HK v. Bd

CACV 252/2009 &
CACV 71/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 252 OF 2009 AND NO. 71OF 2010

(ON APPEAL FROM FCMC NO. 8732 OF 2007)

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BETWEEN

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Before: Hon Cheung JA, Hartmann JA and Kwan JA in Court

Date of Hearing: 26 May 2010

Date of Handing Down Reasons for Judgment: 15 October 2010

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REASONS FOR JUDGMENT

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Hon Hartmann JA:

Introduction

1.The parties to this appeal were married to each other in August 1999.  The husband, the appellant, was then aged 48 while the wife, the respondent, was aged 43.  Prior to their marriage, they had been living together for a period approaching three years.  The marriage fell upon difficulties and the parties separated in May 2006.  At the time of their separation, they had been living together, either in contemplation of marriage or as a married couple, for a period of close to ten years.

2.In July 2007, the wife instituted ancillary relief proceedings in the Family Court.  Attempts were made to settle but without success and the matter came to trial before His Honour Judge Bruno Chan in May 2009.  As the judge observed, essentially two matters separated the parties.

3.First, it was the husband’s case that the value of the matrimonial estate should, in accordance with accepted authority be valued at the time of trial.  He put the value of the estate at some $11.772 million.  It was the wife’s case however that, having regard to the history of the matter, the value of the estate should be assessed at the time of separation, three years earlier.  She assessed the value of the estate some 55% higher, at $18.167 million.

4.Second, it was the husband’s case that, as they had both married in their middle years, there being no child of their marriage and as the wife had not put her case firmly on the basis of need, this was a proper case to depart from equality.  The husband sought 60% of the matrimonial estate, the wife to have the remaining 40%.

5.In his judgment dated 15 July 2009, Judge Chan rejected the wife’s valuation of the matrimonial estate, accepting that the estate should be valued as at the date of trial and agreeing with the husband that the true value of the estate was some $11.772 million.

6.Inter alia, in coming to his determination as to an equitable distribution of the matrimonial estate, the judge took the following factors into account.  First, that it had been agreed that there should be a clean break between the parties, neither of them having any claim against the other for periodic payments; second, that, given the age of both the husband and wife and their employment situations, both would need “their fair share of the assets” to maintain themselves in the future and, third, that, when the husband and wife had formed their union, they had pooled their assets and worked together in all respects in equal partnership to build the matrimonial estate.

7.While noting the husband’s submission that the court should in this instance depart from equal division, the judge was of the firm view that, in all the circumstances of the case, fairness demanded that there be an equal division.

8.As to the costs of the litigation, having considered submissions from both parties, the judge ordered that each party bear their own costs.

9.Both the husband and the wife appealed the substantive determination, that is, the judgment as to the distribution of the matrimonial estate.  They also appealed the ruling as to costs.  The wife abandoned her appeal in respect of the substantive determination but maintained her appeal in respect of the ruling as to costs.

10.In respect of the substantive determination, the husband’s primary ground of appeal was that, in all the circumstances, the judge erred in ordering an equal division of the matrimonial estate.  It was submitted on his behalf, as it had been submitted at first instance, that he should have been awarded 60% of the estate, the wife being awarded the remaining 40%.

11.The husband’s primary ground, while resting on all the relevant circumstances of the case, was supported in particular by the submission that the judge had erred in fact and/or in the exercise of his discretion in respect of some five matters to which we shall refer later in this judgment.

12.Having heard submissions, we dismissed the husband’s appeal in respect of the judge’s substantive determination, saying that we would give our reasons later.  We give those reasons now.

13.In respect of the cross-appeal concerning costs, we reserved our judgment.  That judgment is given now.

The function of the Court of Appeal

14.When determining matters of ancillary relief, in all but the simplest cases, a judge in the Family Court will be required to weigh up a large number of different considerations, giving to them what weight is appropriate in order to come to a decision as to the equitable distribution of the family assets.  In making his determination, the judge will of course do so in fealty to the guidelines set down in s. 7 of the Matrimonial Proceedings and Property Ordinance, Cap. 192.  But these guidelines, by their diversity and lack of hierarchy, are inherently flexible and purposefully so, designed to ensure a fair outcome in cases of widely different circumstance.  But it has been said that fairness has a broad horizon.  In seeking an equitable distribution of a matrimonial estate, an exercise based on judicial discretion, different judges will invariably come to different conclusions, each being reasonable.  That being the case, it is only when a conclusion is plainly wrong, falling outside of the parameters of reasonable disagreement, that an appellate court will be entitled to interfere.

