WONG WAI CHI, SUSANNA v. KIM MIN SUP, MARK

CACV 263/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 263 OF 1998

(ON APPEAL FROM FCMC NO. 6607 OF 1998)

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J U D G M E N T

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Liu, JA:

1. I shall briefly state the facts. The outline is merely to provide a general background; the particulars are not matters of utmost importance on the view I take.

2. The parties were married on 1 August 1993. I call them husband and wife for short. They went separate ways in 1995 for the first time and finally in 1997. The husband was taken to the Family Court for a divorce. Maintenance pending suit was sought by the wife against the husband. The matter came before the Deputy Judge Leung who awarded $15,000 per month for the wife to be paid by the husband monthly. From that determination, pursuant to leave granted the wife appeals.

3. The husband is a hairstylist running his own salon. The wife was previously a corporate management trainee. She stopped work after marriage and went to give her husband a helping hand in his salon until mid-1995 when her husband first left home. During the marriage, the wife took time to acquire a Master degree in Professional Accounting. She sat successfully for the examination but she still has to undergo further training in order to attain a professional qualification. At the end of 1993, a matrimonial home was purchased in the name of a company selected by the parties for that purpose at $8.2 M. The wife's mother, at her request, put up half of the purchase price and the remainder came from a bank mortgage. The wife's mother had disposed of her own property for advancing the half-portion private loan in the parties' acquisition of the matrimonial home. It is said that the husband agreed to pay all mortgage expenses and instalments. It was arranged that the payments were to be met out of the housing allowance provided to the husband by a company which was at the time in charge of one of his salons.

4. After the husband first left home, the wife stopped work in his salon. The husband continued to pay mortgage instalments until June 1998. But in the meantime, the husband paid $22,000 per month for various items of expenses until July 1997. During the union, the wife had the use of a BMW car. As expected, the husband looked after evening expenses and he contributed to the wife's wardrobe. The wife also enjoyed free service in his salon.

5. Mr Pilbrow's skeleton argument provides a very helpful analysis of the monies that came the wife's way: mortgage payment $47,000; rates, utilities, telephone, more precisely at $4,000 odd; medical, dental $2,000; half portion of entertainment and travelling expenses $2,000; household expenses $22,000; giving a total of about $77,000. The husband enjoyed substantial income by way of commissions. He ranked high among the hairstylists serving Hong Kong. His monthly income reached $150,000 in 1994. Certainly, there was a fluctuation in commission receipts but even up to 1996, 1997, the husband had the benefit of close to $80,000 per month.

6. It is the husband's claim that he has since July 1997 been unable to support his wife for his financial difficulties. It is pointed out by Mr Pilbrow, counsel for the wife, that almost immediately following in August and September of that year, the husband was in a position to put $2 M into the Hong Kong Stock Market. He was among the less fortunate investors, but the judge took him to have, at least, $800,000 left over in February 1998 from the ventures. In July 1998, the husband was a contributor to a new hairdressing salon opened in Century Square. But he stopped the mortgage payments for the matrimonial home a month earlier in June 1998.

7. The husband through his legal representative informed the Deputy Judge that he was in grave financial difficulties, lived on borrowed money and was unable, therefore, to keep up with the wife's expenses as well as the mortgage payments. To that, the Deputy Judge's response was that the husband produced no cogent evidence to corroborate his claim.

8. This court is reminded that parties to maintenance claims are obliged to make full and frank disclosures on pain of having adverse inferences drawn against them if they do not. The husband left the Deputy Judge with the impression that he was not cooperative. Documents caused to be submitted to the Deputy Judge were less than comprehensive and provided no clear information. The husband's excuse was that time was lacking for making a fuller disclosure with supporting documents. It is important to note that the judge saw fit to draw an adverse inference against the husband. I shall return to this later in my judgment.

9. The application for maintenance pending suit before the Deputy Judge was made pursuant to s. 3 of the Matrimonial Causes Ordinance. Emphasis is placed on awarding a reasonable sum as the court sees fit.

