Lmh v. Lyc
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FCMC 10733 / 2011 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 10733 OF 2011 ----------------------------
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--------------------------- J U D G M E N T --------------------------- 1.This is a trial on the ancillary relief of a divorce petitioned by the husband. Background 2.Both the husband and the wife are locals. The husband will be 43 years old in May this year and the wife, being a few months older, is now 43. 3.The parties were married in Hong Kong in December, 2004. Before then they had already cohabitated as husband and wife since about 2001. 4.This was the first marriage for the husband but for the wife, it was her second. She divorced her former husband in about 1997. 5.There are 3 children of the family, all boys. 6.The first boy H was born in March, 1997 and is now 17 years old. He was born by the wife from her former boy friend before she met the husband. H had been treated by the parties as a child of the family. Indeed, H even adopted the husband’s surname. H is now studying Form 4 in a local secondary school. 7.The second son E was born by the parties in May, 2008. He is now 5 years old. He is attending K3 in a local kindergarten. 8.The youngest son J was born in November, 2009. He is attending K2 in the same kindergarten. 9.It was unfortunate that the marriage broke down when the husband moved out of the matrimonial home and lived with his girl friend T in June, 2011. The husband then petitioned for divorce on the ground of one year separation with consent on 5 August, 2011. 10.The petition met with a defence by way of an Answer and a Cross Petition on the ground of the husband’s unreasonable behaviour. 11.Subsequently the parties apparently were able to come to terms on how to deal with the main suit. By a consent order dated 8 February, 2012, the wife withdrew her Answer and agreed to water-down her Cross Petition. 12.The husband however did not proceed further with his petition. It was on the application of the wife pursuant to her Cross Petition that decree nisi was granted on 5 March, 2013. 13.By an Order dated 8 February, 2012, the custody of E and J were granted to the husband and the wife jointly with care and control to the wife and reasonable access to the husband. Sometime later on 18 May, 2012, the husband was also granted defined day-time access to them. 14.As for H, the wife was given his custody, care and control and the husband was given reasonable access pursuant to an Order dated 18 May, 2012. 15.There was also a Consent Order of 30 August, 2012 dealing with maintenance pending suit. In brief, the husband agreed to pay a monthly sum of $65,000 as the wife and the 3 children’s maintenance pending suit. He further undertook to pay monthly rental allowance of $54,000 and car allowance of $25,000 in the event that the husband’s company MP failed to continue to provide the same. It is undisputed that the husband is liable to pay these allowances as MP subsequently discontinued these provisions. 16.It is also not in dispute that the husband from time to time failed to pay the maintenance pending suit in full and even completely ceased payment as from April, 2013. According to the wife the amount in arrears as at January, 2014 stood at $1,542,000. The quantum is not in dispute. 17.The husband comes from a well-to-do family. His parents run a successful printing business MP with its own factory premises in Aberdeen. He studied marketing in a university in Australia and returned to Hong Kong in about 1995. After working in an advertising agency for about 2 years, in view of the declining health of his father he joined MP to assist in the sales and marketing areas. At that time his elder brother JL had already joined the family business. According to the husband, throughout all these years JL was responsible for accounting and finance matters and he was responsible for sales and marketing. 18.In about 2009, the husband and JL were made directors of MP and each was given 25% of the shareholdings in MP so that the father, the mother, JL and the husband each owns 25% of the shareholding. 19.In June, 2011, the husband moved out from the matrimonial home in Bel Air (“the matrimonial home”) to stay with his girl friend T. 20.At about the same time on 1 July, 2011, the husband was asked to enter into an employment contract with MP as its sales manager with a salary of $40,000 per month. As admitted by the husband, the reason for this arrangement was that his parents wanted to put pressure upon him to return to the wife so as to keep the family intact. 21.Meanwhile, when the husband was forced to enter into the employment contract, JL was dismissed outright from MP. I will come to this incident in latter part of this judgment. 22.After the husband had moved out from the matrimonial home, he initially stayed in a serviced apartment for a month, then moved to stay at T’s home, and the new couple finally settled down in a rented flat in Yau Yat Chuen, Kowloon. They stayed there for 2 years from September, 2011 until the lease expired. 23.In the meantime, as mentioned above, the husband petitioned for divorce in August, 2011. 24.Then, at the end of May, 2012, the husband’s employment with MP was terminated. The husband says he was sacked because his parents were very upset with his divorce and when he failed to return to the family according to their wishes, or to be more accurate, according to their ultimatum, his employment with MP was immediately terminated. He was paid compensation of $227,000. 25.To ease his financial burden, he obtained a bank loan of $404,000 in June, 2012. 26.The husband was jobless for some time after the dismissal. Through the introduction of a friend SL whom he had known for a long time back in the days in Australia, he was fortunate enough to find a job in a company CDN Limited as its Assistant PR and Marketing Manager, earning a salary of $25,000 per month. 