Lsy v. Hhc
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FCMC 14525/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES SUIT NO. 14525 OF 2005 ---------------------------- BETWEEN
---------------------------- Before : HH Judge Bruno Chan in Chambers Date of Hearing : 2 – 3 March, 3 June and 1 September 2011. Date of Judgment : 7 October 2011. ----------------------- J U D G M E N T ----------------------- 1.Before me is the Respondent Husband’s application dated 26th August 2010 seeking variation downwards of a consent order made on 28th November 2006 upon the dissolution of his marriage with the Petitioner Wife, in which he was to pay her inter alia periodical payments at the monthly rate of HK$4,000 for her maintenance and HK$10,000 for their only son. He now claims that his financial circumstances have since deteriorated to such the extent that he can no longer afford to make those payments other than a nominal maintenance of HK$1.00 per annum for her and HK$100 per month for the son who is now 15 years old and still a full-time student. 2.This is in fact his second such application since the said order over a relatively short period of 4 years punctured already by several enforcement proceedings taken against him for defaults with his payments, with the 1st judgment summons issued barely 3 months after the order in February 2007, followed yet by another judgment summons 5 months later in June 2007, then a garnishee order in September 2007, and finally another judgment summons in May 2010 which eventually led to the matter now before me. 3.While it is normal and in fact inevitable for parties to experience changes to their financial or other circumstances at various times after divorce which may warrant a review of their original financial arrangements, which is the basis of the Husband’s present application as far as his own financial circumstances are concerned, and they appear to have been quite drastic since the divorce when he now claims that all his previous successful businesses in decoration and building materials, which afforded him to agree to the financial terms under the divorce settlement, have since failed and had either been sold for nominal value or closed down altogether, and that he now earns as little as a few thousand dollars per month as a casual worker that he simply cannot afford to continue with the said periodical payments for his former wife and his son. 4.Given his checker history of compliance with the said order in the past, it is not surprising that his application was opposed by the Wife who suspected that his alleged changes had all been fabricated to mislead the court so that he would not have to face up to his responsibility towards her and their son. At the heart of the issue is therefore whether those changes were real, and if so their extents and impacts on the Husband’s finances over the years since the divorce. 5.Matters were further compounded by the fact that the person to whom the Husband allegedly sold one of his businesses for nominal value, a Madam Chiu in China, and whom he claimed to have worked for and purchased a property in Taiwan for investment on her behalf which had nothing to do with him, had filed several declarations purportedly to verify those dealings, but had refused to come to court to be cross-examined by the Wife, hence she argues that they should not be admitted as evidence, or that no weight should be accorded to them in the circumstances. Background 6.The Husband is now aged 55 years and the Wife 47. Both were locally born and raised, and after completing their secondary education, the Wife went to work as an account clerk while the Husband would go on to study at Hong Kong Polytechnic before working in a building materials company. They first met while attending an evening course in the 1980s and eventually married each other on 16th March 1990, while their son was born some 6 years later in 1996. 7.After the marriage the Husband started his own business in building materials while the Wife would help out keeping the accounts of his company which was subsequently incorporated into RBS Building Materials Limited (“RBS Building Materials”) with both stated as shareholders, and in 2004 the Husband also formed another company known as RBS Contracting & Engineering Limited (“RBS Engineering”) doing decoration and construction work, appointing himself its director and the Wife its secretary. 8.The Husband’s business however frequently took him away from Hong Kong to China, and sadly the marriage started to unravel in early 2005 when the Wife suspected that he was having an affair with a woman in China, which was denied by the Husband but he eventually moved out of their matrimonial home in August 2005. 9.With the assistance of Legal Aid the Wife then filed for divorce on 19th December 2005 based on the Husband’s unreasonable behaviour and sough custody of their son and general ancillary relief. By then she had left the Husband’s companies to stay at home, and on 19th January 2006 she applied and obtained, with the Husband’s consent, an order for interim maintenance at the rate of HK$12,000 per month for her and their son pending the proceedings. 10.Initially the Husband opposed the divorce through his lawyers but eventually relented and the decree nisi of divorce was pronounced on 28th August 2006, with the questions of custody and ancillary relief adjourned pending financial discovery. 11.Upon exchanging their respective Financial Statement (Form E) the parties were subsequently also able to reach overall settlement at the 1st Appointment of FDR on 28th November 2006, the terms of which were then endorsed by the court at the hearing which was attended by both parties and their solicitors, in which custody of their son was granted to the Wife with certain defined access to the Husband, and that apart from the said periodical payments, he was also to pay her a lump sum of HK$680,000 by 2 instalments, with HK$400,000 to be paid on or before 12th December 2006, and the remaining balance of HK$280,000 on or before 21st January 2007 (“the 2006 Order”)(PB1 : 39). The decree nisi was then made absolute on 9th December 2006. 12.However, as noted above, by February 2007 the Husband had defaulted with both the 2nd lump sum instalment due and the periodical payments for that month, and on 21st February 2007 the Wife issued the first of her several enforcement proceedings by way of a judgment summons against him for these defaults. Shortly before the hearing the Husband paid up the amount due under the judgment summons which was therefore discharged. 13.The Husband soon fell into arrears again with the periodical payments for the months of March to May 2007 in the aggregated sum of HK$42,000, and the 2nd judgment summons was issued on 4th June 2007, which was again discharged after he had paid up the amount due under the judgment summons with costs shortly before the hearing on 20th August 2007. 