Background

15.When the parties began living together in contemplation of marriage, the husband had settled employment as a Hong Kong civil servant.  Raised in Canada and trained as an engineer, he had joined the Hong Kong Government in 1981 and was employed as a senior environmental protection officer.  He earned a monthly salary of some $88,000 and in addition received a home finance allowance in excess of $33,000.  This made for a total monthly income of about $121,000.

16.The husband was employed on what are commonly called expatriates terms.  These gave him a number of benefits – medical benefits, assistance with children’s costs of education and the like – which, once he was married, were extended to his family.

17.The wife had originally come to Hong Kong with her first husband and the child of their marriage, E.  When that marriage broke down, the wife moved to Manila with her daughter.  She went into business there.  It appears that she had been living in Manila for about three years when she and the husband made the decision to begin living together in contemplation of marriage.  The decision to live together meant that the wife had to make the move back to Hong Kong with her daughter.  In that respect, therefore, the opportunity cost of the couple coming together was met by the wife.

18.At trial, an issue upon which the husband laid emphasis concerned the relative value of the assets that he and wife brought into their union.

19.In this regard it is to be noted that, shortly before the parties began living together, the husband purchased an apartment in Hong Kong in a development called Woodland Gardens.  He purchased it for $7.8 million, personally contributing just over $700,000 to the purchase price with the balance coming from government and bank loans.

20.Woodland Gardens became the matrimonial home for the husband, the wife and E.  There were plans to purchase a bigger place but a downturn in the market put that plan into abeyance.

21.Counting Woodland Gardens as one of his assets, it was the husband’s contention that the value of what he brought into the matrimonial estate was far greater than that of the wife.  The husband had the long term habit of drawing up spreadsheets in order to calculate his net worth.  Drawing from these spreadsheets, it was his evidence that his net worth at the time when the parties came together was about $11 million.  This was disputed by the wife who said that his true net worth at the time was not so different from the amount that she brought in to their union.

22.To illustrate the nature of the conflict, in estimating his net worth at the time when he and the wife began living together, the husband put the value of the Woodland Gardens apartment well above the $7.8 million that he had paid for it.  It was the wife’s contention that this was not realistic, his true equity in the apartment at about that time being less than $1 million. As it was, the Woodland Gardens apartment was eventually sold for a sum of $9 million. After taking account of the various costs of purchase and sale, it was the wife’s contention that the husband had in fact made little more than $1 million profit on the property.

23.Upon her return to Hong Kong, the wife attempted certain business enterprises with mixed results before setting up DDK Communications Limited, its principal business being events management.

24.From the time of the breakdown of the marriage, DDK became the wife’s principal source of income.  At the time when the ancillary relief proceedings came to trial, the wife estimated that the company had been earning her an income of about $52,000 per month.  Before us, however, it was said that, in the current business climate, the wife could rarely hope to achieve that figure.

25.In late 2002, the decision was made to leave Hong Kong in order to settle in Canada, the husband’s home country.  At trial, there was a dispute as to who was the driving force behind this decision.  The judge found that the decision was made reluctantly by the husband who liked living in Hong Kong and who had the security of his civil service employment.  He found that the wife, however, was concerned that the husband, as a result of the lifestyle he was accustomed to in Hong Kong, had developed a drinking problem.  She saw Canada as a more settled environment for the family including her daughter, E.  Whatever the respective levels of enthusiasm, the decision to leave Hong Kong and settle in Canada was a joint decision made by the husband and wife, one which both of them then attempted to put into effect to their mutual best advantage.

26.To this end, using a rather complex system of offshore companies, a number of properties were purchased in Canada.  One was intended to be the matrimonial home, the others were intended for investment.  In addition, a property was purchased in Phuket, intended both as a holiday home and an investment.

27.Woodland Gardens was sold.  The net proceeds, together with certain of the husband’s savings, were used to improve his government pension.  In this regard, a sum of approximately $1.36 million was paid to the Hong Kong Government by the husband to secure a pension for himself that at the present time gives him some $31,000 per month.