27.However, this did not last long. He just worked there from mid September, 2012 to March, 2013 when his employment was terminated because of his work performance and because he had to take too many days off for attending court hearings for the present suit. 28.He has been jobless since then and has been living on the financial support of T, JL and a few friends including SL. With the assistance from T, he has been able to meet the monthly minimum payments of his credit cards. The husband says that T, who has a master degree from the University of Hong Kong, is now working in the beauty industry and is earning about $50,000 per month. 29.Meanwhile, upon expiry of the lease of the Yau Yat Chuen apartment in September, 2013 the husband moved to live in a flat owned by Ms H, a colleague of T. This is a small flat in Mongkok of about 300 sq ft and with 2 bedrooms only. He is allowed to occupy the smaller bed-room rent-free. However, because of the smallness of size, T has moved back to live with her mother for the time being. 30.The husband asserts that he is determined to be on his own feet. He has just passed 2 qualifying examinations for insurance agents. He is planning to take another qualifying examination on MPF products. Subject to the completion of a core training course offered by an insurance company, he will be engaged as its insurance agent. At the time of trial he was hoping to start working as such in March, 2014. 31.The husband is contemplating getting married with T in the future but there is no definite plan yet. 32.As for the wife, she graduated from a university in Australia in 1994, majoring in psychology. She then worked as a flight attendant. 33.She got married for the first time in February, 1994 and divorced in December, 1997. This was a childless marriage but subsequently she gave birth to H with her boy-friend before she met the husband. 34.As said, she met the husband in 2001 and they got married in 2005. The wife then resigned in 2006 when the parties were planning to raise a family. The wife turned to a housewife since then; and E and J were born in 2008 and 2009 respectively. 35.When the husband moved out from the matrimonial home, the wife continued to stay there and had the use of the husband’s Mercedes R350 car until mid of June, 2013 when the lease was terminated. She has since been living with the 3 children in a rented apartment in North Point. Living Standard During the Marriage 36.It is beyond doubt that during the marriage the family was able to lead a very comfortable lifestyle, one that was incommensurate with the husband’s employment and was only made possible through the generosity of his parents. 37.Even on the husband’s own account, his salary on record before June, 2011 was merely $10,000 but he had access to cash in the region of $50,000 to $60,000 per month. Cash apart, he also had the use of MP’s Citibank and AE supplementary credit cards which allowed him to settle not only his business expenses but also some of his family and personal expenses. He also had the use of 3 cars: a Nissan GTR, a Mercedes C-class and a Mercedes R350, all funded by MP. When the parties got married in 2005, they lived in an apartment in Bel Air that was purchased in the husband’s name with monies provided by the parents. When the husband sold it in 2008 with a profit of $7,000,000, he returned $6,500,000 to the parents and the family then moved to the matrimonial home, a 1,700 sq ft large apartment rented by MP. Needless to say, the monthly rentals of $54,000 together with the utilities and even the tuition fees of the children were all taken care of by MP. The family had the use of 2 live-in maids. The husband is also a member of the Hong Kong Jockey Club. With the blessing of the father, he once raised a horse in about 2009 to 2011. 38.According to the husband, he was stripped off of all his finance upon dismissal from MP. The only benefits that he can say he still has are the mobile phone and the auto-pass tag that he removed from his car when he left. He is now using a small Japanese car loaned to him from JL for taking the children to school. The parents so far have not raised any objection to these and the charges are still being settled by MP. The MP Shares 39.As said above, the husband was given 25% of the shareholdings in MP (“the MP Shares”) and was made a director of it in 2009. At about the same time, the husband and his elder brother JL each was given $5,000,000 for investment or planning for the future since his parents did not see a bright future in printing industry. The husband says he invested the money in the stocks market and lost 85% of it in 1 ½ years time. 40.The husband is still the owner of the MP Shares. According to the valuation of the Single Joint Expert, the value of his shares is assessed at about $23,197,000. The husband agrees to the valuation. 41.The husband and JL are also the shareholders of a company DEW, each owns 50% of the shareholding. It is a company originally set up by JL in about 2000 and its sphere of business was relating to that of MP. However, it is common ground that this company had ceased business and the husband was asked to resign as director in January, 2013. All the employees were laid off in early 2013. The Single Joint Expert assesses DEW at nil value. 42.Both the husband and the wife appeared in person and gave evidence in court. Open Proposal 43.The husband offers to pay $40,000 to $50,000 per month plus tuition fees for the maintenance of E and J. The husband says he discussed with his father (“the grand-father”) who had agreed to pay, which payments at the end of the day would have to be deducted from the husband’s shares. The husband explains that the value of MP is entirely on the factory premises that it owns and it is intended that one day the factory premises would be liquidated for cash, in which event, these payments would be deducted from his share of the sale proceeds. Nevertheless, he accepts that it is his subjective wish that the factory premises would one day be sold. The husband is not making any proposal for H’s maintenance. 44.The wife insists that the husband’s proposal would not be sufficient. If she is to be given $50,000 only, she would probably have to tighten up by reducing the rentals. 45.At the beginning of the trial, the wife amended her open offer so that it becomes (i) a lump sum of $5,000,000 to her payable by 5 yearly instalments of $1,000,000 each; and (ii) E and J are to have 6.25% of the shareholding in MP (which is roughly $5,750,000: (($23,000,000 ÷ 25) X 6.25); in the meantime, the husband is to hold the shares upon trust for E and J with dividends to be paid out on monthly basis for their maintenance. The Law and Legal Principles 46.The jurisdiction of the Court in granting financial relief for a party is governed by section 4 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) which provides:
47.Section 5 of MPPO provides for the financial provision for children of the family in cases of divorce. I do not think I need to set out the provisions here. In short, similar to section 4, the Court is empowered to give an order of periodical payments or a lump sum. 48.In deciding on how to exercise its power in this regard for a party to the marriage, the court is bound to consider section 7 (1) of MPPO which provides,
49.As regards the financial provision for the children of the family, the relevant provisions are in subsection (2) of the same section 7,
50.The principles upon which this case is to be considered are the conventional ones, namely those set out in section 7 of MPPO. Those principles are to be interpreted in the light of the Court of Final Appeal judgment in LKW v DD, (2010) 13 HKCFAR 537. Further, Ribeiro PJ in the judgement set out the steps to be taken by the courts in undertaking the exercise. In brief, they are:
51.On the ascertainment of the parties’ financial resources, at issue is to what extent the financial support of the husband’s parents can properly be taken into account for the purpose of assessing the financial resources and obligations of the husband. 52.In KEWS v NCHC [2013] 2 HKLRD 314, Mr Chief Justice Ma clarified the approach that the court should take. He said as follow,
53.Thus, the court needs to ascertain the extent of the parents’ financial assistance to the husband and the likelihood of such assistance continuing in the foreseeable future. In doing so, the court needs to look at the reality of the situation and has regard to matters of substance and not just form. The court could take into account not only what the husband actually had, but what might reasonably be made available to him if a request for assistance were to be made. Financial Assistance from the Parents 54.As regards the first point, ie the extent of financial assistance by the husband’s parents, there is indeed a large measure of agreement between the parties. Both agree that the family was relying on the financial resources of the husband’s parents, whether directly from them or through MP, in order to maintain the affluent standard of living, one, as I said, that was incommensurate with the husband’s employment. 55.Even after the marriage had broken down, the parents’ financial assistance continued to be prominent. Shortly after the husband’s moving out in June, 2011, the husband’s mother (“the grand-mother”) arranged a meeting for the parties during which it was agreed that the husband would give $65,000 per month to the wife as maintenance, the wife could continue to use the Mercedes R350 and she and the children could continue to stay in the matrimonial home. At the same time, the grand-mother cancelled all the supplementary credit cards and the husband was asked to be responsible for the instalments of all the 3 vehicles. Given that the husband’s salary was formally set at $40,000 ($39,000 net after deduction of MPF contribution), there was no way that the husband would have been able to honour this arrangement if it had not been for the endorsement of the parents. Thus, there was additional monthly sum of about $44,281 for this purpose, up until shortly after he was terminated in June, 2012. The husband says notwithstanding this extra money, there was effectively no money left for his spending after payment of $65,000 and the cars’ instalments. It was an attempt by the grand-mother to put pressure upon him to return to the wife and to stop him from proceeding with the divorce. 56.Then in May, 2012, the parents gave the husband one week to decide if he was moving back to the wife, otherwise he would be fired. The husband testifies that during the week he did discuss with the wife and indicated to her that he would succumb to the demand otherwise both of them would be facing very real financial problems. However, the wife’s strings attached to the reconciliation was a monthly sum of $70,000 plus an apartment similar to the one in Bel Air, to be purchased in her name; such conditions, the husband says, were simply out of the question. It is of note that the wife does not dispute this part of the evidence. 57.Again, it is not in dispute that there was another family meeting in about January, 2013 attended by the parents, the husband, the wife and the wife’s younger sister who is a medical practitioner. It was then agreed that the grand-father would pay $40,000 per month for the children. 58.The final assistance was $123,000 given by the grand-mother on 15 March, 2013 of which $40,000 was the agreed living expenses and the balance of $83,000 was for the expenses expected to be incurred for moving out of the matrimonial home. This balance however, according to the husband, was subsequently returned to the grand-mother when the wife refused to move out upon expiry of the lease in March, 2013. The wife only moved out 2 to 3 months later after some exchanges of altercations; and the husband says this incident caused great annoyance to his parents. 