14.However, by then he had again been in arrears of maintenance from June 2007 and hence owed the Wife another 3 months of maintenance for HK$42,000, for which she sought on this occasion a garnishee order against his bank accounts with Bank of China and Hang Seng Bank. Again as on previous occasions, the Husband paid up the outstanding amount due shortly before the hearing of the Garnishee Proceedings on 1st November 2007 which was then discharged with costs to the Wife. 15.It should be noted that the Husband was then legally represented throughout all these enforcement proceedings, but on 5th August 2008 he started to act in person and launched his 1st variation application for an order that the said periodical payments for the Wife and their son be discharged due to his lower income and heavy debts. 16.In his Financial Statement (Form E) filed on 8th September 2008 (PB1 : 43) in support of his variation application, the Husband claimed that he was then employed as a salesman in China earning HK$8,000 per month but had debts of more than HK$720,000 for which he had to make monthly repayments of HK$13,735, and hence he was no longer able to continue with the said periodical payments. He also disclosed that all his shares in RBS Building Materials had been transferred in 2008, while his RBS Engineering had also closed down its business in the same year. He also complained of not being able to see his son after the Wife had moved away from her previous residence without informing him of her new address. 17.At the hearing of his application on 2nd October 2008 the Wife was absent as she had not been served of the notice due to the Husband’s claim of not knowing her whereabouts, which was therefore adjourned pending a social investigation report. 18.The social investigation report was submitted to court on 30th December 2008, and at the returned hearing on 14th January 2009 during which the Wife was represented by her same solicitors as before, the parties informed the court that they wished to discuss their future access arrangements between themselves, but that the Husband’s variation application would be contested and that the Wife was to file her own financial statement as well as her affidavit in response. That hearing was therefore adjourned to 6th March 2009. 19.By then the Husband was of course already in arrears of his periodical payments for more than 6 months and hence the Wife again issued a judgment summons for the total outstanding amount of HK$81,500, which the court directed to be heard after the Husband’s application. 20.Meanwhile the Wife’s Form E (PB1 : 66) revealed that she had moved to a new flat purchased in her father’s name under the Home Ownership Scheme but funded with the lump sum received under the 2006 Order and a bank mortgage as a home for herself and her son as well as her parents, which explains why the Husband was earlier unable to contact her for the son’s access. She also disclosed that she had continued to work as an account clerk albeit on a part-time basis earning about HK$5,000 per month, but had a monthly expenditure in excess of HK$26,000 and hence the necessity to continue to rely on the Husband’s periodical payments. 21.After what appears to be quite a lengthy discovery process mainly on the Husband’s finances, his application eventually proceeded to trial but at the hearing on 22nd October 2009, the parties were able to reach agreement settling both the Husband’s variation application and the Wife’s judgment summons when they signed a minute of consent order on the following terms :
22.These terms were accordingly made an order of the court on the same day (“the 2009 Order”)(PB3 : 419 – 422). However by March 2010 the Husband had only paid the Wife the sum of HK$49,000 out of a total amount of HK$366,000 due under the said order, and the Wife on 7th May 2010 again issued a judgment summons against him for the outstanding amount as well as the accruing periodical payments which he had not paid either. 23.At the hearing of the judgment summons on 6th July 2010, the Husband who was then acting in person acknowledged his defaults and upon discussing terms with the Wife’s solicitors agreed to settle the total outstanding sum of HK$497,830.93 by the following 3 instalments :
24.Given the history of his past defaults and his connection with Mainland China, the Wife insisted, and the Husband agreed, that a deterring order be made that he be prohibited from leaving Hong Kong pending the above payments and that a committal order be made against him for 3 months but to be suspended on the above terms. Accordingly the order was so made on these terms (“the 2010 Order”) (PB3 : 466). 25.The Husband did pay the 1st instalment on time but before the 2nd instalment became due he instructed his present solicitors to issue his 2nd variation application on 26th August 2010, the matter now before me, for an order that the said periodical payments be reduced accordingly, that the execution of the 2010 Order be stayed, and that he be allowed to leave the jurisdiction (PB3 : 470). 26.At the 1st hearing of his application on 7th October 2010, it was agreed between the parties that the application be adjourned for argument, and that pending which the Husband be allowed to leave the jurisdiction upon him depositing a sum of HK$140,000 with his solicitors as surety (PB3 : 619). 27.After the parties had filed their Form E followed by another round of extensive discovery, the application proceeded to trial which took 4 days to conclude, during which both parties were represented by counsel, with Ms Tsui for the Wife on Legal Aid, and Ms So for the Husband on private basis. The Husband’s Case 28.The Husband’s case, as set out in his 3 affirmations filed respectively on 27th August 2010 (PB3 : 473), 28th September 2010 (PB3 : 521), and 28th February 2011 (PB4 : 973(8)), as well as his oral testimony in court, can be summarised as follows :