28.At this juncture it should be recorded that in 2003 the wife was seriously injured when she fell through the glass door of a shop in Hong Kong.  A claim for damages was instituted.  That claim was defended.  At the time when the ancillary relief proceedings were heard before Judge Chan the litigation had not been concluded.  Indeed, it was not concluded when this appeal was argued before us.  It appears that an amount of about $450,000 was paid into court but that amount was rejected by the wife.  Accordingly, whether the wife will be successful in her claim and, if so, what she will receive by way of damages remains uncertain.

29.It was in the summer of 2005, pursuant to the plan to settle in Canada, that the husband returned to that country.  It was agreed, however, that the wife would remain in Hong Kong to enable her to oversee certain projects that had been secured by her company, DDK.

30.An apartment in Causeway Bay was purchased for the wife to live in while she remained in Hong Kong.  The purchase price was $3.2 million.

31.In early 2006, the husband’s mother died.  In terms of her will, the husband was given an option to purchase her home in Kingston, Ontario.  It was agreed that the husband should exercise the option and should obtain a loan from his mother’s estate secured by mortgage for an amount equal to the market value of the property, a sum of C$325,000.

32.Regrettably, it was in 2006 that the marriage broke down.  At trial, the parties agreed that formal separation took place on 31 May of that year.  In the result, what had been built in anticipation of the move to Canada now had to be disassembled.

33.All of the Canadian properties, with the exception only of the house in Kingston, Ontario, were sold.

34.The husband chose the Kingston property, the one that had come to him through his mother’s estate, as the property in which he would like to live and to this end utilised a sum of approximately C$315,000 to make renovations to the property.  The money, it seems, came in large measure from the sale of the other Canadian properties.

35.The wife contended that the renovations were unjustified.  She said that she had not agreed to them and that, in this and certain other respects, the husband had taken joint funds unilaterally.  The value given to the property, she said, did not reflect the full cost of the renovations.  She had therefore been disadvantaged.

36.It was principally for this reason that the wife contended that the value of the matrimonial assets should not be valued as at the date of trial but should instead be valued as at the agreed date of separation: 31 May 2006.

37.The judge rejected the submission that, in effecting the renovations, the husband had wrongfully or recklessly utilised joint assets.  With the breakdown of the marriage and agreement having been reached to sell the other Canadian properties, it was apparent, he said, that the husband would require the property for his home.  As such, it had to be put into a reasonable state of repair just as the wife was entitled to put the Hong Kong apartment into similar order.  He noted that in any event the wife had at one time agreed that the property should undergo certain work to upgrade it and, although at that time specific figures were not discussed, given the state of the property, he found that it had to be anticipated that any reasonable upgrading was likely to be substantial.  In the circumstances, the judge declined to value the assets as at the date of separation and instead – correctly in our view – valued them as at the date of trial.

The grounds of appeal

38.As we have said earlier, it was the husband’s primary ground of appeal that the judge was plainly wrong to order an equal division of the matrimonial estate; a correct division should have been one that gave the husband 60% of the estate and the wife 40%.  This primary submission was advanced by reference to a number of supporting submissions.  These submissions were as follows.

Assets brought into the marriage

39.It was submitted that the judge had failed to give sufficient weight to the disparity in value between the assets that the husband brought in to the union and those brought in by the wife.  This, it was argued, was of particular importance having regard to the fact that the parties married relatively late in life, that there was no child of the marriage and that the marriage lasted for less than ten years.

40.Certain jurisdictions draw a clear distinction between assets which the parties bring into their marriage and those which they create during the course of it.  However, s. 7 of the Matrimonial Proceedings and Property Ordinance does not do so.  No specific differentiation is made.  Instead, the courts are enjoined to have regard to all the circumstances of the case and to a number of specific matters, none of which are said to be of greater worth than the others, one of those matters being: “the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future”.

41.As our law stands at the moment, in applying the provisions contained in s. 7, our courts are guided by three main principles which were first enunciated in Miller v Miller and McFarlane v McFarlane [2006] 2 AC 618.  They are need (generously interpreted), compensation and sharing.

