Lkw v. Ky
Read the full judgment text of FCMC 530/2011 on BabelCite. This Family Court judgment was delivered on 17 July 2014 before HH Judge Bruno Chan.
Ancillary Relief – Matrimonial Proceedings and Property Ordinance – Full and Frank Disclosure – Undisclosed Assets – Maintenance – Matrimonial Home – Wife’s earning capacity – Whereabouts of settlement sum – Husband’s transportation business – Adverse inference drawn on non-disclosure – Wife granted transfer of former matrimonial home and monthly maintenance of HK$5,000 – Costs to Wife
Legal issues: Wife's Earning Capacity · Whereabouts of RMB500,000 · Husband's Undisclosed Properties · Division of Assets and Maintenance
Outcome: Wife granted transfer of former matrimonial home and monthly maintenance.
Cites 3 cases
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FCMC 530/2011 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES SUIT NO. 530 OF 2011 ----------------------------
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----------------------- J U D G M E N T ----------------------- 1.This is the Respondent Wife’s application for ancillary relief against the Petitioner Husband upon the dissolution of what was a second marriage to both that had lasted some 13 years, specifically for monthly maintenance of HK$8,000 for herself and HK$3,000 for her daughter from her previous marriage but treated as a child of this marriage and who is now already 23 but still on full time education at university in Guangzhou, or at least still was up to the time of the trial, and for the transfer of their former matrimonial home in Shenzhen currently in their joint names into her sole name so that she and the daughter can continue to have a home after the divorce and in lieu of her claims against his remaining assets including his transportation business and his interests in his deceased father’s ancestral home as well as 2 other properties in China which she believes he has concealed from the court. 2.The Husband now aged 51 and who runs a cross-border transportation business however argues that an earlier sum of RMB500,000 already paid to the Wife as part of their divorce settlement should be sufficient to meet her reasonable needs, as he believes that she in fact has her own income from running an aquarium shop in Shenzhen, and that in any event she has earning capacity and should be looking for a job to support herself if she is not already doing so, and insists that their former matrimonial home is the only remaining landed property of their marriage valued at RMB2,660,000 or just over HK$3.3 million with just a small outstanding mortgage should be sold with the proceeds to be shared between them with a bigger share of 55% to the Wife. 3.The major issues between the parties are therefore essentially whether the Wife, now aged 43, has been involved in any business of her own, and if not does she have any earning capacity, and whether the Husband has any other property which he has not disclosed including those 2 properties in China as suspected by the Wife, or whether his ¼ share in his father’s ancestral home in Danshui, China should be included for distribution, as well as the value and profitability of his transportation business. Before proceeding to consider the evidence about these issues, it would of course be necessary to first set out the relevant background of the parties. Background 4.Both parties were born and raised in China, where the Husband started to work as a driver upon completing secondary school and later entered into his first marriage in 1986. He and his first wife soon made their home in Hong Kong and had 3 children. That marriage ended in the mid-1990s when he divorced his wife who was then granted custody of their 3 children, with whom he had had little contact since. 5.As for the Wife, she quitted school early to work in various odd jobs in factories and restaurants, and had her first marriage in 1990 from which she gave birth to her said daughter in 1991. She and her then husband later moved to Shenzhen where she worked as a restaurant waitress. After that marriage ended also in a divorce with custody of the said daughter granted to her, the Wife started a courtship with the Husband who happened to be a regular customer of the restaurant where she worked. 6.The parties eventually registered their marriage on 23rd November 1998 in China and made their home in Shenzhen together with the Wife’s said daughter. By then the Husband had already set up his own transportation business known as Goldway Transportation Limited (“Goldway”) which owned several trucks with which he and his hired drivers were to transport goods between Hong Kong and China, and from which he claims he now earns about HK$21,000 on average per month. 7.After the marriage the Wife quitted her job to become a full-time housewife, and in about 1999 the parties purchased a flat at Jia Jun Court, Xuan Jia Hua Ting, Fu Qiang Road, Shenzhen City (“Former Matrimonial Home”) in their joint names for RMB1,161,888 by means of a bank mortgage and where the family resided together with the Wife’s mother. Later in about 2000 the Husband also purchased a property in Fanling in Hong Kong (“Fanling Property”) in his sole name for HK$1,783,000 where the parties would stay from time to time whenever they were in Hong Kong., 8.In the following year on 20th March 2001 the Wife gave birth to their son in Hong Kong. Sadly that child was born with a congenital heart disease which required constant medical attention, but from which sadly he would not survive beyond the age of 11. 9.Going back a bit in time to 2004, the Wife was granted the one-way permit to come to Hong Kong, and for about a year she worked in various restaurants and in a karaoke where she was arrested together with the other staff when police raided the place on suspicion that it was a vice establishment. She was subsequently released without charge on the next day and returned to Shenzhen. According to the Husband that incident was the cause of the eventual breakdown of their marriage as he suspected that the Wife was involved in running that vice establishment, which she denies and insists that she was just a waitress working there ignorant of the vice element in that karaoke, and she believes that the Husband deliberately used that to justify his affair with another woman in Shenzhen while she was working in Hong Kong. 10.In any event by July 2009 the Husband had moved out of the matrimonial home in Shenzhen to allegedly return to Hong Kong to stay in the Fanling Property. A few months later in October 2009 the parties met in Shenzhen to discuss about financial settlement with a view for a consensus divorce when the Husband produced a document under the title of “Divorce Agreement” (“Divorce Agreement”) in which he proposed to pay HK$8,000 per month for the maintenance of the son and a lump sum of RMB500,000 for the Wife, that she was to have the former matrimonial home in Shenzhen the mortgage payments of which he would continue to be responsible, while he was to keep the Fanling Property and his Goldway business, and that they shall proceed to divorce by August 2010 [“R-2”]. 11.It is not clear whether there was indeed any overall settlement or agreement reached between the parties at that meeting as the said Divorce Agreement had only been signed by the Husband, but the upshot of that meeting was that about one month later on 10th November 2009 the Husband paid a lump sum of RMB500,000 to the Wife, and also started to pay her monthly sums of HK$8,000 for the son, and in addition also HK$2,000 for the daughter. 