The Wife’s Case 29.The Wife’s case is straightforward and uncontroversial as to her means or her needs as well as those of the son, and there is in the main no disputes by the Husband over them. As for his claim of his inability to pay the said periodical payments due to the alleged changes to his financial circumstances, she believes that he has never fully or truthfully disclosed his means all these years dating back even to the time of their divorce, in particularly as to his interests in various companies and properties in Hong Kong as well as the one in Taiwan, that he has adopted a catch-me-if-you-can attitude and every time when he was caught he would make all sorts of promises to her and would pay up some of the arrears but defaulted again soon after, and that he has made up all those changes as to his businesses and income so as to mislead the court and to avoid his financial responsibilities towards her and their son. 30.Clearly therefore at the heart of the issues is whether there have indeed been changes to the Husband’s financial or other circumstances not just at the time of his application, but going back to the time of the said divorce settlement which spans over the past 5 years or so, especially as to his 2 RBS Companies which were indisputably the main sources of his income in the past, and his dealings in various properties in particularly those allegedly with the said Madam Chiu, as well as his current financial circumstances. But before going into the evidence of those changes, it would be relevant to first set out the legal principles applicable to such application. The Applicable Legal Principles 31.The powers to vary an order for periodical payments are conferred by s. 11 of Matrimonial Proceedings and Property Ordinance, Cap. 192 (“MPPO”), and under (7) it is stipulated that : “in exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates and, where the party against whom that order was made has died, the changed circumstances resulting from his or her death.” 32.The proper approach to such an application has been summarised by the Court of Appeal in AEM v VFM (Variation of Maintenance) (2008) HKFLR 106, in that the court should look at the matter afresh and make an order that is reasonable in the current circumstances, including to what extent the means of the parties have changed since the original order was made, as well as those factors under section 7 of MPPO in order to achieve fairness within the context of these factors and all the circumstances of the case. 33.On the other hand, as pointed out by Tang V-P in another appeal case of HCTT c TYYC (CACV 380 of 2007), while normally the earlier order would not be varied unless there has been a material change in circumstances, the jurisdiction of the court to vary is untrammelled, agreeing with Ormrod LJ in the English case of Lewis v Lewis [1977] 1 WLR 409 when he said that the power of variation under section 31(7) of the Matrimonial Causes Act 1973, on which our section 11(7) is based, was conferred with the intent that (p412) :
34.This of course does not mean that the earlier order, whether made by consent or not, carries no weight. How much weight should be accorded to it must depend on the circumstances, as Cazalet J said in the English appeal case of Garner v Garner [1992] 1 FLR 573 at p.581 :
35.It is therefore with these principles as my guidance that I now turn to consider the evidence of first whether there has been any material change in the circumstances of the parties since the 2006 Order, and as those changes to the Wife’s circumstances already referred to above are straightforward and uncontroversial, I propose to go directly to those alleged of the Husband’s, which according to him had been quite grave and substantial to say the least, and to do so obviously it would be necessary to go back to his circumstances at the times of the divorce and, more relevantly, when he consented to the 2006 Order. To do so I have adopted the very helpful chronology of event appended to Ms Tsui’s closing submission. Changes in the Husband’s Circumstances 36.One of the most controversial features about the Husband’s case is that notwithstanding his consistent and repeated claims of financial difficulties or inability, he had entered into 3 sets of financial arrangements with the Wife over the past 4 years or so, respectively recorded in the 2006 Order, 2009 Order and 2010 Order, whereby he had agreed on each occasion to pay her something which he did not appear to have the means or resources to do so, at least according to the evidence then presented by him, which has prompted Ms Tsui for the Wife to ask repeatedly throughout her submission : Why did he agree in the first place? The inference to be drawn, she argues, must be that he has never fully or truthfully disclosed his means. On the evidence before the court, she does have a valid point. 37.Consider first the circumstances of the original divorce settlement under the 2006 Order : According to his Form E filed at the time of the divorce on 22nd June 2006 (PB1 : 1) prepared by his then solicitors, the Husband was still the director and majority shareholder of both RBS Building materials and RBS Engineering earning an average income of HK$21,200 per month, but otherwise claimed to have little savings or other assets, and that his shareholdings in either companies was worth virtually nothing, but that he owed debts of almost HK$1.4 million, hence his net asset position was stated at minus HK$1.38 million (PB1 : 13). 38.Not surprisingly, the Wife on 6th September 2006 filed a fairly comprehensive 14 pages request for further and better particulars of the Husband’s Form E, but at the hearing of her such request on 21st September 2006, the parties reached overall financial settlement which led to the 2006 Order. Hence it was not necessary for the court to deal with the Wife’s request, nor was the Husband called upon to answer that request, but by consenting to those terms under the 2006 Order, the Husband had clearly demonstrated through his lawyer that he had the means and ability to come up with a lump sum of HK$680,000 for the Wife as well as a monthly sum of HK$14,000 to meets her needs and those of their son, notwithstanding what he had stated about his means in his Form E, and that by implication they may not be entirely true or accurate, and which will be even more apparent later in this judgment, as otherwise why would he consent to those terms, for which no explanation has ever been given. 39.By the same token, while he may have been late or defaulted with those payments thereafter as referred to above, he had always paid up the outstanding amounts to enable the Wife’s resultant judgment summons to be discharged without any hearing. No explanation as to his defaults had ever been proffered, nor any evidence of financial difficulties, if that was his case, had ever been presented by him at that time or on any of those occasions. Again Ms Tsui argues that inference can be drawn that he always had the means or resources to make good those arrears without any real difficulty. 40.That was until 5th August 2008 when he issued his 1st variation application, and in his Form E filed in support, he disclosed for the first time of those changes in his circumstances in particularly of his 2 companies as referred to in Paragraph 16 above of this judgment. Exhibited to his Form E were copies of statutory notices to the Company Registry of his resignation as director from RBS Building Materials and the appointment of the said Madam Chiu as director as well as the instrument of transfer and bought and sold note of his 10,000 shares therein to Madam Chiu at the consideration of HK$1.00, all dated the same date of 5th August 2008 (PB1: 65(1 – 7)). 