10. The husband does not appeal against any of the findings made by the judge. The husband is content with the award of $15,000 per month, but he resists the appeal prosecuted by the wife.

11. On behalf of the husband, Mr Hung directs our attention to the usual principles on which the exercise of judicial discretion could be disturbed. It is submitted that unless the judge can be demonstrated to be wholly wrong in his award of $15,000 per month, the sum should not be interfered with. It is trite law that in an application for interim maintenance, the Family Judge is not called upon to make any thorough investigation of the income and financial capabilities of the parties. At that stage, there would simply be no time to be perfect. The Family Judge would have to guide himself by s. 3, having regard to the reasonable requirements of the wife and the ability of the husband to pay. Criticisms are levelled by one side against the other. This case is well presented if only judged by the skeleton arguments counsel have submitted.

12. The husband provided some particulars for the consideration of the judge; so did the wife. It was difficult to come to a conclusion on largely general information. Excuses were given by the husband and the wife for what would appear to be incomplete information. The starting point for my deliberation is that the judge did draw an adverse inference against the husband for non-disclosure. That finding is not sought to be challenged on appeal. The question would seem to be whether the Deputy Judge was right in the way in which he drew the adverse inference for making the interim maintenance award. In an adverse inference drawn against the husband, the judge concluded that he must have been earning more than $10,000 per month and must have had means to raise money from some financial resources. The Deputy Judge also took the view that the husband was able to borrow from his business or otherwise finance his expenses on securities for supporting himself and the wife. In the process of drawing adverse inferences, the Deputy Judge further said: "The evidence, however, is not sufficient to support an inference to the extent that he (the husband) is able to pay the mortgage of $48,000 per month."

13. The Deputy Judge took into consideration the position of the husband, the downturn of local economy, the recent relocating of the salon to Century Plaza, the husband's claim of making no more than $10,000 per month and the invitation extended to the wife to adopt a lower standard of living and to try to set herself up in her professional calling with her academic achievements. All this was taken into account by the Deputy Judge.

14. The adverse inference against the husband's ability to pay was drawn by the Deputy Judge primarily from non-disclosure. The Deputy Judge concluded that the husband could spare $15,000 per month for the wife's maintenance after his own needs. The Deputy Judge also drew an inference that the husband was unable to pay all or some of the mortgage instalments. Is the Deputy Judge right?

15. The $15,000 per month awarded by the Deputy Judge was 1/5th of the $77,000 per month as neatly set out in the skeleton argument of Mr Pilbrow. $77,000 per month was the sum the wife had at her disposal before the marriage collapsed. There would seem to be no justification at all for selecting as low a rate as 1/5th or 20%, i.e. $15,000 per month. From the former substantial income of the husband, his resources and his ability to raise fund, the prunning down of the former accretion to the wife to a fifth in the process of drawing an adverse inference against the husband cries out for a re-examination. It was, after all, a case of non-disclosure. The Deputy Judge gave no reasons for the 1/5th or 20%. It is not to be forgotten that the wife had $25,000 monthly extra benefit when she was assisting in the husband's salon.

16. Economic downturn cannot possibly escape the notice of this community. It is virtually common knowledge that loss of assets as much as 55 - 60% would be devastating. Usual damage is some 1/3rd or 33%. Taking the worst scenario, the husband would not have gone below 40 - 45% in assets. The drastic disparity between 40 - 45% and the 20% (1/5th) selected by the Deputy Judge is evidence of a plainly erroneous exercise of discretion in the Deputy Judge's attempted evaluation of what was regarded as being still within the husband's means to pay. I am ignoring the $25,000 per month which the wife was paid for the first two years after marriage. After the husband left home for the first time, perhaps, it is understandable why the wife did not return to the salon to work. Looked at in the round, in the economic downturn which has descended upon us, any rate lower than 40 - 45% of former income and resources selected in the process of drawing an adverse inference is clearly insupportable. After all, there is no concrete proof that the husband is desperate. This court is entitled to intervene. 40 - 45% of what the wife had been receiving would be $33,000 per month. So analysed, the other material placed before the Deputy Judge lost much of its significance. In any case, evidence was sparse and there was no cross-examination. The judge decided that it was open to him to draw an adverse inference but the low rate selected in the inference he drew against the husband is wholly unrealistic. The Deputy Judge is plainly wrong in his selection of a percentage as low as 20% or 1/5th. 40 - 45% of the financial capability which the husband had formerly enjoyed would yield a figure of $33,000 per month. In my view, this court may justifiably intervene. I would raise the $15,000 per month awarded by the judge to $33,000 per month, to run from 12 August 1998 as the judge ordered. To the extent I have indicated, I would allow the appeal.