42.Clearly, in the present case, even if it had not been specifically pleaded, the judge placed emphasis on the first principle, that of need (generously interpreted).  Need, of course, is a relative concept.  We are satisfied the judge was entitled to take it into account.  When the marriage broke down, the husband was looking to retirement while the wife, now into her fifties and with no secured income stream, was doing her best to run a business in a highly competitive market.  Both required reasonable housing and some capital by way of security.  The husband and wife had been together for almost 10 years, not a short period of time when it was borne in mind that the parties were in their middle years.  During the time that they were together both the husband and the wife had worked to build up the value of the matrimonial estate.

43.It was implicit in the judge’s reasoning that, if the estate had been divided as the husband wished, the needs – generously calculated – of the wife would have been compromised.

44.The judge also took into account that the Woodland Gardens apartment, which formed a material part of the husband’s assets brought into the marriage, had been used as the matrimonial home and not merely as an investment.  As such, it had a central place in the marriage.  In this regard, the judge adopted the reasoning of Lord Nicholls in Miller v Miller (para. 22):

“The parties’ matrimonial home, even if this was brought into the marriage at the outset by one of the parties, usually has a central place in any marriage. So it should be treated as matrimonial property for this purpose. As already noted, in principle the entitlement of each party to a share of the matrimonial property is the same however long or short the marriage may have been.”

45.In respect of the Woodland Gardens apartment, the judge further took into account that, although integral to the marriage as the matrimonial home, when it was sold the husband had used a good portion of the proceeds to enhance his government pension, that pension being a secured enhancement not subject to the vagaries of business and one that will stand to his sole benefit for the rest of his life.

46.In these circumstances, we are satisfied that fairness did not dictate that the judge must embark on a complex and hotly disputed valuation exercise related to the worth of the husband and the worth of the wife at the time when they began to live together.

47.While the source of assets is of course a relevant factor and may be determinative, the degree to which it will or will not be so will depend on the circumstances of each case.  The longer a marriage endures the less important becomes the distinction between assets brought into the marriage and assets generated during it.

48.In the present case, the judge took into account not only that the husband’s principal asset brought into the marriage was the matrimonial home itself but that over the ten years of the union both the husband and wife had worked together to build their joint estate for their intended years together in retirement.  In that context, he placed emphasis on the relative needs, generously interpreted, of both parties, securing for both as best as possible a home, some capital and an income stream.  In such circumstances, we do not see how the judge can be criticised for coming to the conclusion that, in order to achieve that result, no distinction should be made as to the value of assets brought into the marriage by each party.

The husband’s early retirement

49.The judge recognised that, if the matter had been left to the husband alone, it was highly unlikely that he would have chosen early retirement from his employment and a return to Canada.  The decision clearly had been made in the interests of the family.  

50.It was, however, a decision which placed the husband in a far weaker financial position than would have been the case if he had remained in his employment.  As such, so it was submitted, the second principle of compensation came into play and should have influenced the division of the matrimonial estate.  The judge, however, failed to take it into account.

51.The principle of compensation looks to redressing significant prospective economic disparities between the parties arising from the way they have chosen to conduct their marriage.  The example is often given of a wife giving-up her career in order to care for the family so that, when the marriage ends and she must look to being employed again, her earning capacity is materially handicapped.

52.On behalf of the husband, it was emphasised that he was left at the end of the marriage in Canada, having given-up secure and well-remunerated employment in Hong Kong, in receipt only of a modest retirement income.  By contrast, the wife was left in Hong Kong still running a business which had been set up during the course of the marriage and which at the time of the ancillary relief proceedings earned her an average of $52,000 per month, some $20,000 more than the husband.

53.This was recognised by the judge.  But he also recognised that the husband’s pension provided him with a secure income for the rest of his life.  Clearly, while the husband may have retired from his employment that did not thereby render him unemployable.  While obviously his age was against him, he still retained his qualifications, he could still boast of many years experience.  With a secure base income by way of his pension, he had the luxury of choice; he was able to look for work if he wished, full-time or part-time, in the engineering field or in some entirely new field, in Canada or elsewhere in the world.

54.At the time of the ancillary relief proceedings, the wife may have been earning an average of $52,000 per month but in the competitive field of events management that income was by no means guaranteed.  There was no evidence that the wife’s business was one of long-standing and great worth.  It was relatively new; its success rested on the wife’s business acumen and, as we have said, on the fortunes of the market.