41.In addition he had exhibited copies of the financial statements of both RBS Building Materials and RBS Engineering for the financial years of 2007 and 2008 purportedly showing both companies had been making substantial losses respectively of HK$325,340 and HK$406,243 for the former, and HK$HK$155,484 and HK$159,359 for the latter which then ceased business on 31st March 2008. He had also produced copies of bank statements of his various accounts showing little savings, and of IOUs showing that he had debts of more than HK$700,000 (PB1 : 65(8 – 37)). 42.In response to the Wife’s subsequent request for discovery against his Form E and his means generally, the Husband had produced further financial documents including his tax return for the financial year of 2008 filed one week later on 12th August 2008 in which he declared of no income earned for that year that would be taxable, and that due to his inability to inject further capital into a property-holding company known as Grand Choice Industrial Limited (“Grand Choice”) in which both he and a friend Mr. Li were directors and shareholders, he had to resign on 22nd August 2007 from the company and gave up his interests in the company’s investment in a flat in Jardine’s Lookout, Hong Kong (PB2 : 140 – 148). 43.Armed with these additional information the Wife presumably carried out her own investigation and filed an affirmation on 4th May 2009, her 15th in these proceedings (PB2 : 225), and pointed out what she believed to be various discrepancies of the Husband’s case about his alleged financial problems, including another company which he had earlier failed to disclose, namely Ever Famous Investment Limited (“Ever Famous”) of which he was appointed as the sole director back in August 2005, and that the company bought a property at Flat F, 55/F, Tower 2, Metro Town, Sai Kung (“Metro Town Property”) about 1 month later on 9th September 2005 for HK$4,547,000, and 2 years later on 10th September 2007 it was sold for HK$ 4,138.000, apparently at a loss for about HK$400,000 (PB2 : 270 – 289). 44.Another non-disclosure which the Wife claimed that he was guilty of was a bank account with Fubon Bank in which he was named as the account holder but which he had failed to disclose in his Form E before. Thus she sought specific discovery against him in respect of all these non-disclosures on 21st May 2009. 45.In his response the Husband denied that he had sold the Metro Town Property, but rather that he had decided not to complete the purchase and thus forfeited the down payment of HK$454,700 after he found out that the Wife was divorcing him and that he needed to focus on the case at that time, and that he had since forgotten about that company until her lawyers asked about it these proceedings (PB2 : 304). 46.As regard the said Fubon Bank account, he alleged that he opened it on behalf of the said Madam Chiu for transferring her money to Taiwan for her purchase of the said Taiwan Property, as she was a Mainland resident and would encounter difficulty dealing with financial transactions in Taiwan, so as her friend he was just assisting her with the matters as her trustee of that bank account and the subsequent purchase of the Taiwan Property, and since he had absolutely no interest at all in them, he saw no reason to disclose them in his Form E. 47.Yet again, and despite maintaining his financial difficulties that caused him to issue his variation application, the Husband eventually agreed terms with the Wife that led to the 2009 Order, which means essentially that not only had he conceded not to reduce or discharge the periodical payments and which he had even reconfirmed his future commitment, but that he was also to come up with almost HK$200,000 by 4 instalments within 2 months to satisfy the outstanding arrears due to the Wife, plus a further monthly sum of HK$30,000 for the next 6 months to meet her legal costs. 48.This again begs the same obvious question of Ms Tsui : Why did he agree to these terms if indeed he was in such financial difficulties? In fact, according to his affirmation filed on 27th August 2010 in support of his present application and where he referred to the historical background of these proceedings, he was said to be then making only RMB4,500 per month as a salesman in China as his main income, which was less than half of what he had reconfirmed to pay to the Wife before even taking into account of his own living expenses (PB3 : 475). 49.The only thing that one can find from all his affirmations filed since which may have come closest to addressing that question is a very general and vague statement in paragraph 5 of the same affirmation in which he claimed that due to insufficient income from his businesses after the divorce to enable him to pay the said periodical payments regularly or punctually over the years, and had to borrow on a few occasions to pay off the outstanding maintenance (PB3 : 474). 50.The same pattern followed the 2009 Order, and after defaulting with the 2nd instalment payment under that order, the Husband again entered into yet another arrangement with the Wife at the hearing of her resultant judgment summons on 6th July 2010 which led to the 2010 Order, in which he was to pay up the total accrued amount of HK$497,830.93 within 2 months, plus a further sum of HK$30,000 for the Wife’s costs of her judgment summons, undoubtedly a even bigger commitment than the one of less than 9 months ago. 51.What were then his financial circumstances when he agreed to these terms? Again, according to his said affirmation of 27th August 2010, they appeared equally dire, as he was said to be still working as a salesman earning RMB4,500 per month, and while he was able to supplement his income by bringing household goods from Hong Kong to sell in China to earn an extra HK$2,000 to $3,000 per month, he had also taken on additional burden with a new family by marrying his present wife on 9th May 2010 who had become pregnant shortly thereafter (PB3 : 475 – 477). All these clearly suggest that he could not afford these repayments. Why then did he again agree? 52.His explanation can be found in paragraphs 22 – 23 of his said affirmation, basically that he was concerned about the possible consequence of being committed to prison under the judgment summons for breaching the earlier order, and without considering carefully of his financial ability, he consented to those terms thinking that he could borrow from his family or friends to meet the instalment payments, which he said he did with the 1st instalment with HK$195,000 from his younger brother, and produced copies of his brother’s bank records and pay-in slips as evidence (PB3 : 508 – 512). 