Kwp v. Lcm
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FCMC 1567 / 2006 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 1567 OF 2006 ----------------------------
----------------------- J U D G M E N T (Ancillary Relief) ----------------------- Introduction 1.This judgment followed a four day trial to determine the issue of final ancillary relief. 2.As will be seem below the main issues in this case are whether or not the former matrimonial home should be regarded as being held on trust for the parties and their two sons or whether, as would be more normal in the circumstances, it should be regarded as being a simple matrimonial asset. In the event that the property is to be sold there is also disagreement with respect to the timing of the sale. Lastly the petitioner wife alleges that the husband has dissipated part of his pension and that this should be taken into account when dividing the net proceeds of sale. Background to the litigation 3.This trial has been a very long time coming. The petitioner wife originally issued proceedings for divorce on the 27 March 2003 on the grounds of the husband’s unreasonable behaviour. Those proceedings were subsequently discontinued and in February 2006 the wife issued a fresh set of proceedings based on two years separation. Although I queried why it had taken such a long time for the matter to come to trial no satisfactory answer was received. According to the court record the issue of custody was initially in dispute. On the 24 April 2006 an order was made for split custody with the elder child remaining with the wife and the younger child going to the husband. A Financial Dispute Resolution hearing was held on the 14 June 2006. It was not successful. There were then subsequent hearings in relation to a possible variation of custody. All matters subsequently appear to have been held in abeyance until 2013 when the issue of ancillary relief returned to court for final determination. It should be noted that according to the court order of the 14 February 2006 the costs of the earlier suit were reserved to be dealt with at the ancillary relief hearing. The decree nisi was granted on the 28 February 2006. There has been no decree absolute. Background to the marriage 4.The parties married in March 1987 and separated in December 2002, when the wife moved out of the matrimonial home. On the face of it then this was a marriage of nearly 16 years duration. The parties are now both 50 years of age. There are two children of the family – both boys – the eldest son who is now 24 years of age and self supporting and the youngest who will be 20 years old in July 2014. The main dispute centres on the younger son’s education plans and how that impacts on the arrangements for the sale of the former matrimonial home. Both children are now living with the father in the former matrimonial home. Issues 5.It seems to me that the following issues now fall to be determined by this court:-
The law on Ancillary Relief 6.The Court of Final Appeal’s decision in LKW v DD (FACV no 16 of 2008) 13 HKCFA 537 sets out the approach that the lower courts should now take when determining final ancillary relief. 7.Mr Justice Ribeiro PJ reiterates that there are four underlying principles that should guide ancillary relief proceedings namely fairness, the absence of discrimination, the upholding of the concept of the yardstick of equality and the rejection of a need for a minute retrospective investigation of the parties finances. 8.In addition he identifies a four step approach to be adopted in an ancillary relief trial which if I may I will summarize as follows:-
9.The s.7 factors are largely dealt with within this general framework. They are:-
10.Although there was initially some dispute about the assets available for distribution and in particular the husband’s allegation that the wife was the legal and beneficial owner of a further property, this line of argument was not pursued at trial. Thus it is accepted that the only matter presently in dispute relates to the timing of the sale of the former matrimonial home and the basis upon which the net proceeds of sale are to be divided. Open Proposals The wife’s open proposals 11.The wife set’s out her revised and final open proposal in a document called the Petitioner’s Supplemental Submission/Revised Open Proposal dated the 4 December 2013. In that proposal she states as follows:-
The husband’s open proposals 12.There was initially some difficulty with the Husband’s open offer because the solicitors for the husband had not produced their clients open proposals prior to the commencement of the trial nor were they willing to limit their cross examination to the issues in dispute. On the 4 December 2014 the following document was produced:-
13.For the avoidance of doubt it seems to me that this approach was singularly unhelpful and contrary to Practice Direction 15. 11 which states at paragraph 11 as follows:-
In all probability this stance is likely to have led to the trial taking longer than it should have done. It should also be noted that notwithstanding this document and the husband’s solicitor’s arguments in that respect, the husband’s solicitors limited their closing argument to the issue of the trust, timing of the sale of the former matrimonial home and the alleged dissipation of assets. 14.In the husband’s last Form E dated the 11 September 2013 he stated that he was seeking the following:-