Leong, J.A.:

17. I agree. For my part, I would add this. On the evidence, prior to the break-up of the marriage, the wife had $77,000 a month for living and household expenses. This included mortgage payment of $47,000 per month for the wife's accommodation. The husband had been paying this sum prior to the break-up. $15,000 per month was awarded for maintenance pending suit. This was approximately only 1/5th of what the wife was accustomed to. The award seemed to have failed to pay sufficient regard to the possibility of homelessness without continued mortgage payments.

18. The evidence showed that the husband retained $800,000 worth of stocks and shares and a hair salon business from which, up to the end of 1997, he had been deriving substantial income by way of commissions, director's fees, various allowances and expenses payments. The husband is a hairstylist of considerable standing, commanding high fees for his service. It would appear that despite the recent economic downturn and the losses the husband claims to have sustained, he could not have fallen to as low as 1/5th of his former financial capability.

19. In the light of all this, the judge was plainly wrong in adopting $15,000, being only 20% of what he had been paying his wife.

20. I agree that the award should be increased to $33,000 per month and to be effective as from the date from which the award was first made. I would allow the appeal to that extent.

Nazareth, V-P:

21. I also agree.

22. The failure of the husband to make timeous and full disclosure placed the judge in a very difficult position. It was compounded by the serious situation of the wife who has continued to receive only $15,000 per month for the last six months and has come under increasing threat of legal action by the mortgagee bank (which has since materialised) to put her out of her home. She understandably pressed the judge for early relief. The judge did the best he could with the limited material before him in that situation. It is no criticism of him that with hindsight we see the matter somewhat differently and find it necessary to intervene in the exercise of his discretion.

23. The circumstances of the husband as revealed by the material before us are of someone who has been doing very well indeed. We see $2m being invested on the stock market only two years ago. We see substantial ownership of three different hair dressing salons, even if that occurred in succession, which is not entirely clear. Moreover, at least one of those is a prime location and is clearly an upmarket salon. A mere glimpse of the rates publicised indicate that. In respect of the husband these are shown at $2,000 to 2,500 for a "cut and finishing", three to four times that of the other staff. In one of the salon's accounts, we see stylist's commission of over $1m in 1996 and again in 1997. The broad picture is far removed from someone fighting for survival in a difficult business climate.

24. True, the husband must have suffered from the recent downturn or recession but all the indications are that he could still have most of the remaining $800,000 of his original stock market investment of $2m. His relatively large income could not have dropped to a minor fraction of what it earlier was to what he would have us believe. The pointers to the dramatic deterioration in his financial situation claimed all come from him. No independent evidence of significance had been produced. That then is the broad picture revealed by the evidence before us. The wife is reduced from having received about $77,000 a month to a fifth of that amount. Moreover, it is one in which one can well see her being homeless if the bank proceeds to sell the family home, originally largely financed by the wife and her mother. That extreme result, in my view, amply demonstrates that the exercise of discretion that produced it can only be plainly wrong. The order should therefore be set aside. Doing the best that can be done in the present unsatisfactory situation, it seems to me also that the monthly sum awarded to the wife should be increased to $33,000 per month, as my brothers have suggested, from the date of the award.

25. Hopefully both parties will be sufficiently dissatisfied with that result as to provoke each to do everything possible to expedite a full review of the interim award. To facilitate that, I would be disposed if invited to give directions for an expedited hearing.

26. Accordingly, the appeal is allowed. We will make the order indicated, after hearing counsel as to its precise form.