55.In our view, in such circumstances, we do not see that the judge was obliged to factor in some form of compensation to account for the fact that during the course of the marriage the husband had decided to take early retirement. 

The valuation of the property in Kingston, Ontario

56.The judge valued this property at C$547,000.  This was based on a joint valuation of the property given in June 2008 after it had been renovated.  Before us, it was submitted on behalf of the husband that he had overvalued it, the true value being C$522,000, this being the result of a joint valuation made in May 2009.

57.On behalf of the wife, however, it was submitted that the value chosen by the judge – that of C$547,000 – was the value agreed by the wife as the fairest “post-renovation” value.

58.In looking to the true value of the property, the judge was faced with the difficulty that the husband had effected substantial renovations and had used matrimonial assets to do so.  While he accepted that the husband was entitled to make the renovations, it did not mean that he could ignore the fact that a sum in excess of C$300,000 had been used.  He was not obliged to accept the valuation of C$522,000 simply because it was the latest valuation, one that took account of a dip in the Canadian property market.  He was entitled to take the earlier valuation as one that more correctly reflected the longer term value now that the property had been subjected to such significant renovation.

59.In the absence of evidence of some manifest mistake, one accepted by both the husband and wife, we see no grounds for substituting the valuation chosen by the judge.

The wife’s expenses in respect of E

60.In the final submissions made on behalf of the husband, the value of the joint estate was assessed to be $11.772 million.  As we have said earlier, this was the figure accepted by the judge as reflecting the true value of the matrimonial estate at the time of trial.  This figure was calculated by assessing the wife’s assets, the husband’s assets and adding them to the joint assets.  In calculating the assets of the husband and wife, provision was made for their existing liabilities; in short, the net assets of the couple were calculated.

61.In respect of the wife, her liabilities, it appears, were related to expenses for E; school fees, airfares, pocket money and the like.

62.As the judge expressed it, on the basis of the husband’s acceptance that E was a child of the marriage, there remained an issue therefore of “what amount of maintenance, if any, that he should pay for her”.  In this regard, bearing in mind that the husband was now reliant on his pension for his monthly living, the judge accepted that he was not in a position “to make any provision of significance for E” and that the responsibility would have to be shouldered by her biological parents.

63.On behalf of the husband, it was submitted that, having found that he was not in a position to make any provision for E, this finding should have been factored into the division of the matrimonial estate.  Accordingly, the wife’s liabilities which were in respect of E’s support, should have been removed from the calculations assessing her net assets.

64.We see nothing in this point.  If anything, it illustrates the dangers of attempting to determine matters of ancillary relief purely on an accountancy basis.

65.Quite clearly, when the judge made his finding that the husband was not in a position to make any provision of significance for E, he was speaking only of future maintenance payments.  His finding had nothing to do with the manner in which the matrimonial estate itself should be divided.

66.The judge was entitled, in assessing the wife’s net worth, to take into account that she had certain current liabilities in respect of E’s support just as he was entitled to take into account, in assessing the husband’s net worth, that he had certain current liabilities.  In so doing, the judge was not in any way contradicting his separate finding that the husband, being reliant on his pension only for his monthly living, was not in a position to make future monthly maintenance payments for E.

The wife’s personal injury claim

67.As we have said earlier, in 2003 the wife sustained serious injuries when she fell through a glass door into a shop.  She instituted an action claiming damages.  Although there had been a payment into court by the defendant, it had not been accepted by the wife.  When the appeal came before us, the litigation had still not reached finality, there being no judgment on the issue.  In the circumstances, while the wife clearly had a right of action which she was pursuing, there was no guarantee that she would be successful or, even if she obtained judgment on the question of liability, what would be the quantum of damages awarded to her.

68.The husband did not seek a share of any damages that may eventually be awarded.  Nevertheless, it was submitted on his behalf that the appropriate manner in which to deal with the claim was to credit it as an asset “on the wife’s side of the balance sheet”.

69.The judge was satisfied that the wife’s claim was a “circumstance” that must be taken into account.  However he declined to give it any form of provisional value and to credit it to the wife’s side of the balance sheet.  Instead, he regarded it as foreseeable future income.  In this regard, he said:

“In her Form E the wife put her income at an average of $52,000 per month from her event management business. There is, as aforesaid, her personal injury claim with possible compensation for future income, but despite the huge amount claimed in her writ, the husband accepts that realistically the figure should be much lower and I agree it would be fair to put it at between $450,000 and $1 million.”

