Lbo v. Wwkf
Read the full judgment text of FCMC 11924/2005 on BabelCite. This Family Court judgment was delivered on 30 April 2015 before Her Honour Judge Melloy.
Matrimonial causes – Variation of maintenance – Leave to enforce arrears – Judgment summons – Earning capacity – Financial resources – Consent order – Property sale proceeds – Instalment order – Costs – Husband retired with limited earning capacity; Wife recovered financially. Husband had proceeds from Baguio Villas sale but chose not to use for children. Leave granted to enforce arrears over 12 months. Judgment summons adjourned. Husband ordered to pay HK$1.5 million arrears by instalments. Costs partially awarded to wife.
Legal issues: Earning capacity of parties · Financial resources available · Variation of maintenance · Leave to enforce arrears · Judgment summons
Outcome: Husband discharged from future maintenance; Arrears enforced; Judgment summons adjourned
Cited by 1 case · Cites 4 cases
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FCMC11924 /2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 11924 OF 2005 ________________________
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________________ JUDGMENT ________________ Introduction 1.There are several applications before me that now require adjudication. In the first instance the wife issued a judgment summons dated the 20 November 2013 seeking to enforce outstanding maintenance payments for the two children of the family plus payment of their educational costs in the total sum of HK$556,638.40 on the premise that the arrears only went back one year. The husband subsequently issued a Notice of Application dated the 14 February 2014 seeking to vary the children’s maintenance downwards. He asks to be discharged from all his previous maintenance obligations. On the 17 February 2014 the wife issued a further inter partes summons seeking leave to enforce arrears of maintenance that had accrued more than 12 months previously. Although there is some confusion over the figures, according to the wife’s 4th affirmation dated the 20 January 2015, filed immediately before the adjourned hearing she is seeking the following:
2.Rather late in the day and as set out in counsel’s closing submissions, she also seeks interest and a surcharge on that sum. 3.This case concerns the enforcement of maintenance and educational expenses for the two children of the family, who are now aged nearly 21 and 18 years old respectively, where the husband has been retired for a number of years and his earning capacity is allegedly somewhat limited. There are also issues concerning the husband’s other financial resources and the extent to which they should, if proven, have been used to maintain the two girls. Since the commencement of these proceedings the wife, who was in severe financial difficulty at that time has now recovered her financial stability somewhat, in that one property has been sold and she has secured another job. Consequently she confirmed at the adjourned hearing in January, that she is now in a position to financially support the girls through their undergraduate degrees. She is strongly of the view however that the husband should contribute towards those expenses as he had originally promised to do. Background 4.The parties were previously married for just over 12 years and they spent most of their life together in Hong Kong. The wife is American and the husband is Hong Kong Chinese. They are presently aged 54 and nearly 65 years old respectively. As indicated above they have two children, both girls, the eldest of whom is now studying a four year liberal arts programme at a good college in the United States. The younger one is hoping to follow suit and likewise wishes to study a four year liberal arts degree commencing in September of this year. 5.On the 14 October 2005 the wife issued divorce proceedings based on one year separation with consent. She pleaded that the parties had been separated since April 2004. The proceedings were amicable and a consent summons was entered into which included inter alia an agreement that the husband do pay periodical payments of HK$15,000 per month per child, until each reaches the age of 18 years or ceases full time education whichever is the later. In addition he undertook to pay for half of the children’s educational expenses (including school fees and extracurricular activities) until each had completed their tertiary education. On the 13 April 2006 the decree nisi was pronounced and an order was made in these terms. The parties’ assets were also divided between them in an equitable fashion. The wife then relocated back to the United States with the two girls. In July 2007 the wife remarried in the United States and in February 2008 the husband remarried in Hong Kong. Variation of maintenance 6.The general rule of thumb is that where a judgment summons has been issued together with an application to vary, then the application to vary should be dealt with first, regardless of which application came first in time. It is often the case that the two applications will be dealt with in two separate hearings. In the event that they are to be dealt with one after the other in the same hearing, then it is incumbent on the court to ensure that it is clear that the application to vary is dealt with first and in chambers and that the judgment summons is dealt with second and in open court. In this instance given the delay between the hearing in August and the adjourned hearing in January, and the fact that the wife was travelling from the United States for those hearings, it was felt that it was more appropriate for the judgment summons to be dealt with after the application to vary. Having canvassed the same with both sides the matter proceeded on that basis by agreement. There was also an application for leave to enforce arrears that were over 12 months old. The law on variation of maintenance 7.Both sides have referred to previous cases determined by this court where the law is set out as follows:
8.It is accepted that in considering a change of circumstances, I may look at the case de novo. In other words the court is not necessarily fettered by the existence of a previous order. I may look at the situation afresh and make an order based on the parties’ existing financial circumstances. (See Ch 3.131 Jackson’s Matrimonial Finance and Taxation, 7th edition). It is also true that there would normally be a reason for the application to vary or what some might call a “trigger”. 9.The parties also have a duty to make full and frank disclosure of their means and a failure in that duty can lead the court to draw an adverse inference. (See Baker v Baker [1995] 2FLR 829). 10.The court has a very wide power, including a power to terminate payments and to backdate the variation ordered. The overall objective is to achieve a fair outcome (see M v M, FCMC 4070 of 1990, dated 12 May 2006, unreported). Recent case law 11.In a recent Court of Appeal decision on variation – WNWG v PBF – [2012] HKCU 675, these basic principles were reiterated. The Hon Lam J said that:
12.This then is the appropriate approach to take in an application to vary as here. In this instance the parties entered into a consent summons with the intent that this would govern their financial affairs going forward. In particular provision was made for payment of the girl’s education expenses up to and including their tertiary education. It is clear that it was understood that each party would be responsible for 50% of those costs. The issues with respect to the application to vary
What is the earning capacity of each party? 13.The husband’s case is that he does not have an earning capacity of any significance. He explained that he was originally employed in the garment industry. At the time of the divorce he was the Vice President of a company that manufactured denim. The husband earned a good income – HK$80,000 per month plus commissions. He held this position when the parties divorced in 2006. He says that the company shut down its operations in Hong Kong in July 2007 and since then he has found it very difficult if not impossible to find a similar position in Hong Kong. He was employed for short periods of time from July 2007 to October 2008 but earned only HK$20,000 per month. He later secured another job in October 2008 – but that only lasted a month. Thus the husband effectively retired shortly thereafter, i.e. from about November 2008. His tax demands for the year 2008/09 show that he was not obliged to pay any tax for that year. Notwithstanding that it is common ground that the husband continued paying maintenance until January 2009 and that he paid some maintenance until September of that year. The wife sets this out in her 2nd affirmation of the 28 August 2013. This was later confirmed by the husband in the witness box. For ease of reference I will set out the table in the wife’s affirmation as follows:
14.The husband has paid no maintenance since then – i.e. since October 2009 to date. 15.It is his case that he is largely dependent on his current wife, who supports him financially and pays for all household expenses, holidays etc. The husband claims to have monthly expenses of just over HK$7,600 per month and he says that he is responsible for his own personal expenses. Notwithstanding that it is clear that he enjoys a comfortable lifestyle. 16.The wife’s case is basically set out in her third affirmation dated the 12 April 2014 as follows:
17.In addition she also asked in her Form E Financial Statement dated the 4 December 2012 that:
18.In so far as the husband’s present earning capacity is concerned - although I have great sympathy for the wife I do not accept having heard the evidence, that it is feasible to expect the husband at now nearly 65 years of age, to earn the same or similar amount of money as when he was at the height of his career. I also note that the manufacturing industry has declined in Hong Kong and that a lot of companies have closed down their operations here and moved elsewhere. I accept that the husband’s approach must have been very frustrating for the wife – especially when she was making every effort to introduce him to would be employers. It also seems to me that the husband may not have tried very hard to find alternative employment, especially employment outside of Hong Kong. I do however accept that he has an earning capacity of sorts and one that he must now make every effort to realize. He should also have issued an application to vary the maintenance a lot earlier. I also accept that his position has become worse as time has gone on and that his earning capacity is now probably lower than it would have been back in 2007/8, when these problems first arose. Indeed the wife accepts that it becomes more difficult with age to find employment – but that it is not impossible if you approach it in the right way. I would agree with her. It also seems that the husband has little incentive to find alternative employment as he is being maintained almost entirely by his present wife. 19.The wife for her part was involved in executive search and head hunting. She likewise earned a good income when the parties were together and prior to divorce. At the time that she issued the judgment summons however she was in severe financial difficulty. Although she had set up a new company EMLCC, it was not doing well and she was forced to rely on assets to help support both her and the family. I accept that EMLCC did not generate any income in 2013 and accordingly she was not required to submit a tax return. Since then however she has managed to turn things around and all credit should be given to her for that. She started a new job in September 2014 and she was able to sell a property – so providing her with much needed liquidity. Consequently she has put US$400,000 to one side in order to pay for the girl’s tertiary education. It is not clear whether or not that sum will be sufficient. 20.Thus on the face of it the wife has an earning capacity in the region of approximately US$11,000 per month inclusive of bonus. Although I am of the view that the husband also has an earning capacity I would also accept that it is somewhat limited. However it seems to me that he should be able to earn in the region of HK$15,000 - HK$18,000 per month – either on a full time or part time basis. What other financial resources does each party have at their disposal? 21.The wife has other financial resources at her disposal including a further property etc. The real question here is whether or not the husband also has other resources at his disposal which he could utilize or could have utilized previously for the girls maintenance and education costs. The wife puts her case on this as follows in her third affirmation:
The husband’s Retirement fund 22.The husband explains in his affirmation in reply that he withdrew his MPF fund early when he was aged 62 years old and he received just over HK$140,000. I accept what he says in this respect. It is clear that these funds would not, on their own, have provided him with the means to pay for the girl’s maintenance and education costs. However the husband could have offered to make some payment with these funds and it seems to me that in the circumstances it was incumbent upon him to do so. Valuable watches 23.I also accept that the husband does not have a valuable watch collection of the magnitude that would likewise assist with the girl’s costs. I accept that he has a Rolex and an Audemars Piguet watch. The sale of Baguio Villas 24.The husband owned the flat in Baguio Villas with his current wife as tenants in common. The difficulty is that the husband was not forthcoming about the full facts surrounding the sale of that property, nor did he produce documentary evidence to support what he said until the second tranche of the trial in January 2015. In his affirmation dated the 5 May 2014 he put his case as follows:
25.This led to the following direction being given at the end of the hearing on the 5 August 2014:
26.The husband produced copies of bank statements, which showed that there was a mortgage on the Baguio Villas property of just over HK$2.7 million. It is common ground that the property was sold for HK$9.05 million. Three sums of money were then paid into the husband’s joint bank account with his current wife – HK$905,000 on the 27 May 2008, HK$519,528.42 on the 28 June 2008 and HK$4,800,000 on the 30 June 2008. Thus the net proceeds of sale amounted to some HK$6,224,528.40. Had the parties divided this sum equally between them each would have been entitled to HK$3,112,264.20 cents or say just over HK$3.1 million each. Instead the husband says that because he owed his current wife money, including money that he had borrowed to pay for the girls maintenance (although this is not mentioned in his affirmation) and because they had agreed that he would be responsible for the renovation costs of the new property, which is held in his current wife’s sole name, it was agreed that he would receive only HK$1 million and that the remainder of the funds would be paid to Ms KL. To be frank I did not find the husband at all credible in this regard. His affirmation was misleading, as was his oral evidence. The full picture did not become clear until he produced copies of the bank statements at the adjourned hearing. Even then his explanation was somewhat farfetched. 27.So is the husband to be believed? Or was this situation orchestrated, as the wife would have me believe, in order to reduce the assets held in the husband’s name in the event that proceedings for enforcement were issued? 28.The husband points out that at the time that Baguio Villas was sold that he was paying the maintenance and the education costs even though he was only earning HK$20,000 per month. In his affirmation he says that he relied on his savings in order to be able to do this. Later as I have said, he claimed to have borrowed from his wife for that purpose. Whilst that may be true – it is also clear that the situation was fast becoming untenable. In such circumstances it seems to me that, putting it at its lowest, the husband did not choose to make his daughters his priority when organising his financial affairs with his current wife. It seems to me that it was open to him to insist that he took his 50% share of the net proceeds of sale when the property was sold and that he could then have utilized some of that money for their benefit. He chose not to do so. His current wife must also have been aware of his financial commitments to his daughters. Some provision should have been made for them instead of ensuring that any available cash was transferred to Ms KL. 29.I accept in the circumstances that the husband had some funds available from June 2008 onwards to contribute towards the children’s maintenance and educational costs but that he chose not to do so – this is notwithstanding the fact that he was unemployed from November 2008. I also accept that he most probably borrowed some funds from his current wife to pay for the maintenance and educational costs up until January 2009. Unfortunately this has not been quantified or verified in any way. However I am not of the view that the husband has amassed any secret assets. I also accept that his present standard of living is due to the fact that his wife is able to support the both of them to a reasonable standard. Leave to enforce the arrears of maintenance 30.Section 12 of the Maintenance Proceedings and Property Ordinance provides that the leave of the court is required to enforce maintenance payments which are due more than 12 months before the date of commencement of the application for enforcement. The starting point is that arrears exceeding 12 months will not be enforced unless there are special circumstances see CYM v YML and CSL v WWK. The rationale behind this rule traditionally was that if an applicant could wait for a year before bringing proceedings for enforcement then it was more likely than not that he or she did not need the money. It has been said in CSL v WWK that:
31.In this instance the wife did not issue proceedings until approximately 4 years after the husband stopped paying her any maintenance or to contribute towards the education costs. She says that this was because:
32.I accept that up to a point. I also accept that the wife e-mailed the husband directly on a number of occasions in an attempt to assist with his employment search and generally. However it was not until the 27 November 2012 that she instructed solicitors to write to the husband in an attempt to obtain payment of the arrears that had accumulated up until that point. This was two years after the husband first stopped paying. The husband did not respond to that letter. The wife’s solicitors wrote again on the 21 February 2013 and once again the husband ignored their letter. This left the wife with little option but to issue proceedings. In such circumstances it seems to me that the wife had not waived her right to seek payment of the arrears. On balance then I will give the wife leave to enforce the arrears of maintenance that are over 12 months old. Conclusion 33.In conclusion then I will order that the husband be discharged from his undertaking V1 and order 1 as contained in the court order dated the 14 October 2015 shall be dismissed with effect from the date of his Notice of Application to vary i.e. the 14 February 2014. In doing so I accept, save as is set out in this judgment that the husband will not be in a position to financially contribute towards the girl’s maintenance and education costs going forward. I am comforted a little by the fact that the wife has been able to put US$400,000 aside for that purpose. I also acknowledge that this may not be sufficient especially in the event that the girls wish to undertake post graduate or further study of any kind. Unfortunately in that event it may be necessary for them to take out student loans. I accept that this was not the original intention of the parties’ as evidenced by the consent summons. However given the material change of circumstance of both parents there may be no other alternative. For the avoidance of doubt then the wife is entitled prima facie to enforce arrears of maintenance from February 2009 to February 2014. Judgment Summons The law 34.I have also set out the law on judgment summonses in other judgments that have been handed down by this court. This will be repeated here as follows - the judgment debtor is required to show cause. He has to show the court why he should not be committed to prison for contempt. The court needs to ascertain whether he had the ability to make the payments ordered and whether he has wilfully failed to do so. The judgment creditor needs to prove this beyond reasonable doubt. 35.The court has the power to commit a judgment debtor to prison for up to three months or to commit suspended upon payment of the outstanding debt either in its entirety or by instalments, or to adjourn sine die with liberty to restore. 36.When considering the possibility of imprisonment, the court is bound by the claim made in the original judgment summons. In other words, the court looks to the amount that the judgment creditor says is owed at that date and the judgment debtor is put to strict proof in relation to those amounts. If the court is considering the possibility of making a new order in which the judgment debtor is, for example, asked to pay by instalments, then it is possible to calculate the outstanding amount due up to date, or to remit or suspend, or in some other way vary the amount owed. Discussion 37.As set out above I accept that although the husband’s earning capacity is now much reduced, that he still has an earning capacity and one that as I have said he must now realize in order to contribute towards the children’s outstanding maintenance and education costs. I am also of the view that he had the financial resources available from the net proceeds of sale of the Baguio Villa’s property to contribute towards those expenses but that he chose not to do so. The husband has produced an unsigned contract dated the 16 April 2009 showing an estimate for construction works and new furniture in the sum of HK$756,390. It is the husband’s case that he was responsible for these costs. However no evidence has been produced in relation to the monies said to be due and owing to Ms KL for maintenance and education costs prior to October 2009 or generally. On a broad brush basis then even if I accept that the husband had to pay HK$756, 390, for the construction works that still leaves approximately HK$2,343,610 of the HK$3.1 million that was notionally the husband’s share of the net proceeds of sale. Of that it seems to me that at least HK$1.5 million should have been made available to cover the girl’s maintenance and educational costs. I do not accept that the HK$1 million transferred to the husband should only have been used by him to cover his own expenses, when it was clear that had continually failed to comply with the court order and he had also failed to issue an application to vary. 38.The wife has also raised an issue in her closing submission in relation to any interest payable on the outstanding sums due and a surcharge. These points were not raised during the hearing. The husband’s counsel complains about this and with some justification it seems to me. In any event I am approaching this on the basis that the HK$1.5 million that I intend to order the husband do pay shall be inclusive of any interest or surcharge payments. Conclusion 39.Having heard the husband in the witness box it seems to me that at best he has failed to make proper allowance for the girl’s expenses from the net proceeds of sale from Baguio Villas. I accept that he does not have a very high earning capacity. However he does have an earning capacity of sorts. It seems to me that he should be able to earn at least HK$15,000 – HK$18,000 per month. On that basis I will make an order as follows:
40.In so far as costs are concerned I accept that the wife had no alternative but to issue proceedings given the fact that the husband ignored her initial pre action letters. However it is also clear that funds are somewhat limited and that neither party has been wholly successful – although the wife has been more successful than the husband. In such circumstances I shall make an order nisi to be made absolute in 28 days time that a) the husband do pay 50% of the wife’s party and party costs of the judgment summons to be taxed if not agreed. b) He shall also pay the costs of the wife’s summons to enforce arrears that were over 12 months old dated the 17 February 2014 also on a party and party basis to be taxed if not agreed. c) There shall be no order as to costs in relation to the husband’s Notice of application to vary dated the 14 February 2014.
Mr. A Tsang instructed by Ip & Heathfield for the Petitioner/Judgment Creditor Mr. T Ko instructed by Sit, Fung, Kwong & Shum for the Respondent/Judgment Debtor | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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