53.As for the 2 remaining instalments, he claimed that he was unable to borrow anymore money, and did not know what else he could do about them, but sought leave of the court to leave the jurisdiction for China to visit his wife due to her pregnancy. 54.All these of course as noted above were not acceptable to the Wife who insists that the only proper inference that can be drawn from such conducts of the Husband is that all along he has the means and resources to meet all these payments, even though he has never fully or truthfully disclosed all of them, which explains why he would consent to those orders but without any real intention to follow through with them, and when he was caught he would then make all sorts of promises to avoid the consequences, but after making some payments, he would again decide not to pay until he was caught again, a pattern that has been repeating over and over the past 4 years. 55.Whatever the validity of that argument of the Wife, there can be no dispute that when the Husband filed his 1st Form E at the time of the divorce on 22nd June 2006, he failed to disclose his interest in either the company Ever Famous or the Metro Town Property, and even if it is true of what he said about his subsequent inability to complete its purchase which fell through and that it was later sold by the developer to somebody else in July 2007 with a loss of some HK$460,000, it all happened only afterwards and could not excuse his failure to disclose such interest in his Form E, as after all it was a very significant piece of asset of his. 56.Even more significant was his interest in Grand Choice or its property which he also failed to disclose in his 1st Form E. According to its audited account for the financial year ended 31st March 2006 produced by the Husband (PB2 : 138(66 – 75)), that company was first incorporated on 20th May 2005 with him and the said Mr. Li appointed as its directors on 12th July 2005 with each holding 1 share, and that a total sum of HK$5,256,000 had been paid for the purchase of the property at Flat B, 30/F, Tower II, The Legend at Jardine’s Lookout, Hong Kong (“The Legend Property”), with a commitment to pay a further sum of HK$21,024,000 in respect of acquisition of that property. 57.It appears that the Husband had at that time already paid more than HK$2.6 million for his half share of the down payments, and had committed to pay a further HK$10,512,000 being his half share towards the balance of the purchase price in future to complete the purchase of that property. It was clearly a much bigger investment than his Metro Tower Property, yet similarly not a single word about it was ever mentioned in his said first Form E at the time of the divorce. 58.Ms Tsui therefore argues that at the time of his 1st Form E filed on 22nd June 2006, the Husband had invested more than HK$3 millions on 2 properties, and was committed to invest a further HK$14 millions by 2007 to complete the 2 purchases, and even if it is true that they had subsequently fallen through as alleged by him, there can be no reason in my view for him not to disclose them in his Form E at that time other than the intention to hide them from the Wife in their divorce proceedings, for which he must be guilty of failure to make full or frank disclosure of his means when he consented to the 2006 Order. 59.Given this failure of the Husband, the Wife of course does not accept what he claimed subsequently happened to these 2 investments, which leads to the next issue of whether these 2 purchases did in fact fall through as alleged by him, and if so, why. I propose to first deal with his evidence on the Metro Town Property and its holding company Ever Famous. Ever Famous 60.According to his reply to the Wife’s request for further and better particulars (PB2 : 304), the Husband signed the provisional contract on 9th September 2005 on behalf of Ever Famous for the purchase of the Metro Town Property for HK$4,547,000, of which he paid HK$227,350 on that day, with the 2nd and 3rd instalment in the same amount each to be paid on or before 8th November 2005 and 6th February 2006 respectively, and the remaining balance of HK$3,864,950 upon completion of the building (PB2 : 306(5)). 61.There does not appear to be any dispute as to the authenticity of this document, and the Husband’s evidence is that after making only 2 instalment payments in the total sum of HK$454,700 in 2005 but before the next payment became due in 2006, he received the Wife’s divorce papers in late 2005 and when he became embroiled in the divorce proceedings, he decided to give up on this investment thereby forfeiting the earlier payments already made with a total loss of HK$454,700, hence he had nothing to do with the subsequent sale by the developer, and that by the time he was to file his Form E in August 2006, he no longer had any interest in that property to be disclosed. As for the company Ever Famous, it was just the vehicle for that investment which had no other business, income or asset for him to disclose either. 62.While that was certainly a lot of money to forfeit in those circumstances, and that the Wife may well question his real motive for doing so, the Land Registry Record produced by the Husband (PB2 : 360(1) – (4)) does reveal that his agreement to purchase the property had indeed been terminated with the down payments forfeited by a letter of determination dated 28th June 2007 and registered against the title of that property on 29th June 2007. 63.Ms Tsui for the Wife submits that it is difficult to believe that being an experienced businessman, that the Husband would give up the property and treated the investment as a loss simply because he had to deal with the divorce proceedings. However incredible it may sound to the Wife, the determination of the purchase appears to be well supported by documentary evidence, and the fact that it took place well after the parties had reached their divorce settlement in 2006 shows that there was no reason for him to hide anything or to fake the termination of the purchase. I do however agree with Ms Tsui that it at least shows that his financial ability was much better than what he had disclosed in his 1st Form E around the time of the divorce. I shall next turn to Grand Choice. Grand Choice 64.The Husband’s dealings with this company are more controversial and involved much more money. According to the agreement signed by Grand Choice on 12th July 2005 for the purchase of The Legend Property for HK$26,280,000 (“P-2”), HK$1,314,000 were paid as deposit on signing of the agreement, with further instalments at the same rate to be paid on 10th September 2005, 9th November 2005 and 9th January 2006 respectively, and the balance of the purchase price of HK$21,024,000 to be paid upon completion. 