These points were not pursed at trial. The assets 15.For the avoidance of doubt, according to the parties updated Form E’s, the only joint asset of any real value remains the former matrimonial home. Before the commencement of the trial the parties agreed that the property, which was purchased under the Home Ownership Scheme, shall be valued at HK$3,085,000. The net value, after payment of the premium etc is estimated at HK$2,085,151.50. There are no other assets of any real value. The husband is presently unemployed. He has minimal savings and one life insurance policy. He is living with his new partner who appears to be in gainful employment. He says that he owes her money. He receives a small government pension of just over HK$4,000 per month. 16.The wife for her part is the Vice Principal of a Kindergarten earning HK$28,775 per month. She holds 3 life insurance policies and has two MPF funds totalling approximately HK$188,000, which she cannot touch until she retires. She allegedly has debts of approximately HK$600,000 including HK$400,000 said to be owed to her mother. She has no other assets of any value. 17.I must now turn to consider the issues, the law and the parties’ evidence as set out in their Form E’s,together with their supporting affirmations and their answers to the questionnaires raised. Further I will rely on each party’s oral testimony. Discussion Are the parties holding the matrimonial home on trust for the family of four in equal shares? If not how should the matrimonial home be regarded? 18.The husband’s arguments in this respect were unconvincing. I also agree with the wife’s solicitor that it seems to have been an argument that developed during the course of the litigation. In the husband’s last affirmation dated the 11 August 2006 he said as follows:-
19.This was a position that the husband maintained during the trial. With respect this is no different from most married couples, who purchase a property with a view to it becoming a home for both themselves and any future children that they may or may not have. This general intention does not in my view create an enforceable trust instrument. To do so would be to undermine the whole basis of matrimonial law. 20.In her closing the wife also made the following points:-
21.With respect I agree. I am therefore proceeding on the premise that there was no such trust and that the matrimonial home should be regarded as being a jointly held asset of the parties only. What is the computation of assets available for distribution? 22.As indicated above there are no other joint assets of any value save for the matrimonial home. The wife does however hold an MPF fund in her sole name which was valued at approximately HK$188,000. When should the former matrimonial home be sold? 23.This is the central dispute between the parties. The husband says that the former matrimonial home should not be sold until September 2019, whereas the wife says that it should be sold in August 2015. 24.The basis for this is that the husband argues that it will take that long for the son to complete his undergraduate degree in banking and finance (or something similar) at A University. 25.Previously the son was enrolled on an Advanced Diploma course in Business Studies (Banking and Finance). Unfortunately he failed the Putonghua exam and was not therefore able to continue to take the second year of the diploma course. He retook that exam in January of this year and passed it. He will therefore be able to resume his studies in September 2014. In the meantime he is not working or studying, although he is also apparently interested in the performing arts and particularly in singing and “magic”!! 26.The wife also pointed out that the son has a criminal record including a shoplifting offence, which seems to me to make a career in finance somewhat unlikely. In any event it is the husband’s case that the son will need to complete the diploma and then take a four year degree programme. Thus he argues, the former matrimonial home should not be sold until September 2019 – i.e. in 5 years time. He says that he will take that long for the son to complete his studies and that he will not be able to afford to support the son financially otherwise. This is a compromise on the husband’s part. Originally he asked that the matrimonial home not be sold for 8 years. 27.The wife for her part says that she is willing to similarly compromise so that the former matrimonial home is not sold until after the son completes his diploma. Thereafter she says that he should be in a position to work and to be “self supporting and self reliant”. 28.The wife also points out that the son should be able to complete a degree course within two years once he has completed the diploma course successfully. This is disputed by the husband. 29.However if one looks carefully at the A University brochure it seems clear that what the wife says in this respect is correct. Normally only sub-degree (SD) graduates/final year students (except for those who entered directly to the final year of SD programmes) will be eligible for admission to senior year places (i.e. Year 3# of the 4-year curriculum for the 2014 intake). Only under very exceptional circumstances that SD Year 1 students be specially admitted to Year 2# of the 4-year curriculum. In this connection, SD Year 1 students are encouraged to complete the SD study first for future articulation to senior year places. Applicants holding other academic qualifications will be eligible for admission to Year 1 of the 4-year curriculum. 30.Thus in normal circumstances if a student successfully completes a sub degree programme such as an advanced diploma course as here, then he will then be admitted to year 3 of the 4 year degree programme. Thus if all goes according to plan the younger son should be able to complete his undergraduate degree by August 2017. 31.Bearing all of the above in mind it seems to me that in order to give the son the very best chance in life that it would be optimal if the sale of the former matrimonial home could be delayed until September 2017. This will ensure that the son has a roof over his head while he completes his studies and, if the husband is to be believed, that the husband is then able to support him financially during this period. Even if that is not the case the son should be able to avail himself of either a government grant or student loan. Thus it seems reasonable to me that the former matrimonial home should not be sold until September 2017. I should add that there will be no extension of time if the son fails further exams or if he decides contrary to the information received from A University to try to enter the university course at year 1 instead of year 3. I should add that in making that order I am also cognizant of the fact that the wife is only 50 years of age and that it is unlikely that she will be able to retire for some years yet – certainly not before September 2017. Has there been any dissipation of assets and how, if at all, should that be taken into account? 32.The husband does not dispute the fact that he gambled away more than half of the lump sum that he received on retiring from government service. On the 3 September 2003 he received the sum of HK$902,255.36. Of that he used HK$398,386.27 to repay debts leaving a remaining sum of HK$503,869.09. In relation to that remaining sum he said as follows in his affirmation of the 11 August 2006:-
