasonably successful in that respect, unfortunately her career has now taken a downward turn. Mr T, her former agent said in his affidavit as follows:
46.Counsel put it as follows in her closing:
47.I accept that she has lost some of her regular work. I also accept that she may find it difficult to sustain a career in the public eye going forward. She says that she has been looking at other opportunities and at the possibility of retraining. I accept that she may need some financial support in order to do so. 48.Mr Erving says that she should be able to afford to pay for a new flat herself. He says, “the wife’s needs are wholly satisfied from her own resources despite her failure to disclose the full extent of those resources”.
49.Whilst I accept that the wife has been less than frank in relation to her income for the previous year, I also accept that she in unlikely to sustain that level of income going forward. I do not accept that the evidence shows that she has sufficient money at hand to purchase the apartment of her choice. 50.Consequently I agree that in the circumstances it is reasonable for her to live more comfortably than she appears to be doing at present and that any award that the court might make should take that into account. (c) the standard of living enjoyed by the family before the breakdown of the marriage; 51.This forms a major part of the wife’s case. I accept that the Wife’s reasonable needs (generously interpreted) have to be seen in the context of the standard of living enjoyed by the parties during the marriage, albeit for a short time. 52.There is no doubt that the parties enjoyed a very high standard of living whilst married. The wife received a monthly allowance of HK$30,000 and she also had use of a credit card on which she spent approximately HK$50,000 per month. Although she spent partially on the household, this was generally speaking her allowance to do with as she wished. From the Husband’s credit cards it seems that the husband also spent lavishly on her. They lived in high end properties and enjoyed a very comfortable lifestyle complete with overseas trips, business and first class flights, luxury hotels etc etc. 53.The wife is not asking for this same standard of living to be replicated. She simply asks that it be taken into account. She wishes that her own standard of living be increased to enable her to live more comfortably. I accept that this is reasonable. (d) the age of each party to the marriage; 54.The husband is presently aged 40 and the wife 34 years old. (e) any physical or mental disability of either of the parties to the marriage; 55.Thankfully this is not in issue. Compensation
56.This is very much in issue. The wife argues that she should be compensated for loss of opportunity i.e. that had she not married the husband and continued with her career in the Philippines she may have become a successful movie star. Certainly she argues that her career would have continued unabated. 57.The difficulty with this is that it is highly speculative. Yes, the wife may have become a successful movie star – but equally she may not have been. 58.The husband argues that the concept of compensation is not engaged because in order to be compensated it is necessary to show that you have lost something. In this case, he says that since she has re-established herself in her career that there is nothing to be compensated for. 59.Although that is true to an extent, it is also true that the wife gave up her career in the Philippines and followed her husband to Hong Kong where she was virtually unknown. She was unable to work because of the restrictions on dependent visa holders at that time. The husband admitted that she had just broken into films and that she gave it all up to be with him. It seems clear from the evidence of Mr T that it is now difficult for her to break back in at the same level as before – although clearly she has had some success in picking up where she left off. 60.In the words of her Counsel she says in her closing that
60.I accept this. Therefore to a limited extent the concept of compensation is engaged. Sharing (f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family; 61.This was hotly disputed. The husband maintained that the wife has not made any contribution to him in his business and that her contribution overall as a wife was very limited. The wife maintains that she assisted, that she was a valuable asset for him in his business and generally, that she ran his house, helped to refurbish them etc. I accept that the wife did make a contribution, but that this is necessarily somewhat curtailed given the length of the marriage. (e) the duration of the marriage; 62.This is clearly a short marriage in the classic sense of being short in duration and childless. Conduct of the parties, which it would be inequitable to disregard 63.Both parties sought to introduce an element of misconduct when describing the reasons for the breakdown of the marriage. Thankfully it is not of the type that needs concern the court. I intend to say no more about it. What share of the assets should the wife receive? 64.It is accepted by the wife that given the shortness of the marriage and the fact that the husband was almost wholly responsible for the family asset base, that this is a suitable case to depart from the yardstick of equality. The wife seeks a share of the marital acquest in general terms, based on the increase in the value of the assets during the course of the marriage. She seeks a share in the increase in value of the matrimonial home/s. She seeks a share in the increase in value of the husband’s business interests. She also asks that she be compensated for her loss of opportunity. She asks that her needs (generously interpreted) be taken into account. Having considered all of these factors and my findings as set out above, I intend to make an order that the husband pay the wife a lump sum of HK$5 million on a clean break basis, such sum to be paid within the next 28 days. This takes into account the HK$2.35 million that the wife is entitled to receive from the increase in value of the matrimonial homes whilst the parties were married. It also provides the wife with a share of the marital acquest in so far as the husband’s businesses are concerned. A precise computation of the marital acquest in this respect is not possible given the nature of the disclosure provided. If the husband complains about this he really only has himself to blame. I have also taken into account the fact that her needs (generously interpreted) should be catered for. I accept that she should be in a position to purchase a two bed roomed apartment (c HK$2.3 – 2.9 million) and a new car if she should so wish. I am also satisfied that HK$5 million will provide her with some capital in addition as a cushion. It does, however, also acknowledge that she has an earning capacity and one that is ongoing, albeit possibly at a more reduced rate than before. Costs 65.Taking into account the Husband’s approach to disclosure, which is not to be encouraged and the fact that the Wife’s own disclosure on income was found to be wanting, together with the fact that the Wife really had no option but to litigate this matter, I will make an order nisi, to be made absolute in 14 days, that the Husband pay 2/3 of the Wife’s costs on a party and party basis to be taxed if not agreed. There shall be certificate for counsel.
Mr C Erving of Messrs Erving Brettell for the Petitioner Ms M Rattigan instructed by Messrs Hampton Winter & Glynn for the Respondent |
Cases cited in this judgment
Further hearings and rulings under FCMC 2706/2008