65.The records of the Land Registry produced by the Wife (PB 2 : 294) reveal that Grand Choice completed the purchase on 5th October 2007 with the assistance of 2 mortgages from DBS Bank, and the Husband’s evidence is that due to his financial constraints, he was unable to meet his share of the mortgage payments and when he was pressed by the other shareholder the said Mr. Li, he had to forfeit his down payments and gave up his interests in the property before the completion. 66.In support of his case the Husband has produced an agreement purportedly made on 22nd August 2007 whereby he transferred his one share in Grand Choice to Li at nil consideration, together with copies of the relevant instrument of transfer of the share, its bought and sold note, and notification of change of director all dated one day after that agreement and submitted to the Company Registry on 23rd August 2007 (PB2 : 140 – 148). 67.Again the Wife does not dispute the authenticity of these documents, but suspects that it was not a genuine transfer in that given their good relationship and that according to the Husband’s Form E that Li had lent him HK$949,000 before, it is hard to believe that Li would press him for a comparatively smaller sum of his share of the mortgage instalments, or that the Husband would be so easily and so willingly give up such an valuable investment after having already paid substantial amount of money in down payments, when its value had gone up significantly as evidenced by Exhibit P-3 that an identical unit on lower floors would fetch a price of HK$29,999,000 in May 2006, an increase by more than HK$3 million from the original price. 68.Ms Tsui for the Wife also argues that the Husband’s evidence as to exactly how much he had paid for that property and its source were vague and evasive, that there were no documentary evidence of such payments other than the fact that the mortgage amounted to HK$18,126,631 (PB2 : 277), which shows that more than HK$8 million had already been paid, with the Husband’s half share stood at some HK$4 million, she submits that it is incredible that he would walk away from such an investment, and that if he indeed had cash flow problem at that time, he could have liquidated his share by selling it to Li or selling the property altogether with a good profit, or at least let out the property to subsidize the mortgage payments instead of giving up his share just like that with a substantial loss. 69.I agree with Ms Tsui that the circumstances of the Husband’s transfer of his share in this property do appear suspicious, in particularly that it was carried out when the Wife was taking enforcement proceedings against him for the periodical payments under the 2006 Order by issuing a judgment summons just 2 months earlier in June 2007, and just 3 days after the hearing of that judgment summons when he paid up the amount due under the summons, with the garnishee proceedings at his heels in respect of his further arrears. 70.However, if indeed the transfer of his interests in the Metro Town Property and The Legend Property were both sham transactions designed to avoid the Wife’s enforcement proceedings as submitted by Ms Tsui, might one not ask why would it be necessary for him to do so, since he had never before disclosed his interests in these properties, and there is no evidence to suggest that the Wife already knew about them at that time? In other words, why go through all these troubles including all the necessary procedures with the Company Registry just to conceal something which she did not know? 71.Perhaps it was a subconscious act, or perhaps it was in anticipation of and in preparation for his 1st variation application to be launched in the following year in August 2008, well knowing from past experience that it would be opposed by the Wife which would then trigger off another round of fresh Form E and further disclosure and discovery by her lawyers, hence a decision to get rid of those 2 properties well ahead of these inevitable exercises in case they would be found out certainly sounds entirely possible, especially given his conducts over the past few years in these proceedings referred to above. 72.Ms Tsui for the Wife has in fact taken the matter further by suggesting another explanation : that the Husband’s transfer of his share to Li could be a swop for his share in the said Taiwan Property, a much more controversial issue involving his various dealings with the said Madam Chiu, of which I shall now turn to. Dealings with Madam Chiu 73.The Husband’s evidence is that Madam Chiu was a business woman in China with whom he became acquainted some years back and had borrowed money from her. In 2008 when he was unable to carry on his building materials business and was thinking about closing down RBS Building Materials, Madam Chiu asked him to transfer the company to her at a nominal value so that she could use it for her own business, and that she would hire him to work for her in the same business in China. He therefore transferred his shares in RBS Building Materials to Madam Chiu in August 2008. 74.He said she then asked him to go with the said Mr. Li to Taiwan on her expenses to purchase the said property for investment, that it was Li who called the shot in Taiwan, and that he was not sure whether it was to be Madam Chiu’s own investment or her joint investment with Li, but his role was just as a nominee to sign the necessary purchase papers on behalf of Madam Chiu. 75.Accordingly he went with Li to Taiwan 2 or 3 times, and it was on 29th April 2008 that he signed the agreement jointly with Li for the purchase of the said property for NTD39,650,000 (approximately HK$10.1 million) with money from Madam Chiu deposited into an account with Fubon Bank opened by him on 9th July 2008 on her behalf and remitted to Taiwan. 2 years later on 13th April 2010 the property was sold on Madam Chiu’s instruction for NTD53,500,000(approximately HK$13.59 million), with all the sale proceeds returned to her. 76.As noted above the Husband has produced 3 declarations allegedly made by Madam Chiu in China, but since she has failed to attend the trial to be his witness, of which he claimed that she was too busy to come to Hong Kong, but which Ms Tsui argues would be fatal to his case and unfair to the Wife for not being able to cross-examine her on her declarations and the circumstances of the purchase and sale of the Taiwan property, and hence the court should disregard both of them. 77.The 1st declaration was dated 1st July 2008 in a handwritten single page, and in which Madam Chiu stated that she had appointed the Husband to open an account for her at Fubon Bank, that all the moneys in the account belonged to her and could only be used with her authorization, and that the Husband should provide her with its monthly statements. It was then purportedly signed in the bottom by both the Husband and Madam Chiu (PB3 : 634). 