59.As for the second point, ie the likelihood of such financial assistance continuing in the foreseeable future, the parties adopted a polarized position at the beginning of the trial but towards the end of it, the wife was apparently drawn by the evidence to come closer to that of the husband. The Husband’s Case 60.As I have alluded to above, the husband says he was stripped off of all his finance upon his dismissal from MP because he did not take heed to the parents’ demand to return to the wife. His parents saw him as the murderer of the family and were extremely upset about his behaviour. Another reason is that according to his surmise, the parents mistakenly took the view that the husband had a part to play that led to the debts MP had incurred during the period when the brothers were managing the business. The husband says at about the same time when he left the family, the parents caused a check at MP’s accounts and unearthed that MP owed banks in the tune of $7,000,000 while previously it was debt-free. As a result, JL was instantly fired. He surmises that the parents considered that he and JL had embezzled MP’s funds and probably he still has some hidden assets. The Wife’s Case 61.The wife’s case, on the other hand, is that the dismissal and indeed the whole predicament that the husband says he is now in, is a scheme diligently played out by the husband and his parents. The wife maintains that there are still financial assistances from his family otherwise it would not be possible for the husband to pay the monthly minimum payments of his credit cards and the instalments of his bank loans. She agrees that the husband did take out a loan of $404,000 in June, 2012 but disagrees that he was in lack of money. The husband has many unexplained deposits and withdrawals and these imply that he continues to have financial assistance from the family and has hidden assets. Also, despite his alleged financial difficulty, the husband still decided to purchase a new insurance policy that required him to pay premium of $3,412 per month. Finally, the wife also describes of a family pool from which the family members can take what he or she requires. Deposits and Withdrawals 62.The wife conducts a forensic examination on the husband’s bank statements. She is at pains to draw evidence in support of her contention. She says from November, 2010 to November, 2011 there were deposits of $479,380.27 by the grand-mother and unexplained deposits of $409,966. There were withdrawals of $1,796,000 that cried for explanations and there were also withdrawals said to be in favour of T in the total sum of $770,000. The board picture is, according to the statement of 27 November, 2010, the husband at one time had a portfolio of assets of $4,481,867 but one year later on 27 November, 2011 it shrunk to $171,016. The wife says these funds were removed and hidden. 63.The husband explains that the deposits from the grand-mother were for his horse. His father was fond of horse racing, the horse in truth belonged to the father but because he was a racing member, the horse was purchased in his name. The husband agrees that he now cannot recall the purpose of various deposits totalling $409,966 for the period from November, 2010 to November, 2011. 64.As for the withdrawals, he surmises that the withdrawal of $320,000 on 31 January, 2011 was for T’s car. Subsequently, the car was sold and the sale proceeds, which was drawn in one cheque by the buyer in the sum of $370,000, was deposited into his account on 11 October, 2011; out of which he returned the balance of $50,000 to T on 18 October, 2011. The withdrawal of $720,000 on 29 November 2010 was a loan to T when she was studying full-time at the university; so far T has returned approximately $461,500. There is evidence in support of this assertion. These explanations aside, he concedes that he cannot now recall the purposes of the other transactions. 65.The wife also raises queries on various transactions in the account from April, 2012 to September, 2013. I think it is fair to say that, except a few items of insubstantial amounts, by and large the husband is able to explain the source of the deposits and the nature of these transactions, with supporting documentary evidence on a number of these items. For instance, on 21 June, 2012, the husband paid $127,626 by way of a cheque for the repayment of monies owed to SL. He was only able to do so upon receipt of compensation of $227,500 from MP for his dismissal. Another example is $83,000 that he withdrew by way of a cheque on 2 April, 2013. This was for the return of the balance of $123,000 moving expenses that the grand-mother gave on 15 March, 2013 (see Para. 58 above). 66.The statements from August, 2012 to August, 2013 show there were not much money in the account but every month there would be some deposits just sufficient for the minimum payments of the credit cards. The wife cross-examines the husband on these deposits, ranging from $3,000 to $4,000 odd each time that were made available to the husband for this purpose. The husband explains that, with deposit slips of some of the items in support, these were monies from T. 67.The wife also refers to some entries on the statements showing charges of custodian fee of $25 in some of the months, the implication being that there are hidden accounts. The husband explains the custodian fee is for the stocks account which has already been shown on the statements. A monthly fee of $25 will be levied if the account remains inactive during the month. 68.She also alleges that the husband failed to disclose his Citibank credit card account, which may thrown light on the husband’s spending pattern. The husband testifies that the Citibank credit card account was mainly for auto-pay of the wife’s monthly cable-television charges. The card was cancelled some time in 2011 or 2012. There were some transactions from May, 2011 to August, 2011, possibly because both had used it during the time. The husband also produces a letter from the Citibank confirming that there was no debit transaction since January, 2013. 