12.At about the same time or earlier the parties arranged for the son to receive his primary education in Hong Kong by crossing the border everyday to attend a primary school in Fanling. To cut down on the son’s travelling time to school the Wife later rented a place in Tai Wai, Shatin where she would stay with the son during weekdays and to return to the former matrimonial home in Shenzhen on weekends. 13.In February 2010 the Husband sold his Fanling Property for HK$1,790,000 allegedly to fund his payment of RMB500,000 to the Wife, but of which she claims to be unaware at that time and disputes that it was sold for that purpose, and that she believes that he has 2 other properties in Shenzhen where he has been cohabiting with his girlfriend, first at a flat at Flat G, 7/F, Fumin Building (“Fumin Property”) from 2008, and later in 2011 at 3/F, Phase One, Tai Wai Sing Bong, Lung Kong Region (“Lung Kong Property”), all of which he has categorically denied. 14.In any event the parties subsequently had a heated dispute in late October 2010 when the Husband accused the Wife of changing her mind about their divorce agreement and of demanding more money from him which subsequently required police intervention, and which eventually led to the Husband issuing a petition for divorce on 13th January 2011 in these proceedings against the Wife based on her behaviour, but which he subsequently amended to one based on 1 year separation since 30th July 2009 with the Wife’s consent, and upon which the decree nisi of divorce was then granted on 28th July 2011. 15.The parties were also able to agree to have joint custody of their son with care and control to the Wife with reasonable access including staying access to the Husband, which agreement was then made an order of the court on 11th July 2011, but they were unable to resolve their remaining dispute on the question of ancillary relief mainly over the distribution of their former matrimonial home in Shenzhen. 16.In his Form E [Bundle/23] the Husband disclosed that he was making HK$21,000 per month from his transportation business, that he had just over HK$30,000 in savings with an MPF then at just over HK$150,000, and that his only remaining asset of substance was the former matrimonial home in Shenzhen after having earlier sold his Fanling Property to fund the said lump sum of RMB500,000 for the Wife under their divorce agreement but that she had subsequently gone back against her words and demanded for more money, hence he proposed in his Form E that the former matrimonial home should instead be sold with the sale proceeds be shared equally between them but that the Wife should return half of the said lump sum of RMB250,000 to him. While no proposal was made about any maintenance for the Wife or the children, his Form E disclosed that he was then paying HK$8,000 per month for the son, as he believes that the Wife was then running an aquarium business in China and hence could support herself without requiring any maintenance from him. 17.In her Form E [B/48] the Wife however claimed to be unemployed without any income other than the said monthly sum of HK$8,000 from the Husband for their son, that she had virtually no savings or assets save for her half-share in the former matrimonial home which she put at RMB715,000 and a vehicle worth about RMB65,000, and that she wished to seek a monthly sum of HK$10,000 for the maintenance of herself and the children, but she did not mention anything about the alleged divorce settlement of October 2009 or the whereabouts of the said lump sum of RMB500,000, nor did she make any claim over the Husband’s share in the former matrimonial home which was then being occupied by her and the son. 18.As noted above after an unsuccessful FDR, the ancillary relief application then came before me for PTR, but sadly the parties lost their son to his illness in July 2012 and understandably took some time off the proceedings. Eventually and after updating their respective financial means in their narrative affirmations, the ancillary relief finally proceeded to trial in early 2014 after they failed to accept each other’s respective open proposal made before the trial as follows. It should also be noted that the Husband has since the passing of the son ceased paying the said monthly sum of HK$8,000 to the Wife which he claims was meant for the son only under the Divorce Agreement of October 2009. The Wife’s Open Proposal 19.The Wife’s open proposal was in fact set out in her then Counsel’s opening submission of 21st February 2014 on the following terms:
The Husband’s Open Proposal 20.The Husband’s open proposal was in fact made much earlier in a statement dated 8th October 2013 which he adopted at the opening of the trial as follows:
21.It is quite clear from these proposals that the major bone of contention between the parties is over the former matrimonial home in Shenzhen, which the Husband insists to be their only remaining marital asset of substance left and hence should be divided between them equally but he is prepared to let the Wife have a slightly bigger share as a clean break after taking into account of the lump sum of RMB500,000 already paid to her earlier pursuant to an agreement, and that if she insists that he should pay her monthly maintenance, then she should return to him half of the said lump sum, while the Wife insists that it is only fair that she gets to keep the entire property for her accommodation as the Husband has at least 2 other properties where he has made his home in China, and that since she has no income of her own and was wholly dependent on him throughout the marriage, she requires financial provisions from him to continue instead of a clean break between them, as she has by now all but used up the said sum of RMB500,000 on her needs and expenses over the years since their separation in 2009. 22.The Husband as noted above does not accept that the Wife has no earnings or earning capacity, nor does he accept that she has truthfully accounted for the whereabouts of the said lump sum of RMB500,000, which together with the Wife’s alleged interests of his in 3 other properties in China including the Danshui Property thus constituted the major issues between the parties in the trial, during which the Husband was represented by Ms Linda Wong of Counsel, while the Wife had by then started to appear in person. Henceforth before proceeding to consider the evidence of these issues, it would be helpful to first set out the legal principles applicable to the determination of ancillary relief matters, not least because the Wife is unrepresented. The Applicable Principles 23.The powers of the court to make orders for periodical payment and lump sum payment, which is what the Wife is seeking, are derived from section 4 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (‘MPPO’), and in the exercise of this power, the court shall take into account of those matters set out in section 7(1) of the Ordinance, which I set out in full for the benefit of the Wife as follows :-
24.The principles of how these section 7 enquiries should be approached have been definitely set out by the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537 when Ribeiro PJ stated from §56 of his judgment:
25.It is with these principles in mind that I shall now embark on the section 7 exercise, starting with the identification of the parties’ assets and financial resources, which is as noted above at the heart of their disputes, of which I shall start with the 2 main issues concering the Wife : (a) whether she has been running the aquarium business in China, and (b) the whereabouts of the said sum of RMB500,000. The Aquarium Business 26.The Husband’s allegation that the Wife has been running this aquarium business was first made as noted above in his Form E, which he repeated in his 1st Affirmation of 10th September 2012 in §9 when he just said: “ … the Respondent has been running her own aquarium business. I believe that she has been a partner of the said business and the other partner is her boyfriend.” [B/103]. 27.It was in his 3rd Affirmation of 16th April 2013 that he provided more details of his case about the Wife’s alleged business in §5 [B/126] as follows:
28.In his evidence in court the Husband further explained that it was on that first occasion in 2012 when he made enquires at the Cleair Aquatics in Shenzhen that he was given the Wife’s business card as the boss which was stapled to a leaflet of the said aquarium business under Exhibit “LKW-6” and “P-1” by a saleslady there, who also told him that for any inquiry about price, he would have to contact her boss directly. 29.The Wife of course denies to have any connection with this aquarium business, and her reply to this allegation was first set out in her 4th Affirmation from §7 [B/130] as follows:
30.At the trial the Wife further postulated that the Husband just got hold of the business card of 鐘興marked LKW-7 from the shop and simply duplicated the one marked LKW-6 by putting her name and her mobile phone number on it in order to connect her to the business, but without realising that she had since their separation changed to a different phone number of which he was not aware, hence she argues that it just shows that that business card was fabricated by him, as otherwise there was simply no reason at all for her to put her old phone number which she no longer used on her own business card if it were indeed her card. 31.Furthermore, it seems very odd to me that the alleged business card of the Wife would also contain the mobile phone number 13824309751 of that other person 鐘興 which simply does not make any sense as mobile phone number is obviously something so personal to each individual that there is no reason for her to include the mobile phone number of another person even her business partner in her own business card, and it goes to support her case that the Husband had fabricated her name card by duplicating the one of 鐘興 but made the mistake of not omitting his mobile phone number from the business card intended for the Wife. 32.As a matter of fact, if indeed the Wife had since 2005 started and been running this business in the same building of the parties’ home where they were then still living together, I find it difficult to believe that the Husband would appear to know nothing much about it other than the address of its shop and the name of her other partner, that he could only obtain her business card indirectly from a staff of the shop some 3 years after their separation, and that on both occasions when he attended at the shop that the Wife was not even there running the business as he has alleged. 33.It seems equally far-fetched to me that the Wife would be, as alleged by the Husband, so soon after being arrested by police for working in that nightclub/karaoke in Hong Kong in 2004 that she would so soon thereafter be running something so different as an aquarium business in Shenzhen in which she seemed to have absolutely no experience or expertise. The Wife’s evidence as noted above is that she had to work as a waitress in that nightclub earning some additional income after she had just been allowed to stay in Hong Kong where she had rented a flat with the son while he went to a local school, which bags the obvious question of where would she get the necessary capital to fund the aquarium business? I am unable to find any answer from the Husband’s evidence. 34.Besides, if indeed the Wife had been running this aquarium business since 2005, why did the Husband not make any reference to it in the said Divorce Agreement which was clearly prepared by him and in which he obviously found it necessary to make it one of the terms that he should be entitled to keep his own business as part of the settlement, or that he was willing to pay the Wife as much as RMB500,000 when she already had her own business with her own income and would also be getting the most valuable asset in the former matrimonial home? Again I am unable to find any logical explanation from his evidence. 35.Above all, if in fact he had bother to search the website of Cleair Aquatics at Http://www.cleair.net listed on the back of the leaflet (“P-1”) which he obtained from the aquarium shop, he would have noticed from the introduction of its home page that Cleair Aquatics is in fact one of the brands or products of what appears to be a much bigger corporation in Chengdu(成都) with international or at least national connections all over the Mainland and that Cleair Aquatics was in fact not commenced in 2005 by the Wife as alleged but rather much earlier in 1995 by its parent company in Chengdu(成都), as the first paragraph of its “About Us” stated as follows:
36.In the premises and on the evidence before the court, I am unable to imagine how this Wife, financially or otherwise, is capable of starting or running this business as alleged by the Husband. Accordingly, I totally reject his case that the Wife has or had had any interest in Cleair Aquatics, and I accept that it may well be the case that the Husband all along knew about the Wife having befriended the person-in-charge of that particular shop and his wife whom she would visit from time to time while living in the same building during the marriage, and when she changed her mind about their divorce settlement and wanted to claim more money from him, he decided to make use of that information to build a false case against her and to resist her financial claims against him in these proceedings. Whereabouts of RMB500,000 37.The Husband’s evidence on this payment to the Wife is first set out in his Form E [B/41] in which he claimed that on 13th October 2009 with the intention to end their marriage, he met with the Wife for discussion to resolve their financial issues in the event of a divorce when she agreed to accept RMB500,000 from him in settlement of her claims for maintenance, that in order to fund that payment he had to borrow the money from a friend and gave the said sum to the Wife about a month later on 10th November 2009, and that later he had to sell his Fanling property to repay his friend, but as the Wife later changed her mind and demanded for more money from him before she would agree to give him the divorce, to which he disagreed and hence he was unable to go ahead with the divorce as originally planned. 38.The Wife does not dispute their discussion about their divorce and financial settlement at that meeting in October 2009 or her subsequent receipt of the said sum of RMB500,000 from the Husband about a month thereafter, but she denies that she had ever agreed that the said sum was to be in full and final settlement of her financial claims upon their divorce, as she has all along also required him to continue to pay her regular maintenance, and that in any event she has by now used up most of the said sum on her various expenses and those of the 2 children as the Husband’s monthly sums of HK$8,000 were insufficient, and that upon the passing of their son in July 2012 he had ceased his maintenance payments altogether, which also explain why she had had to sell her car or liquidate some of her insurance policies, and finally resorting to borrowing from her brother. 39.In her 4th Affirmation of 27th May 2013 [B/132] the Wife gave a breakdown of how she had already spent about HK$400,000 of the said sum by that time on the following items:
40.That was then in mid-2013, which if true and on the basis of what she claimed to be her monthly expenses of about HK$15,000 in her Form E, clearly by now what was left of the RMB500,000 would have all been depleted or to irrelevant amount. 41.The Husband of course does not accept that the Wife has by now spent the entire sum or in the manner as alleged, and Ms Wong on his behalf submits that what the Wife said in her 4th Affirmation is in fact inconsistent with her evidence at the trial under cross-examination when she claimed to have already exhausted all the money by 2011 and had to start borrowing money from her brother. 42.According to Ms Wong and her closing submission, it seems that in less than one month of her receipt of the said RMB500,000 into her bank accounts, the Wife had withdrawn RMB200,000 of which she was only able to account for RMB90,000 being spent on mahjong games, purchasing a fur and some furniture as well as a holiday with the son, leaving RMB110,000 unaccounted for. 43.As for her further withdrawals of RMB150,000 from late September 2010 to end of January 2011, and RMB110,000 between March and April 2011, Ms Wong submits that again the Wife was only able to account for some of the money being spent on her mahjong games and rental deposit for her rented flat in Hong Kong at that time, leaving the rest of those withdrawals accounted for, whereas her claims that she had spent some of the money on her legal costs in these proceedings and her mother’s medical expenses were inconsistent with her evidence in court that they were in fact met by borrowing from her brother, while her daughter’s school fees would have already been taken care of by the Husband’s monthly maintenance. Ms Wong therefore submits that it is highly suspicious of the Wife’s claim that she has already used up the entire sum of RMB500,000, of which the court should take into account as part of her assets. 44.While I accept that the Wife’s evidence given in court to account for the said sum of RMB500,000 may not always appear precise or cogent, which is however understandable given the fact that many of the details went back some 3 or 4 years ago, but since there is no dispute as to her legal costs or her mother’s medical expenses which had to be paid one way or the other, as well as her insurance premium payments, together with the fact that the Husband had since late 2009 stopped paying for her own maintenance, if indeed she had not used the sum of RMB500,000 for any of her alleged expenses or her own regular household and personal expenses, then how did she manage to maintain herself the past 4 or 5 years when she had no income of her own or other financial resources? 45.At that rate her own stated monthly expenses from late 2009 to end of 2013, which span over 4 years, would have required more than HK$700,000, and even if they were in fact at the same level of her open proposal at HK$8,000 per month, it would still have consumed the bulk of RMB500,000 over that same period just on her regular living expenses, not to mention her legal costs or her mother’s medical expenses. In the absence of evidence that she may have had other resources or income at that time, and notwithstanding the imprecision of her evidence on this issue, I am unable to find anything suspicious about the Wife’s account of how she spent the said sum of RMB500,000 over the past years, or for that matter what was left of the sale proceeds of her car or her insurance policies, and I believe that most if not all of them have by now been depleted or at an irrelevant amount. Husband’s Transportation Business 46.Before proceeding to consider the next major issues over the Husband’s alleged non-disclosed interests in the said Fumin Property and Lung Kong Property, it would be highly relevant to first consider the profitability of his trucking business Goldway Transportation, not just at presence but also going back several years to around the time of their separation in 2009, it being his only known source of income would inevitably go to the question of his ability to own those 2 properties since that time. The Wife’s stance is that the Husband has deliberately understated both the profits of his business and his own income. 47.There is no dispute that the Husband wholly owns the business, holding 99% of its shares while the only other named shareholder was merely a nominee of his, but his evidence is that while Goldway owns 3 – 4 trucks or lorries driven by hired drivers and himself, and that although the annual business revenue is in excess of HK$4 million, its annual direct costs such as hire-purchase payments of the company’s trucks, their repairs and maintenance costs, drivers’ salaries, and fuel and gas would cost in excess of HK$3 million, while its annual administrative expenses would amount to as much as HK$1 million, resulting in little net profit each year which explains his stated income of just over HK$20,000 per month in his Form E. 48.The Wife of course does not accept that that is all that the Husband earns, alleging that he has deliberately lied about the number of trucks that Goldway owns which she puts at 6 – 7 instead of only 3 - 4 as alleged by him thereby understating his business’s revenue and hence his income which she believes should be at least HK$40,000 to $50,000 per month on average, as she had always been told by him and based on the regular amount of what he used to spend on their family per month throughout their marriage. 49.Apart from her own words, the Wife has not proffered any other evidence about the number of the trucks that Goldway actually owns, nor is that information readily apparent from the disclosed audited accounts of Goldway before the court [B/153 – 179, 191.13 – 26], but they appear to support the Husband’s evidence about the business’s profits and hence his income based on the financial statements [B/162, 166, 179, 191.26] between 2007 and 2012 which reveal an average annual revenue in excess of HK$4 million but after deducting for all the direct costs and administrative expenses produced a much smaller net profit for the year, at best from almost HK$160,000 in 2011 to no profit at all in 2008 as follows:
50.It is apparent from the above that what accounted for the huge differences between the gross profits and net profits is the administrative expenses, or what are commonly known as ‘overhead expenses’ of a company or business which will usually have to be defrayed first before the net profits, if any, are distributed in cash as dividends to the owners or shareholders, and in this case the Husband. 51.While these administrative expenses of Goldway were never challenged by the Wife at the trial and that most of them, such as Rent and Rates, Bank Charges, Secretarial and Accounting Fees are just common or routine overhead expenses and nothing controversial except for 2 particular items, not so much as to their authenticity but rather their practical effects on the net profits or cash position which may be relevant to the actual amount of income available and payable to the Husband : Depreciation and Entertainment, the amounts of which are listed below together with the Husband’s Director’s Remuneration and Net Profit over the same period referred to above by way of comparison:
52.For accounting purposes the item of Depreciation being the reduction in the value of an asset, such as those trucks of Goldway in the Husband’s case [B/191.23], is commonly or routinely allowed and included in the company’s income statements for its costs allocation within an accounting period, and while it certainly has the effect of reducing the company’s profit for the purpose of assessing its tax liability, but since it is a non-cash expense, it does not actually change the company’s cash flow, or more significantly the cash available for payment to the owner or shareholders by way of distribution of profits or dividends. 53.In the present case the Depreciation Value adopted in Goldway’s accounting documents from 2007 to 2012 ranges from as much as half a million dollars to less than HK$200,000 for the year, and by putting these sums back in the cash flow and if they were subsequently distributed to the Husband as part of the business’ net profit for that year, and by taking into account of the director’s fee already received by him for the year, the total monthly cash available and payable to the Husband would indeed become much closer to the higher income which the Wife believes he was actually able to earn at that time as follows:
54.As for the item of Entertainment, it being an actual expense is obviously different from the item of Depreciation as certainly it cannot form part of the Husband’s income, but expenses such as restaurant meals with clients or customers can certainly benefit the Husband indirectly by reducing his own personal expenses for such meals thereby leaving him with more income for other uses or purposes. 55.While it is true that none of the above had ever been properly put to the Husband at the trial by the Wife, these figures were all provided by him from his disclosed audited accounts and were no doubt evidence before the court which clearly indicate that the Husband was in fact earning or capable of earning much more than he had admitted from his business and in line with what the Wife has alleged. 56.This is in fact also supported by the bank records of his several personal bank accounts attached to his Form E [B/141 – 151] which show various much more substantial deposits than his claimed regular income, and more importantly all these evidence suggest that he indeed had had the means or ability to own one or both of the said Fumin and Lung Kong properties as suspected by the Wife. 57.In addition, while Goldway is necessarily an ongoing business of the Husband and the main source of his income, and that there is no suggestion by the Wife that it should be liquidated, which may explain why there was never any formal valuation of the company, it would however be relevant to note that it by no means has no assets of value, as it is not disputed that it does own substantial assets such as trucks or lorries, the exact number of which remains controversial and unverified, although according to Exhibit R-2, a note produced by the Wife and allegedly in the Husband’s handwriting of some operating details of 6 trucks with their registration numbers, name of the drivers, etc from 2007 to 2011 which seem to support the Wife’s case, and that according to Goldway’s audited report [B/101.23] their value before depreciation were put at HK$1,143,038 as at 31 December 2012 which is not insignificant. 58.In conclusion, I am satisfied that the Husband was actually earning more than what he had disclosed in his Form E, and more significantly that he was financially capable of owning the said Fumin Property or the Lung Kong Property or even both, which of course by no means follow that he must be their beneficial owner, of which I shall next turn to consider the evidence, but perhaps first to deal with the more straightforward issue over his interest in the Danshui Property. Husband’s Interest in Danshui Property 59.The Husband does not dispute his interest in this ancestral home of his deceased father who died in the earlier 90s of which the Husband is entitled to inherit as part of the estate, but his case is that since he has 3 other siblings and there had been on-going disputes amongst them over the question of succession, and as a result he had already renounced his share back in 2005 as he so claimed in §10 of his 1st Affirmation [B/104]:
60.At the trial he confirmed that the said property was still in the name of his deceased father and had still not been vested in the beneficiaries, and that even though it has a market value of RMB1,060,000 according to the agreed valuation report [B/380], at most his share would only be ¼ at about RMB265,000, but according to the written legal opinion of a Mainland lawyer {B/343}, the vesting of the property would be subject to various payments of government premium and tax and hence the value of his share would realistically be much lower at no more than HK$100,000, as he so stated in his open proposal. 61.However, his proposal to pay a lump sum of RMB80,000 or the equivalence of almost HK$100,000 to the Wife in settlement of her claim against the said property seems to contradict his evidence that he had back in 2005 already renounced his interest. I believe that he has somehow still retained his interest in this property, but given the limited nature of his interest and the various restrictions over the sale of the property according to his expert, and while I do not necessarily accept his case that at best the notional value of his interest in that property is no more than HK$100,000, I agree that it is certainly not substantial. The Fumin Property and Lung Kong Property 62.As will be apparent below, I propose to deal with the issues over these 2 properties together. According to the Wife, the Fumin Property was where the Husband had cohabited with his girlfriend a Ms Man from 2008 to 2011, and that although it was registered in the name of a Mr. Tang, a relative of his, she believes that the Husband was and may still be the beneficial owner, and that after he had moved to the Lung Kong Property in August 2011, he then had the Fumin Property renovated before putting it in the market for rent or sale. 63.While it is not clear whether the Fumin Property has since been sold, the Husband does not dispute that he had indeed resided there at that time albeit for only a month or so and by himself alone instead of allegedly with his girlfriend, but he denies to have any beneficial interest in it, claiming that he was merely helping out his relative by keeping a watch of the property while it was being renovated. This is in fact what he said about these 2 properties in his 1st Affirmation [B/105]:
64.When this explanation of his connection with the Fumin Property was challenged by the Wife, the Husband gave further elaboration in his 2nd Affirmation in §12 [B/122] as follows:
65.In response to the allegation over the Lung Kong Property, the Husband said this in §13 of the same affirmation:
66.The Wife of course argues that these delivery notes are in fact clear evidence of the Husband’s decorating and furnishing both the Fumin Property with the intention of letting or selling it, and the Lung Kong Property for his own occupation, which follows that he must be the beneficial owner of both properties, as she said in her 3rd Affirmation [B/116] as follows:
67.The document marked “KY-7” [B/287] referred to above shows a delivery note issued by a building materials supplying company by the name of “深圳市星華衛浴” dated 11 August 2011 to a customer Mr. Lau (the same surname of the Husband) of Fumin for the delivery of what appear to be materials for decorating a bathroom and the labour charges for installing a toilet and a shower cubicle. 68.The other 3 delivery notes marked “KY-6” appear to be issued by a different shop but its name was not apparent, and were dated slightly earlier on 13 and 23 of June and 4 of July 2011 respectively but all referred to an incomplete address in the same building of the Lung Kong Property and again to a Mr Lau whom the Wife believes to mean the Husband, and similarly set out quotations for various building materials to be delivered with charges for installations and renovation as in the case of the one under “KY-7” above. 69.The Wife’s evidence over these documents is that at that time after learning that the Husband was cohabiting with his girlfriend at the Fumin Property but was putting it in the market through an estate agent, she together with a female friend therefore pretended to be potential customers and asked to view the property, and when they were accompanied by the agent to the said property, she recognised some of the clothing and personal belongings of the Husband there as well as those delivery notes stashed together on his desk, which she then secretly took with her and later brought to the shop in respect of the 1st delivery note pretending to be a neighbour of the Fumin Property wishing to hire the same decorator then renovating that property and asked the shop staff to help her to contact the owner, and when the staff telephoned the Husband in her presence, he disclosed his address at the Lung Kong Property, and that was how she discovered where he was moving to, and when she later attended at the Lung Kong Property, she also noticed that it was being renovated by some workers as the door was then left open. 70.According to the Wife this renovation work in the Lung Kong Property was in line with those detailed in those 3 other delivery notes marked “KY-6” [B/283 – 285] which were dated respectively 13th and 23rd of June and 4th July 2011 as they all referred to the same address of that property and same customer with the same surname of the Husband, and which similarly set out quotations for various building materials to be delivered and charges for installations and renovation as in the case of the note marked “KY-7” but were much more substantial. 71.The Husband of course denies to have anything to do with either property or any of the delivery notes in his affirmations, but his evidence at the trial on these issues appeared to me at best scanty and at worst downright evasive, and eventually he conceded under cross-examination by the Wife that he was indeed the same Mr. Lau referred to in the 1st delivery note in respect of the Fumin Property but that he was merely taking delivery on behalf of his said relative, and maintained his case to have nothing to do with the other 3 delivery notes in respect of the Lung Kong Property which he suggested were probably fabricated by the Wife. 72.This is of course denied by the Wife who insisted that she would not know how even if she had wanted to, and having seen and heard her for days in court in evidence, she simply does not impress to me of someone with the knowhow or sophistication to be able to fabricate these delivery notes by including all those various items of building materials and different types of renovations of which I have earlier described against the Husband in these proceedings. Besides, if she did indeed fabricate these notes in support of her case that he was the beneficial owner of the Lung Kong Property, and was clever enough to make up all those different items on the notes, it does not make any sense for her to just put down the name of Mr. Lau as the customer thereby allowing the Husband the opportunity to argue that it was neither here nor there as he did in his affirmation, rather than putting down his full name to make sure that he and nobody else would be so implicated. These notes certainly look genuine to me, and I have great difficulty accepting that they were forged or fabricated by the Wife for use against him as suggested by the Husband. 73.Of course the facts that these delivery notes are genuine and that the Husband was indeed the person stated as the customer do not necessarily follow that he must therefore be the owner of the property referred therein, as he could very well be just a tenant since it is not uncommon for a tenant of a rented apartment to want to purchase his own furniture and for them to be delivered to that apartment, and sometimes even to carry out some minor renovations to the apartment with the landlord’s permission, but clearly that is not the case of the Husband. 74.As noted above, the Husband’s evidence in respect of the Fumin Property is that he was merely there keeping an eye thereof for his relative while it was being decorated. It has never been his case that those items in the delivery note marked “KY-6” were for his own use, which bags the obvious question of why was it stated that they were to be delivered to him in the note if he was neither the owner nor the tenant? There was simply no convincing explanation from him. 75.As for his alleged connection with the Lung Kong Property, the Husband’s case appears even more suspicious as while he claimed in his affirmations that it belong to a friend Mr. Tze and that he had only visited him there a few times, he appeared rather vain and evasive while under cross-examination about those visits to the extent of confessing that he was not even sure that he had actually been to that particular property as he could no longer remember the exact address of his friend, while claiming that it was in the same building of the said Lung Kong Property, which seems suspicious to me and bags the even more obvious question that if he had never lived there, why then was his surname so stated in all 3 delivered notes for the said property and which were found amongst his belongings at the Fumin Property? 76.It is noted that the Husband has always claimed to be residing in a rented apartment elsewhere at Fuk Tin District in Shenzhen at that time and has produced a copy of the tenancy agreement as evidence [B/188], but that agreement shows that the tenancy was to expire on 31st July 2011, and while he did explain at the trial that his tenancy had since been extended without signing another agreement, the fact that the expiration of his tenancy happened at the same time of his move to the Lung Kong Property alleged by the Wife seems to me just too much of a coincidence when considered together with all the other evidence before the court. 77.If indeed the Husband had moved to the Lung Kong Property at that time, again as noted above one could argue that he was just a tenant rather than its beneficial owner, as after all that property was also not registered in his name, in which case it would be relevant to look into the kind of furnishing and renovations in more details as set out in those 3 delivery notes to see if they would fit consistently with that scenario. 78.While it is true that some of the items on those notes include moveable fixtures and furniture such as shower curtains or portable wardrobes that a tenant may be entitled to install for his own use in his rented premises, but there were clearly also many other items that were of the nature of structural alterations that normally only the property owner is entitled to do, such as altering the bathroom tiles or the floors, changing the doors, installing fixed wardrobes and so on, and hence I fail to see how the Husband in this case would be allowed to carry out those renovation to the Lung Kong Property if he was indeed merely a tenant. 