78.As for the 2nd declaration which was dated about a year later on 27th June 2009 , Madam Chiu stated that as she did not want to be involved in these proceedings of the parties, she decided to cancelled the Fubon account, and that since the Husband had to deal with his own legal matter, she did not want it to affect his job or the reputation of her company, she therefore decided to forthwith sever his relationship with RBS Building Materials, and to have nothing further to do with him in future. It was then purportedly signed by Madam Chiu (PB3 : 638). 79.The 3rd declaration, dated 11th October 2010 and shortly before the hearing of this application, is far more formal in that it appears to have been attested by a Chinese lawyer with the identity card of both Madam Chiu and the lawyer attached. It is also in much more details in which Madam Chiu described how she came to know the Husband back in 2004/2005 in China over some business activities, and how she decided to invest in Taiwan in 2008 by asking the Husband to open the Fubon Bank account to fund the purchase of the Taiwan Property together with Li on her behalf, but that later when Li was too busy to travel to Taiwan for her, she decided to let the Husband dealt with her property by himself whom she had come to trust, and that after he sold the property in 2010 on her instruction, all the proceeds had been returned to her of which the Husband had absolutely no interests at all (PB3 : 622 – 632). 80.It is clear that while Madam Chiu may not have mentioned anything about the Taiwan Property in her 1st 2 declarations, for which Ms Tsui questions why, arguing that it was no doubt the much more important and valuable asset than the bank account, with the 3rd declaration Madam Chiu certainly did, and with details. However, since the Husband’s case is clearly that the Fubon Bank account was to fund the purchase of the property on behalf of Madam Chiu, in the absence of any documentary evidence such as bank records linking those funds directly to her, the issue over the beneficial ownership of that Taiwan property therefore all boils down to the creditability of the Husband and Madam Chiu, hence there is no question that her failure to attend the trial as his witness has deprived the Wife of her right to challenge her declarations by way of cross-examination on what was no doubt the central issue in this case. 81.In fact, not only was the Wife entitled to cross-examine Madam Chiu on the circumstances of the purchase and sale of that property and the money movements as submitted by Ms Tsui, as well as what she asserts to be different versions of her signature in those declarations, but more directly relevant or significant in my judgment as to why Madam Chiu, having decided to terminate the Husband’s employment on 27th June 2009 simply because she did not want to be involved in his personal affairs, would still allow him to hold on to a very substantial asset of hers in the Taiwan property, if it was indeed her property, for almost another year until April 2010 when it was sold for more than HK$13 million? 82.Or, for that matter, why was the Fubon Bank account only opened on 9th July 2008, more than 2 months after the purchase agreement for the Taiwan property had already been signed, if its purpose was to fund the purchase? Or of all the ready-made shelf-companies which one could easily and cheaply obtain from accountants or solicitors in Hong Kong, why would she want the Husband’s RBS Building Materials which had just sustained a total business loss of more than HK$640,000 according to the agreement of the transfer of that company dated 5th August 2008 (PB2 : 149)? Or how much did she actually pay him for working in her company after the transfer? 83.All these are no doubt some of the important and relevant questions that go to the heart of the issue over the Husband’s financial means and ability, which the Wife was entitled, and in fact necessary in my judgment, to put to Madam Chiu while under oath in court, but was deprived of simply because Madam Chiu was too busy to come to Hong Kong, a claim which must be rejected as invalid or unreasonable in the circumstances, and accordingly no weight whatsoever should be accorded to these declarations in my consideration of the Husband’s evidence. 84.There is of course still the Husband’s own declaration of trust made on 1st June 2009 in respect of his interests in the Fubon Bank account as a trustee for Madam Chiu (PB3 : 636). Again it made no mention at all of the Taiwan property which was then still being held by him, but the fact that it was made not at the time when the account was opened but instead some 11 months afterwards at the time of his 1st variation application, and more significantly only after he had received a letter from the Wife’s solicitors dated 20th April 2009 asking him about that account shows that it was more self-serving than for any other purpose. 85.Even more unsatisfactory is his evidence over how the Taiwan property was purchased in his joint names with Li but later sold in his sole name only, as evidenced by the 2 respective purchase and sale agreements produced by him. The agreement for the purchase of the property dated 29th April 2008 and other accompanied documents clearly show that the property was purchased in the joint names of the Husband and Li with their signatures all over these documents (PB3 : 550 – 593). 86.However, the agreement for its sale dated 13th April 2010 shows only the Husband’s name and signature as the seller (PB3 : 596 – 600). It is not quite clear why Li was not included as the joint seller, and that even if he could be legally omitted according to the law and practice in Taiwan, this appears to be contrary to the Husband’s evidence that it was Li who called the shots in the purchase of the property, and that for whatever reason that he was not involved in the sale 2 years later, it surely looks incredible indeed that Madam Chiu would still trust the Husband to hold such a valuable property alone when she had fired him from her company less than a year ago. 87.Equally suspicious is his evidence over the payment of the sale proceeds and their disposals. According to the Husband, the payment was by cheques made out in the name of some other person or persons instead of him on the instruction of Madam Chiu, but upon pressing by Ms Tsui under cross-examination, he claimed that the name of the payee was in fact left blank in the cheques which were then given to a person sent by Madam Chiu whom he did not know after receiving a message from her, which must be said to be highly unconventional at least as far as conveyancing practice in Hong Kong is concerned. 