69.On the wife’s accusation that despite his alleged dire financial difficulty, he still decided to purchase an insurance policy, the husband accepts that he did purchase one in August, 2012, naming T as the beneficiary. He could do so because the monthly premium was paid by debiting his credit card on which he has been paying minimum payments only. 70.Finally, on why his portfolio of assets shrunk from $4,481,867 in November, 2010 to $171,016 in November, 2011, it was in part due to his loss sustained in the stock exchange. He made use of the $5,000,000 given to him by the parents in 2009 in investing in stocks; in particular he invested heavily in a company called China Vanadium Titano-Magnetitle Mining Company Limited by purchasing its shares substantially from time to time and at various high prices, including at one time as high as $5.06 per share in about February or March, 2010 (Exhibit P-7); but contrary to his anticipation the share price dived all the time. Due to his deteriorating financial situation, he eventually had to liquidate them at a substantial loss. The husband explains that he needed to borrow $404,000 from the bank because at that time he was paying the wife $65,000 and he also needed money for his own expenditure. It did not take too long to finish off this $404,000. 71.Another reason is that since moving out from the matrimonial home in June, 2011, his access to MP’s credit cards were cut and what made things even worse, he was required to pay his cars’ monthly instalments. He thus had to be responsible for his Mercedes C-class at $15,000 odd up until July or August, 2011 when it was sold. He also had to pay $28,000 per month for his Nissan GTR up until April, 2012 but when he sold it for $560,000 he had to surrender the proceeds to the parents. Paying $65,000 to the wife apart, he also had to foot $15,700 for the Mercedes R350 that was being used by the wife up until May or June, 2013. Lastly, he had to take care of his own rentals and living expenses. All these explain why his assets dwindled to an insignificant amount. Discussion 72.The husband strikes me as a frank and truthful witness. He is forthcoming and spontaneous in the way in which he gives his evidence. He is not evasive. If there is anything he could not recall he would simply admit it and would not try to improvise along the way. It also appears to me that he is not too money-minded. He expresses that he is not particularly concerned about what assets the wife has; perhaps this is the reason why he does not have lengthy cross-examination on the wife’s financial situation and her suspected involvement in a beauty business. 73.It is true that the husband has no idea on various deposits and withdrawals from November, 2010 to November, 2011. Bearing in mind that his relationship with his parents only significantly turned sour in June, 2011 when he moved out from the matrimonial home, in my view, it is unlikely that these transactions were intended to be part of a pre-meditated scheme with a view to defeat the wife’s claim. Even assuming for one moment that all these deposits were from the parents, it would not alter the overall picture that at that time, the family was relying heavily on the parents; that is something beyond dispute. On the evidence before me, the husband was just using his account in the normal fashion. Indeed, as the husband points out, if he was mindful to carry out the scheme as alleged by the wife, there was no point for him to deposit monies into the account and then withdrew them. 74.It is also true that before the employment contract, notwithstanding that on record the husband merely got a monthly salary of $10,000, he had the use of substantial cash. After the contract was signed, he continued to receive money far exceeded the contract sum of $40,000. Hence, it is glaringly apparent that before his dismissal, he continued to receive substantial financial assistance from the parents, whether it was directly from them or via MP. 75.At the same time when the husband was forced to enter into the employment contract, JL was dismissed outright. The wife concedes she heard of that at the relevant time. Though JL is now jobless, financially he is in a much better position because he is able to live on his investments in the Mainland. After the brothers had been dismissed, the grand-mother returned to look after the business. The husband’s position had been taken up by his cousin who was already the general manager of MP. In my view, the husband’s evidence as to why the parents are so unyielding in their position is credible. 76.I accept that the husband’s relationship with his parents has turned from bad to worse and he now does not have much communications with them. He only sees his parents when taking E and J to see them. 77.The bank statements show since his dismissal, there are not much money left, indicating he has been running out of funds. The husband says he manages to survive only with the assistance of T, JL and his friend SL. Of course, the wife has her own theory: all these are part of a scheme diligently played out in order to convince the court. That said, it is important to note that in the hearing of 12 February, 2014, when it came to the end of her cross-examination on the husband, the wife at one point conceded that she believed “two-thirds in the husband” that he is in financial hardship (“三分之二信，三分之一唔信”), but she remained adamant that when these proceedings are over, all the previous financial assistance would recur in the same manner as it was in the past. 78.A piece of evidence that strikes me is about the sale of his watches and camera. This part of the evidence, not in any of his affirmations, came out spontaneously during the cross-examination. I examine in detail about the sale in order to confirm the veracity of his evidence. The husband testifies that he liquidated his 6 watches (a Rolex, a IWC, a Panerai, an Omega, a Cartier and a Roger Dubuis) for cash from August, 2011 to 2012 over a course of 4 transactions. He is able to recount, though not without some difficulty, the place, the approximate time and the prices of sale. He also sold his Canon 5D Mark II camera and a few lens for $20,000 odd in 2013. The fact that he sold these “big boy toys” over a course of 5 transactions suggests the absence of further financial support from the parents. 79.Further, it would appear that even the wife’s mother was sympathetic to the husband’s dire financial situation. By a texted message dated 30 January, 2014, the wife’s mother offered to let the husband occupy her flat in Nam Tin so that he may have a roof over his head and the children have a place to stay during access (see Exhibit P-11). 