79.His case of course does not even suggest that he was a tenant of the property, and that unlike the Fumin Property in which he claims to be assisting his relative with its renovation, with the Lung Kong Property he was merely visiting his friend there, which brings me back to those delivery notes of which he has conceded that the one relating to the Fumin Property was genuine and that he was the person named therein, henceforth if I were to accept the Wife’s evidence of how she came to obtain the other 3 delivery notes relating to the Lung Kong Property, and I see no reason why I should not in view of the evidence referred to above, the only logical conclusion that I can come to in the circumstances is that indeed the Husband was also the person named in those 3 delivery notes relating to the Lung Kong Property, in which case the Wife is entitled in my view to ask the court to draw adverse inferences against him that he was indeed the beneficial owner to be so entitled to carry out that kind of renovations to that Property, and that he had concealed his such interest with the intention to mislead her and the court. 80.After all, the Husband certainly had had plenty of motives to do so since his said settlement meeting with the Wife in 2009 when she allegedly changed her mind after receiving RMB500,000 and demanded more money from him, it became crystal clear to him that she would pursue her such claims when he went ahead with his divorce, thereby providing him sufficient time and opportunity to arrange for any future acquisition of assets such as those said properties to be so concealed from the Wife to avoid her claims including putting them in the name of a trustee or nominee. 81.Ms Wong for the Husband has casted doubt on the Wife’s evidence for her failing to produce any photos of either properties. I fail to see their relevancy to the issue over the Husband’s possible interest in those properties. Ms Wong also submits that even taking the Wife’s case at the highest in respect of the Lung Kong Property, her evidence could only show that the Husband had once lived there at the material times, and that there is no evidence to prove that he did own the property legally or beneficially, nor is there proper evidence of its value, as the document relied on by the Wife [B/290] purportedly valuing the property at RMB860,000 is so inadequate without stating even the full address of the property or the name or expertise of the maker that it is of no evidential value. 82.While I agree that the document relied on by the Wife may have fallen short of a proper expert report to be accepted unreservedly as to the true value of the property, which would however be difficult if not impossible for her to do so without proper access to its interior given the Husband’s denial of any connection with the property, but any unfairness occasioned by the court’s necessarily imprecise assessment of the extent of the Husband’s interest in that property as a result of his failure to make proper disclosure should fall on him as the defaulting party rather than the innocent party, as has been held as a proper approach in various authorities, starting with the classic passage in J v J [1955] P215:
83.In the more recent case of F v F [1994] 1 FLR 359, where the husband was held to have deliberately failed to disclose his assets including those located abroad, and that his explanation of his financial position was fundamentally implausible, Thorpe J (as he then was) ordered him to pay a lump sum to his wife which was well beyond his disclosed means, and explained his reasons at 367C:
84.These principles were endorsed by the Court of Appeal in Baker v Baker [1995] 2 FLR 829 when it held that the trial judge was entitled to draw adverse inference against the husband and the standard of proof in a case of material non-disclosure was alleged was the ordinary balance of probabilities, as propounded by Butler-Sloss LJ (as she then was) at 831E:
85.Otton LJ sitting in the same court agreed that failure of such duty to make full and frank disclosure would severely undermine the integrity of the legal process at p837B:
86.Butler-Sloss LJ then went on to state the standard of proof to be applied to such cases of material non-disclosure at p833D:
87.Her Ladyship continued at 835D:
88.These principles were applied in the case of Al-Khatib v Masry [2002] 1 FLR 1053, where it was held that there was a compelling case for drawing adverse inference against the husband in the light of his utterly misrepresentative and untruthful disclosure of his means even at trial, with the very substantial scale of his concealment and deceit, and the court’s inability in the absence of corroboration to accept as the truth anything that the husband said unless it was either an admission or otherwise contrary to his interests, the court would draw the inference that the husband had sufficient assets to satisfy the wife’s claim as it was entitled to do so from the evidence before it, as Mumby J said at §89:
89.I respectfully agree with the standard of proof required to infer the existence and amount of assets which a spouse in ancillary relief proceedings fails or declines to reveal to the court as enunciated in those passages referred to above, which is on a balance of probabilities, and it is on that basis that I agree that adverse inference should be drawn against the Husband that given his failure to fully and frankly disclose his interests in the said Fumin Property and Lung Kong Property, these properties must indeed be of significant value and may probably be worth as much as what the Wife has alleged at more than RMB2.6 million combined if not more. If their net value were indeed significantly less or that he was interested in only one of them, then the Husband only has himself to blame for failing to come forward with the whole truth about these properties. 90.I note that Ms Wong for the Husband has in her closing submission also referred to a few more issues such as the proceeds of sale of another property sold back in 2004 or certain debts incurred by the parties during the marriage, which were never properly raised at the trial and are in my view exactly the kind of issues which the Court of Final Appeal in LKW supra said the court should not countenance any attempt to engage as either irrelevant or of no benefits to its determination of the parties’ disputes. 91.Having now resolved all the major factual issues between the parties, I shall now return to their respective open proposals and to consider them together with the section 7 enquires, which is relatively more straightforward and essentially boil down to how the parties’ needs can be met with the identified assets so that fairness between them can ultimately be achieved. Section 7 Enquiries 92.On the basis of my findings above, the only asset of substance that the Wife still has is her half-share in the former matrimonial home, as what remains, if any, of her savings including the said sum of RMB500,000, the sale proceeds of her car and her insurance policies, as noted above of insignificant or irrelevant value. Her proposal for the transfer of the former matrimonial home to her sole name free of mortgage and for monthly maintenance of HK$8,000 for herself are essentially on the basis that she needs her own accommodation after the divorce, and that since she had been wholly dependent on the Husband without any employment throughout most of the marriage, she would also require his financial support to continue. As for the daughter’s maintenance, it seems it is no longer relevant as I understand she should be graduating from university this summer. 