70.Assuming that the wife eventually obtains a sum between those two figures, a sum of say of $700,000 as damages, as a form of future income it would be equal to the husband’s pension paid to him over 22 months: less than two years.

71.In the circumstances, we do not see that the judge was under any obligation to take the wife’s claim for personal injury into account in any manner other than the way he did.

The primary ground of appeal: that there should have been a 60/40 division

72.On behalf of the husband, it was submitted that, on a proper application of the principles governing ancillary relief to the facts of this case, a simple, indeed simplistic, division of the matrimonial estate in equal shares did not constitute a fair determination.  The judge may have spelt out the principles but he failed properly to apply them.  The husband, it was said, had been left in a distinctly worse situation as a result of the marriage while the wife had left the marriage in a distinctly better situation.

73.Except in the very rarest of cases, ancillary relief proceedings are not designed to restore the status quo ante.  To suggest that the wife came out of the marriage in a distinctly better situation than she would otherwise have been in is to indulge in speculation.  If she had not married the husband, how well might she otherwise have done?  There is no answer to that.

74.What could not be ignored by the judge was that for a period of close to ten years both the husband and wife had worked together to build their matrimonial estate, each looking to the skills and energies of the other and doing so for their mutual benefit as well as for the benefit of E, the child of the family. 

75.There is no doubt that the watershed decisions in the marriage were the decisions of the husband (encouraged by the wife) to take early retirement from the Hong Kong Government, to maximise his pension and to return to settle in Canada.  If the family had moved to Canada as planned, matters may have turned out very differently.  Regrettably, they did not.  The breakdown of the marriage caused the breakdown of these plans.  It is plain that the husband greatly regretted taking early retirement.  But, as we have said earlier, this was a decision made by both the husband and wife for their mutual benefit as they perceived it at the time.  Marriages are full of such decisions.  As we have also said earlier, the fact that the husband had taken early retirement meant that he had, in return for a pension, given-up secure employment.  But it did not mean that he had thereby become unemployable nor did it mean that he was in some way ‘condemned’ to live in Canada.  It was all times open to him to seek employment elsewhere in the world.  Indeed, with ‘the cushion’ of a basic pension, he had at least some choice as to whether he would work or not and, if so, whether he would do so on a part-time basis or full-time basis.  That choice, it seems, was not open to the wife.

76.Taking into account all the matters submitted to us, those particularly which we have considered above, we accept that another judge may have viewed the position of the husband more sympathetically and may perhaps have awarded him slightly more than 50% of the matrimonial estate.  But the issue is not whether another judge may have come to a different resolution; the issue is whether the judge in the present instance came to a resolution that was plainly wrong, one that fell outside of the parameters of reasonable disagreement.  In that regard, looking to all of the circumstances of the case, we are satisfied that the judge, adhering to the provisions of s. 7 of the Matrimonial Proceedings and Property Ordinance, came to a resolution that was reasonably open to him.  As such, this Court is not in a position to alter that determination and impose its own.

The appeals as to costs

77.At the conclusion of his judgment, the judge made an order nisi that there be no order as to costs.  Both parties sought to be heard on that matter and submissions were made.  In a ruling dated 23 February 2010, the judge maintained his view that the appropriate order in all the circumstances was one in which each party bore their own costs.  Both parties appealed that ruling.

78.In family matters, as in all civil proceedings, the basic principles are that costs are in the discretion of the court but that costs should follow the event except when it appears to the court that, in the circumstances of the case, some other order should be made.  In family matters, because of their particular dynamics, the exercise of discretion is broader-based than in other civil proceedings.  However, as was observed by Butler-Sloss LJ in Gojkovic v Gojkovic [1992] Fam 40, there still remains the necessity for some starting-point.  That starting-point, as we have indicated, is that costs prima facie follow the event.

79.On behalf of the wife, the oblique criticism was made that the judge proceeded on the basis of “honours even”, that seemingly being the essential reason why he came to his determination that both parties should bear their own costs.  We do not see that the judge can be criticised in that respect.  If costs were to prima facie follow the event, it was necessary for the judge to identify who had been successful and who had not.