80.On the analysis of the evidence before me, I am driven to the conclusion that after his dismissal from MP, apart from the few payments that I have referred to above, the husband received virtually no financial assistance from the family. I do not believe the financial situation that the husband now finds himself in is a scheme carefully plotted by the parents and diligently played out by all the members including JL over the past 2 ½ years. 81.I am not drawn to the wife’s assertion of the existence of a family pool from which the 4 family members may have recourse to whenever they are in need. There is no evidence in support of the contention. 82.I remind myself that the ultimate question is the likelihood of financial assistance from the parents in the future. The wife is adamant that all the financial assistance will be resumed as before once these proceedings are over. The husband expresses that this is also his wish. In this regard of one thing I can be certain: it is anything but their wishful thinking. The evidence before me is that the couple was financially at the mercy of the parents; but unfortunately the financial assistance has essentially ceased after June, 2012. It seems clear to me that the parents are determined in their stance in not continuing with the financial assistance; of particular note is that given the situation, the husband is prepared to be on his own feet by becoming an insurance agent. I will come to this in the latter part of this judgment. Thus, it is my finding that apart from the $40,000 to $50,000 that the husband says the grand-father has agreed to pay, it is unlikely that there will be other financial assistance from the parents in the future. Parties’ Financial Resources 83.The husband is on paper a multi-millionaire by virtue of the MP Shares, which is assessed to worth $23,197,000, but unfortunately for both parties, given the fact that MP is a private family business, together with the fact he only has a minority interest, unless the parents are willing to buy out his share, this piece of asset is wholly illiquid. It is also of note that the expert has not given a discount on the value of the MP Shares to reflect the fact it is a minority interest. Nevertheless, the husband raises no objection to the valuation; and there is no evidence before me on the appropriate rate of discount, I will adopt the figure as assessed. 84.The other more substantial assets are the parties’ equities in their MPF accounts which will not be liquidated until they become 65 years old. Hence, there is almost no liquidity in this case at all. 85.As for DEW, the husband says this company ceased business in around March last year; and according to the expert, this company does not have a value. 86.In his Form E dated 4 February, 2014, the husband reported a liability of $350,000 towards MP. This, he says, is his share as the 50% shareholder of DEW for settling the severance payments of the employees. This liability was virtually imposed upon him from his mother by having a cheque for $350,000 deposited into his account and he was then asked to issue a cheque for the same amount. The documentary evidence shows this is what happened. I am also given to understand that the same modus operandi occurred to his brother JL. In my view, as the 50% shareholder of DEW, this is legally speaking his liability; if the value of the MP Shares is taken into account in the matrimonial pot, there is no reason why this liability should not go in as well. 87.As for the wife, because of the cessation of maintenance from the husband, she had to rely on her savings and loans, now totalling $700,000, from her younger sister. This has not been subject to challenge by the husband. 88.Based on the above analysis and on the basis of the undisputed items disclosed in the parties’ Form E, the parties assets and liabilities are as follow, Schedule of Assets and Liabilities Husband’s Assets
89.Hence, the total family assets are worth $21,934,967 ($21,875,993+ $58,974). Earning Capacity of the Husband 90.The husband says as a matter of fact he did not complete his university education before returning to Hong Kong. He only had 2 years’ experience in an advertising agency prior to joining the family business where his remuneration far exceeded his actual earning capacity if he was to compete in an open market. The husband readily accepts the reality; the easy-going life he had is a matter in the past and he is determined to be on his own feet. 91.The husband explains that if he is to return to the advertising industry, he could at most earn $30,000 per month which would barely be sufficient for him and the children. Given his connection with MP, for obvious reason, the opportunity of joining another printing company simply does not open to him. Given these constraints, with the hope to earn higher income, he has decided to become an insurance agent. He has so far passed the examinations on the General Principles of Insurance and on Long Term Insurance, which would enable him to obtain the relevant licences requisite for starting as an agent. As at the time of trial, he was planning to take the examination on MPF license. With the MPF license, it would be easier for him to make use of his previous connection in approaching his targets. An insurance company has already engaged him as an agent. He should be able to commence work as soon as after he has attended the company’s core training course. He is hoping to earn on average $40,000 to $50,000. 92.I listened with care to the husband’s plan and considered, equally with care the evidence provided by him. Whilst whether or not he will succeed as he wishes remains an open question, his plan is, in my view, at least workable and given exceeding endurance and industry, is also attainable. I must say I am persuaded by the husband’s intention to be free from the shadows of his parents. Earning Capacity of the Wife 93.The wife has a degree in psychology. She says (and I accept) that her previous experience as a flight attendant may not be too relevant to other jobs. She was also a fashion model in the early years. The second son E has asthma; she wants to wait for one or two years to see whether his condition is stable before re-entering the labour market. By the time, she will be 45 years old. If capital allows, she intends to operate a small boutique; if not, she would like to engage in some customers service jobs. She expects to earn about $20,000. 