33.The wife does not ask that this sum be added back into the computation of available assets for distribution. Instead she argues that this is a reason to depart from the yard stick of equality and that given this she should receive 60% of the net proceeds of sale of the matrimonial home. The law on the dissipation of assets 34.The law on dissipation is well established. For the avoidance of doubt please note the following section of Rayden in that respect:
As I have said the wife does not seek an add back. Bearing in mind the above how should the net proceeds of sale be divided? In other words, should the yardstick of equality be departed from, and if so on what basis? 35.If the wife were to receive 60% of the net proceeds of sale she would receive HK$1,251,090 as against HK$834,060 for the husband. In other words she would receive an additional sum of just over HK$400,000. In the context of this particular case that is a considerable amount of money. If the parties were to receive half each, then they would each receive a sum of approximately HK$1,042,575. 36.I am though mindful of the fact that the wife should be recompensed in part for the dissipation of the husband’s pension and that this is an appropriate case in which the yardstick of equality should be departed from. I will therefore order that the wife shall receive 55% of the net proceeds of sale or approximately HK$1,146,833. The husband will receive the balance of approximately HK$938,318. Thus the wife will receive just over HK$200,000 more than the husband. In making this order I have also taken into account the fact that the wife has at her disposal a MPF fund of approximately HK$188,000, although most of that sum will have accumulated post separation. I am also cognizant of the fact that the husband has lived in the property rent free whereas the wife has had to pay rent. All in all however I am satisfied that this is a fair disposal of the matter. The section 7 factors 37.I have largely dealt with these factors in the context of the general discussion above. However for the avoidance of doubt I will reiterate as follows:- a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future; 38.The husband is not currently working and is in receipt of a small government pension of just over HK$4,000 per month. He is living with his partner – who is in gainful employment. He clearly has some earning capacity but one that he is not actioning at the moment. He previously worked in a number of different capacities in addition to his job with government as an assistant officer including inter alia working as an assistant dog trainer. The wife for her part is now working as a Vice Principal of a Kindergarten earning HK$28,775 per month. The financial resources of each are limited and are unlikely to improve in the future. As stated above the only significant asset is the former matrimonial home. b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future; 39.Both parties need sufficient money in order to maintain themselves into retirement. The husband has argued that he needs to remain in the matrimonial home until the younger child has completed his tertiary education and that he has certain obligations in that respect. I have accepted that in part. As indicated above however I am also conscious of the fact that the younger son may also be able to avail himself of government grants and loans in order to help him fund his studies. c) the standard of living enjoyed by the family before the breakdown of the marriage; 40.The standard of living enjoyed by the family was that of a normal grass roots family. d) the age of each party to the marriage and the duration of the marriage; 41.The parties are both 50 years old. They were married for nearly 16 years. e) any physical or mental disability of either of the parties to the marriage; 42.There are no physical or mental disabilities that need to be taken into account when determining the matter. f) the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family; 43.I accept that both parties made a valid contribution towards the family, both in terms of a financial contribution and in terms of their care for the children. g) in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring. 44.I have taken this into account as set out above. Costs 45.Given that both parties are legally aided each side has submitted that there should be no order as to costs. I have some difficulty with that proposal given the way in which these proceedings have progressed. Nonetheless I will make an order nisi to be made absolute in 14 days time that there be no order as to costs of the ancillary relief proceedings. In doing so I would add that it seems to me that this is a case that could and should have settled. The costs are completely disproportionate to the level of assets involved. This means that after the legal aid statutory charge has taken effect that there will be very little money left for either side. The wife’s Form H dated the 24 February 2014 puts the wife’s costs, prior to legal aid taxation at HK$496,300, whereas the husband’s costs are even greater at an estimated HK$695,000. This is a tragedy for the parties and one that could perhaps have been avoided. 46.In so far as the costs of the original divorce suit are concerned I will also make an order nisi to be made absolute in 14 days time that there be no order as to costs in relation to FCMC 3524 of 2003. Order 47.I will therefore make an order as follows:-
Ms B. Chan of Ho & Wong for the Petitioner Mr A. Loong of Yu, Tsang & Loong for the Respondent | |||||||||||||||||||||||||