80.In this regard, he recognised that one of the fundamental barriers that stood in the way of a settlement, forcing the husband to trial, was the wife’s assertion that the matrimonial assets should be valued in the main at the date of separation rather than at the date of trial allied in any event to a valuation of the estate by the wife which he found to be a gross overvaluation.

81.As to identifying and valuing the assets, the judge was critical of both parties.  In this regard he spoke of the “accounting approach” adopted by the wife, an approach which he found to have been provoked in large measure by the husband’s own insistence on the use of spreadsheets and the like, these and other papers setting out in minute detail the nature of every asset and their changing perceived values.  In this regard, in his judgment, the judge had the following observations to make:

“It appears that the wife has taken a purely “accounting approach” in respect of these assets as if it were a straight commercial partnership, as demonstrated by the way she prepared her schedule of assets… as well as her evidence in her affidavits and testimony in court, no doubt exacerbated by the husband’s long-held habit of preparing periodical detailed spreadsheets of his assets and his similar approach of going into minute details in his accounts and utilisation of the joint funds… the result is the parade before the court of 16 trial bundles of more than 5000 pages of documents, bank statements, e-mails and letters of which only a tiny fraction were relevant or referred to at the trial.”

82.It is basic, of course, that, if there is to be any hope of a settlement, the parties must be able in a sensible and relatively straightforward way to identify the matrimonial assets and be able at least to come within a reasonable distance of each other concerning the value of those assets.  The wife’s gross overvaluation, as the judge found it to be, stood in the way of settlement and, at trial, meant that an inordinate amount of time had to be taken up in attempting to settle on a realistic valuation.  In that regard, as the judge found it to be, much of the blame was to be apportioned to the wife.  But not all of the blame because, as the judge observed, both parties were guilty of taking an accounting approach which was unnecessary in light of the nature of their estate and which only added to costs: the more than 5000 pages of documents, bank statements, e-mails and the like being evidence of that.

83.But the judge did not find that it was the wife only whose misapplied approach to the litigation resulted in the costs of over $2 million.

84.The judge further recognised that, aside from a brief window in time prior to the trial, a further fundamental barrier that stood in the way of a settlement, this time forcing the wife to trial, was the husband’s assertion that this was a proper case in which to depart from an equality of division of the matrimonial assets.  The basis of this assertion was, among other matters, the asserted disparity in the value of the assets that the husband and wife were able to bring into their union and, because of decisions made during the course of the marriage, what the husband alleged to be his resulting unhappy situation after its breakdown.  Aside from the fact that, if the wife was to obtain a fair division of the estate, it meant that she was forced to trial, it followed that the trial itself would have to examine the position of the parties when they first joined their individual estates together in contemplation of marriage and would also have to look at the history of the marriage in greater detail than would otherwise have been the case.

85.As it was, of course, the judge rejected the husband’s assertion that he should be awarded 60% of the matrimonial estate, agreeing with the wife that there should be an equal division.

86.In his ruling as to costs, the judge said the following:

“Who was the successful party at the end? In respect of the two major disputed issues between the parties ... it is clear that they were each successful on one, but not on the other, which was basically the reason for my order nisi of no order as to costs.”

87.The judge chose to express himself succinctly.  But, as we have attempted to indicate above, in respect of the cases advanced by both the husband and wife, it was implicit in the judge’s reasoning that neither could be identified as the ‘successful party’ or even the ‘more successful party’.  As to core issues upon which they relied, both had succeeded to an extent and both, to a greater or lesser degree, had failed.  It was further implicit in the judge’s reasoning that these flaws in the respective cases, flaws which marked the litigation from an early stage, had substantially stood in the way of settlement and forced the parties to trial, a trial which was heavily burdened with accounting documents and which focused in greater detail than should have been necessary on the history of the marriage, more especially as to what each did or did not bring into their union.

88.During the first instance hearing as to costs, counsel representing each party placed considerable emphasis on the various offers to settle which had punctuated the litigation.  The judge took these offers into account even though he accepted that he had not studied each and every offer in the greatest detail.  We have, however, looked to all relevant correspondence concerning settlement.  Much of it, for a matrimonial estate not of the greatest complexity, is weighed down with the kind of accountancy and valuation minutiae that is more often found in business negotiations.  We would agree with the judge that the most relevant proposal to settle matters was contained in a letter from the husband’s solicitors dated 2 December 2008.