94.The husband has some evidence suggesting that the wife has been actively involving in a beauty salon of which the wife’s father is on record one of the partners but in fact the wife is the de facto partner. When being put to her that one of the employees Amy addressed her as “the boss” (老闆), the wife’s answer is that it was Amy’s decision as to how to address her but for her, she does not now recall how Amy addressed her. This answer is telling. I would have thought that if she is not the boss, her answer would have been that there was no way that Amy would have addressed her in the manner suggested by the husband. 95.Faced with this evidence the wife insists that her father is the true partner and her younger sister, being a medical practitioner specializing in this field, is working part-time for the business. As for her, she stages as the brand spokesperson and that is the reason why her portraits appear on the posters and promotional materials of the salon, but she emphasizes that she just did it for free. She is now working there for 2 days per week but again she stresses that it is without pay for the reason that she is just learning how to do the job. 96.On the evidence before me, in particular from the photographs taken on the salon’s grand opening, it would appear that the wife’s involvement in the business is more extensive and substantial than what she testifies. Indeed, I have grave doubt over what she said. I find it quite unconvincing that she has chosen to engage in a no-pay part-time job when she, like the husband, is equally in need of money. I accept that there is no cogent evidence that she is a de facto partner, but I believe she is economically active and she is earning some money from the business. Though there is no evidence as to how much she is earning, doing the best I can I am prepared to ascribe to her an income of $20,000 per month. Financial Needs of the Husband 97.In this latest Form E dated 4 February, 2014, he stated his monthly expense at zero and he is merely spending $4,100 on the children. He says he is now being supported by T. I accept the husband is now in a dire financial situation. He is going to work as an insurance agent; he may need some time to take-off before he could achieve a more substantial income, yet something far less than what he used to get in MP. Financial Needs of the Wife and the Children 98.The wife is living with the 3 children in a rented flat in North Point, the monthly rental being $28,000. She is being assisted by a foreign domestic helper who is still employed in the name of the husband. She stated that her monthly expenses, all inclusive, are in the region of $99,624. This figure has not been subject to challenge by the husband. On the contrary, the husband mentions that the more would be better for the children and he would like to earn as much as he could. 99.That said, the wife admits that some of the figures she gave are not the actual figures now simply because she has no money to spend on them. She has cut back some of the expenditures. Apart from this concession, I consider that some of the figures are very much on the high side. For instance, the wife stated that she needs, on a monthly basis, $3,000 meals out of home, $3,000 on transport, $3,000 on clothing/shoes, and for each child, $1,000 on extra-curricular activities, $1,000 on entertainment, $1,000 on holiday and $1,500 on clothing/shoes. What is more, she stated that H needs $7,200 for his birthday party (ie $600 each month on average) and E and J each needs $8,400 for the same event. This might be their lifestyle in the good old days but it was a matter of the past. Doing the best I can, and also taking into account their previous standard of living, I consider that the needs of the wife and her children should be in the region of about $85,000 per month. The Sharing Principle 100.Inclusive of cohabitation, this is a relationship lasting in reality some 10 years, which by today’s standard is by no means short. Further, the parties have raised a family of 3 children and each of the parties has a role to play. The husband made financial contribution while the wife was a homemaker. Apparently, the yardstick of equality should apply. 101.I am conscious that the husband has some criticism over the wife’ s “performance” as a homemaker but whether it is true or not, I do not think it is so material that it warrants a departure from the yardstick of equality. Considering whether there are good reasons for departing from equal division 102.Both parties recognize that the bulk, if not the whole, of the asset that the husband has, in the form of the MP Shares, is a gift from his parents; as such it is to a very great extent external to the marriage. When MP was established, the husband was merely 16 years old. During the time when he was working for MP (and for DEW as well), he was already in receipt of a remuneration package far above the market rate for his position, qualification and experience. That said, notwithstanding the externality of this asset, given that in reality this is essentially the whole of the asset in the matrimonial pot, it seems clear to me that this piece of asset should not be ringfenced but should be subject to a departure from equal division. I believe this is the correct approach. 103.Jackson’s Matrimonial Finance, (9th Edition) has the following commentary on this subject,
104.While one may argue that the comfortable lifestyle that the parties had was only made possible because of the generosity of the parents and not because the husband was in possession of or was enjoying this asset, yet the fact remains this is essentially the only substantial asset that the parties have and this asset is also somewhat intrinsically related to the husband’s work. As said by Wilson J (as he then was) in R v R (Lump Sum Repayments) [2003] EWHC 3197 (Fam), [2004] 1 FLR 928, in which the learned judge faced a similar situation where the husband’s main assets were minority interest in a family company,