88.All these then take me back to Ms Tsui’s proposition as to the true ownership of the Taiwan property : Firstly, she submits, that Madam Chiu could not be the owner not only for the many inconsistencies in her conducts referred to above, but more significantly for the fact that she never mentioned anything about the property in her earlier declarations because she was simply not involved with it, but only did so in the much later 3rd declaration at the request of the Husband when she lied to assist his case, and that whatever interests she may indeed have in the Fubon Bank account, it had nothing to do with the property. 89.It then follows, she submits, that it was the Husband and Li who were the true joint purchasers of the property, as they had done in the past with their joint investment in The Legend Property, but afterwards somehow they decided to swop their respective interests in the 2 properties, with Li taking over the Legend Property and the Husband taking over the Taiwan property. 90.Given the differences in the time when the 2 properties were purchased and more importantly in their respective purchase price, this proposition of Ms Tsui does sound somewhat far-fetched on first hearing, but when one takes into account the many discrepancies in the Husband’s evidence referred to above, I am unable to rule that out entirely. 91.The point is that since the Taiwan property was purchased and sold in the Husband’s name, the onus was on him to prove, on balance of probability, that he had no beneficial interests therein. On the basis of the evidence before the court, I have to say that he has fallen far short of discharging that onus, and while I am unable to decide with certainty the extent of his interests in that property, i.e. whether solely or jointly with Li or anyone else, I do not accept that he had no beneficial interests at all as he claimed. Hence it follows that when the property was sold in April 2010 for some HK$13.5 million, he would have received at least part of that proceeds, which may explain why he was able to pay the 1st instalment of HK$200,000 to the Wife in July 2010 under the 2010 Order. I shall next turn to the remaining issue over the Husband’s current financial circumstances. Husband’s Income and Other Financial Circumstances 92.Given all those that have transpired above, it is small wonder that the Wife does not accept the Husband’s claims that he earns only RBM4,500 per month as a salesman in China, that he is in dire situation, and that his new wife has disappeared with his new born child, the latter of which she believes that he has merely put on a show to get the court’s sympathy, and I agree she has good reasons to doubt him. 93.It is true that he has produced what he claimed to be his employer’s certificate of his income, as well as various IOUs of alleged debts, which were all disputed by the Wife as to their authenticity, and none of the alleged creditors have come forward to give evidence on his behalf, but the same question must be asked again : If indeed he was merely earning only RMB4.500 per month, which is the equivalence of HK$5,500, how could he afford to offer earlier to the Wife to pay off the arrears by monthly instalment of HK$5,000 each, when he had just taken upon new liability of a new family, not to mention his own normal needs and expenses? Like his evidence on his various dealings referred to above, while I am unable to determine exactly what is his present income, I do not accept that that is all he earns. 94.Similarly, I have serious doubt about his claim of earning only HK$8,000 per month back in 2008 allegedly working for Madam Chiu after his transfer of RBS Building Materials to her, given the suspicious circumstances of that transaction, and in particularly in view of my above findings against him in respect of the Taiwan property, as even if he purchased it jointly with Li, and while the purchase price was to be paid by stages of the construction according to the purchase agreement, it would still mean that he would have to come up with HK$5 million over 2 years between 2008 and 2010 for his half share. With his alleged monthly income of HK$8,000 from 2008 to 2009, that is simply impossible, unless he had other resources or substantial savings, of which of course not disclosed, and the same adverse inference would apply against him. 95.For the same token, while it cannot be disputed that the last instalment payment made by the Husband to the Wife towards the arrears under the 2010 Order came from the bank account of one of his brothers, I agree with the Wife that it could easily have been designed by the Husband to mislead the court, given the extents that he had gone to conceal his assets in the past. Conclusion 96.This being the Husband’s application to vary the monthly maintenance, quite dramatically if I may say so, from HK$14,000 down to practically nothing at HK$1.00 and HK$100 respectively for the Wife and the child, as noted above it is for him to satisfy the court that indeed his financial circumstances have deteriorated to such an extent that he be virtually absorbed from all financial responsibility towards his former wife and in particularly his school-aged son, and to do so it is encumbrance on him to first make full frank and truthful disclosure, of which he has failed and failed miserably, as to both his means and his various financial dealings over the past several years. 97.Not only did he fail to disclose his 2 earlier property dealings at the time of the divorce settlement which led to the maintenance order he now seeks to vary, but he had continued to adopt a catch-me-if-you-can attitude thereafter and only made piece-meal disclosure when pressed or caught as in the case with the Fubon Bank account and the Taiwan property, while his agreements to pay the arrears on such terms of those consent orders so contradicted his then claimed dire financial situations stated both under oath and in affirmations that the only logical conclusion is that they must be far from accurate or were false altogether. 98.In fact, there have been so many discrepancies and inconsistencies amongst what he had stated in his affirmations, his oral testimony in court and his conducts leading to all those consent orders that followed the divorce, it is virtually impossible to determine with any certainty what exactly had been his financial situations since and up to the presence, and if for those reasons the court is ultimately unsympathetic with his application, he has only himself to blame. 99.In the premises and for all the reasons discussed above, I do not see any alternative but to dismiss the Husband’s application, with costs to follow the event to the Wife with certificate for counsel to be taxed on Legal Aid Regulations, which is a cost order nisi to be made absolute at the expiration of 14 days. Lastly, I wish to express my gratitude to counsel for both sides for their valuable assistance in particularly as to the voluminous documents involved.
Ms Jennifer Tsui instructed by M/S T.H. Koo & Associates for the Petitioner. Ms Rita So instructed by M/S Wong & Co. for the Respondent. | |||||||||||