93.While there is no serious dispute that during the early stage of the marriage when the son was small, the Wife was essentially a housewife and was never required to seek any employment, and that although I have rejected the Husband’s case that she has been running an aquarium business, there was that episode that she did work albeit for only a brief period in about 2004 in Hong Kong that got she arrested and returned to Shenzhen shortly afterwards, I accept that it is not necessarily the case that she has absolutely no earning capacity, and at her present age and no longer burdened by any childcare, she is clearly capable of some sort of employment such as working in a restaurant as she used to before the marriage, albeit at limited income of say a few thousand dollars per month only. 94.As noted above she had put her monthly expenses for her household and personal at over HK$15,000 in her Form E, but that included her then rental expenses of HK$4,300 for the apartment in Hong Kong which is no longer relevant, hence if she is to remain residing in the former matrimonial home in Shenzhen, essentially her future needs would amount to just about HK$11,000 per month, and when she instead only asked for HK$8,000 in her proposal, I assume because she could either cut down further on her expenses, or more likely because she intended to go back to work to supplement her income. 95.At either rate I believe it would be well within the Husband’s means to pay, as even according to the 2012 audited account of his business, the net profit for that year of HK$118,174 together with his director’s remuneration of HK$180,000 would have provided him with a monthly income of almost HK$25,000, and that was before discounting the item of depreciation of HK$162,608 which would have given him an additional cash of HK$13,550 per month, bringing his total possible income to more than HK$38,000 per month, which is clearly more than enough to meet the Wife’s claim for her maintenance as well as his own needs and expenses as set out in his Form E at only HK$12,000 per month after discounting his then maintenance payment for the son. 96.I accept that some of these figures actually go back 1 – 2 years ago or even earlier and may not be entirely up-today, but it is the parties who have chosen to present their case as they were, upon which the court can only do so much to carry out its assessments. In any event there was never any suggestion by either side at the trial of any substantial or significant change to their respective financial situation since that time. 97.Given the fact that this marriage had lasted some 13 years during which it is not disputed both parties had discharged their respective duties towards the marriage and the family, with the Wife as the home maker and child-carer and the Husband as the money-earner and breadwinner, which explains why he has proposed equal-sharing with the Wife of their marital assets even though all of which were no doubt acquired through his means. 98.However, this seems to me more a case about meeting the needs of the parties in particularly of the Wife upon their divorce rather than a mere straightforward case of equal sharing of marital assets, as the Husband’s open proposal of selling the former matrimonial home and paying 55% of its sale proceeds to the Wife to which even if the said sum of RMB500,000 are to be added back would only provide her with a total sum of HK$2.5 million without any periodical maintenance as a clean break, which is clearly insufficient to meet her future needs including housing for the next 40+ years even without the assistance of any Duxbury calculation. Given my findings of the Wife’s very limited earning capacity and that most if not all of the said sum of RMB500,000 should have by now been depleted, this proposal of the Husband is plainly unrealistic and unworkable. 99.Similarly, nor is his alternative proposal of giving the Wife 50% of the sale proceeds of the former matrimonial home plus RMB80,000 in settling her claim against his interest in the Danshui Property capable of meeting her needs, while his remaining other proposal to throw in a monthly sum of HK$4,000 for her provided that she shall repay to him RMB250,000 being half of the said sum is equally unworkable in view of my finding that she no longer has that sum or other means to do so, nor do I think it is a fair proposal under the circumstances. 100.There is no question in my mind that the Husband at 51 will be able to meet his own living expenses by continue running his transportation business for years to come, and even when he becomes too old to do the driving himself, he can still hire other drivers to operate his trucks, as he had always done before, while his housing need would have been catered for by the said Lung Kong Property even before taking into account of his interest in the Danshui Property or the Fumin Property. 101.In the circumstances it is in my view not only necessary but also fair for the Wife’s housing needs be met by allowing her to keep the former matrimonial home for herself, and while I accept that the Husband may not be able to pay off the outstanding mortgage in one go as requested by the Wife, I have no doubt that he can and should continue to pay off the outstanding mortgage by monthly instalments which may have only a couple more years, and to pay her periodical maintenance albeit not necessarily at the rate of her requested amount of HK$8,000 but instead at HK$5,000 per month as she should be able to find a job to help pay her living expenses. 102.While this may appear that the Wife would be getting the most valuable item of their marital acquests, the fact that the Husband gets to keep the bulk of his income and profits from his business and his said other properties some of which he had tried to conceal from the court and hence their true value are never known and for which he was no doubt entirely to blame, but even on the Wife’s rough estimation and by drawing inference adversely against him in respect of those 2 properties, the Husband’s share of the remaining assets cannot in my estimation be less than what the Wife is to get, and may in fact probably be more. Conclusion 103.In conclusion and for all the reasons discussed above, I am convinced that fairness between the parties would be achieved by having the former matrimonial home transferred to the Wife upon the discharge of the existing mortgage by the Husband who is to continue to be responsible for its monthly instalment until its full discharge, while he is to keep the rest of the assets in full and final settlement of all their financial claims against each other save and except for the Wife’s claim for periodical payment, for which the Husband shall pay her a monthly sum of HK$5,000 to meet her future living expenses. 104.Lastly, while the Wife may not have been wholly successful with all her claims, she clearly is on most of the issues in particularly over the Husband’s hidden assets as well as her claim over the former matrimonial home, and although she was unrepresented during the trial, there is no question that she had incurred legal costs up to then, hence costs should follow the event in her favour. 105.Accordingly, my order is as follows:
Ms Linda Wong instructed by Messrs Paul W Tse for the Petitioner. The Respondent appeared in person. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under FCMC 530/2011