105.I consider these observations apply with even greater force here for the reason that the wife is not given any secured accommodation. It would be wrong for me not to include this piece of asset. Doing the best I can, considering the length of the marriage and the standard of living that the parties used to enjoy, I consider that in all fairness the wife should be entitled to 25% of the overall assets, or numerically, $5,483,742. Deciding the Outcome 106.Both parties are still relatively young and have some 20 years to go before retirement. Both are educated and have earning capacity. Though I appreciate that the husband may take some time to be entirely on his own, for the present purpose, I would take his estimate of $40,000 to $50,000 as his monthly income. I can also properly include the money that the husband says the grand-father has agreed to pay towards the children. Taking a board brush approach, inclusive of the tuition fees I will adopt a figure of $55,000. It follows that the husband would have a monthly stream of income of about $105,000. As a matter of fact, this is the only asset that would readily be available to the family in any real sense. Since the husband is just at the beginning of his second career, erring on the side of caution, I will adopt a more conservative figure of $95,000. 107.As for the wife, my observation is that she is an intelligent and sociable person. I am quite sure that given time, she would also have significant earning capacity, one perhaps even no less than that of the husband. As said, I have given $20,000 as her monthly income. 108.The husband is now relying on T and he has not stated the amount of his monthly expenses. I think it is reasonable for me to reserve a modest sum for his use; I will give $10,000 for this, leaving $85,000 for disposal. I am conscious that the husband still has some credit cards payments to make, and therefore he may still be in deficit but I believe this situation would improve in times when his insurance business grows. 109.Given that according to my assessment the wife and the children would need $85,000 per month, there would be a shortfall of $65,000. The husband has no proposal on the maintenance of H, but it is beyond doubt that the boy was treated by the parties as a child of the family. The husband cannot now be allowed to be excused from his responsibility. Out of the shortfall of $65,000, I consider that each child should get $16,000 as maintenance, totalling $48,000. The husband maintained the wife during the marriage; the remaining $17,000 therefore should go to her maintenance. 110.Now turning to the MP Shares, as said, the expert has not given a discount on the minority interest. The real problem though is the illiquidity of the asset which was far too obvious to the parties right at the start of the trial. The cash resource of the husband is essentially zero and there is little hope that the husband would be able to raise any loans or to realize his shareholding by whatever means. There is nothing to suggest that the parents are willing to consider buying his share back. Even if they do, it can be foreseen that the sale would be at a fire sale value, which is not beneficial to the parties. In all events, it seems clear to me that there is no possible means by which the husband could liquidate or divide the asset upon divorce. 111.Again, much guidance can be found in the case of R v R (Lump Sum Repayments) [2003] EWHC 3197 (Fam), [2004] 1 FLR 928 as referred to above. The husband in that case also owned a minority interest in his family company and it was virtually impossible for him to liquidate his shares. Faced with this conundrum, the solution that Wilson J (as he then was) devised was to order provisions for payment by the husband of a lump sum by a first instalment of £30,000 followed by 240 further instalments payable monthly, such payments to be secured by way of a first charge over his shares in the family company. As was pointed out by the learned judge,
112.Wilson J also spoke of the first charge over the shares,
113.Given that what is available is the husband’s stream of monthly receipts before his shares could be realized and it is anybody’s guess as to when this would happen, I believe to order him to pay a lump sum by instalments is the only viable solution. Considering that on the one hand there should be a discount on his minority interest but on the other, there is still $1,542,000 maintenance pending suit in arrears, I believe a lump sum of $6,000,000 is an appropriate figure. This is to be payable by monthly instalments of $20,000 each in 25 years’ time. I recognise that 25 years is a long time but the wife is still relatively young and given the limited financial resources that the husband has in the meantime, I do not think he is able to pay any more than this. Of course, in the event that the parents decide to buy back his shares or if the husband is able to liquidate his shareholding prior to this date or there is any change in the circumstances, either party may apply for a variation. 114.I also find it appropriate that the lump sum is to be secured by way of a charge over the husband’s shareholding in MP pursuant to section 4(2)(b) of MPPO. Orders 115.For the above reasons, I give the following orders:
Costs 116.As for the costs, I consider it is appropriate for the parties to bear his or her own costs. I will give an order nisi that there be no order as to costs of ancillary relief, including all costs reserved. 117.I will also give the Section 18 Declaration.
Mr Lo, the petitioner, appeared in person Madam Lam, the respondent, appeared in person [1] Meaning resources that party should have if he or she properly and reasonably utilized all available resources, for example, earning capacity. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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