89.Although the husband had previously sought more than 50% of the matrimonial estate, with the trial drawing closer he reduced his demand, suggesting a settlement that was for all practical purposes one of equal sharing.  Importantly, to avoid the complex accounting approach that had bedevilled earlier proposals to settle, the husband’s proposal on this occasion was based more on an equal division of assets, those assets being given only their approximate current valuations: in our view, a sensible approach at a time of very considerable uncertainty in the world’s financial markets.

90.The husband proposed that he retained the property in Kingston, Ontario, while the wife retained the Hong Kong apartment.  Both would therefore have a roof over their heads.  The third property in Phuket was to be sold and the proceeds divided equally.  The husband made further suggestions as to various sums of money held in investment accounts but, these aside, it was his proposal that he and the wife were to retain all other assets that were at that time in their individual names or in their possession.  These proposals were based on an estimation of the value of the matrimonial estate of $9.448 million.

91.This proposal, certainly as to the distribution of the parties’ major assets, was very much in line with the judge’s disposition: see para. 116 of his judgment.  The proposal was rejected by the wife, essentially on her far greater estimation of the true value of the estate.

92.In his ruling as to costs, the judge was not prepared to hold that this offer by the husband should be decisive.  It appears that the most substantial reason for coming to this decision was founded on the fact that, once the offer had been refused by the wife, the husband had not proceeded to trial on the basis that there should be an equal division of the matrimonial estate and had instead reverted to his earlier position that there should be a division of 60/40% in his favour.  In his ruling, the judge commented that, had the husband not changed his position at trial, he would have been entitled to his costs incurred after 2 December 2008, the date of his offer.

93.In holding that the offer should not be decisive, the judge was further influenced by the fact that the husband’s proposal put the valuation of the matrimonial estate at that time at $9.448 million, a figure which fell significantly short of the valuation given to the estate by the judge in his judgment.  However, with respect to the judge, the valuation contained in the husband’s proposal never purported to be a valuation of the entire matrimonial estate.  It purported to be a valuation rather of the three real estate properties plus monies held in certain investment accounts.  The husband’s valuation did not include, by way of illustration, the inheritances that both were due nor the value of the wife’s jewellery or the husband’s golf club membership, a membership which the judge valued at $325,000.

94.The fact of this offer is a matter which has caused us concern.  It has been said on numerous occasions that, in the course of matrimonial litigation, when an offer has been made, if the party to whom it has been made rejects that offer and at trial receives no more than what was contained in the offer, that party is at risk of an adverse order as to costs.  Litigants cannot ignore sensible and rational offers of compromise in the comfortable knowledge that they can do so with impunity.

95.But there were of course many issues which the judge in the present case had to take into account in considering how best to exercise his discretion as to costs.  It is a long established principle that, after analysing the case of each party, costs must be judged by way of overall impression.  They are not to be assessed by breaking down the litigation into its many component and interlocking parts in order to draw up some kind of profit and loss account.  While the husband had at one time made a proposal based essentially on an equal division of the matrimonial estate, when that proposal had been rejected he had reverted to seeking a greater share of the estate, a claim which did not find favour with the court.  Much of the wasted costs of the trial therefore lay with him.

96.While this has not been the easiest matter to determine, more especially in light of the husband’s proposal of 2 December 2008, at the end of the day we have been drawn to the conclusion that, despite the judge’s error as to the husband’s valuations contained in that offer, it remained within the judge’s discretion to make the order as to costs that he did, namely, that both parties should meet their own costs, neither having any equitable basis for claiming that the other should meet their costs, in part or in whole.  Accordingly, the appeals by both parties against the order as to costs are dismissed.

97.As to the costs of this appeal, taking into account that the husband was unsuccessful in his appeal against the substantive determination as to the division of the matrimonial assets but that both the husband and wife were unsuccessful in their respective appeals as to costs, we order that the husband is to pay 50% only of the wife’s costs of appeal either as agreed or as taxed.

Mr Russell Coleman SC instructed by Messrs Erving Brettell for Petitioner

Mr Robin Egerton instructed by Messrs Hampton, Winter & Glynn for Respondent