CSP v. LCYK

FCMC 4477 / 2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 4477 OF 2006

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J U D G M E N T

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Introduction

1.  This is an application by a Petitioner wife for ancillary relief namely a lump sum and a periodical payments order for herself and the child of the family.

Background

2.  At its heart this is a dispute concerning the wife’s entitlement to a share of the family assets, where it is accepted that the husband inherited most of those assets.

3.  The parties married on the 15 March 2001, when the wife was 22 and the husband 20 years old respectively.  On the 6 August 2001 their only child, a son, HY was born.

4.  The parties started off their married life, by living with the husband’s parents in King’s Road, Hong Kong.  The husband’s elder brother also lived with them.  It is not disputed that this property was originally held in the name of the husband’s mother.

5.  The marriage was not an easy one and in May 2003 the wife moved out of the King’s Road property with HY.  The circumstances surrounding this are in dispute and are, in any event, largely irrelevant for the purposes of the present hearing.  The parties had by then been married for just over 2 years.

6.  A year later, on the 25 May 2004 the husband’s mother passed away.  She had been diagnosed with cervical cancer some years earlier.  It seems that the wife visited the mother whilst she was ill and that their relationship was quite cordial.  Following the mother’s death the wife moved back into the King’s Road property at the invitation of the husband and his family.

7.  It is agreed that the King’s Road property was originally held in the sole name of the mother and that she had also previously held an interest in a factory unit.  She also held a number of bank accounts in her own name.  The husband and the elder brother were the only two beneficiaries under the mother’s will, with the elder brother being appointed as the sole executor.  The will was dated the 15 September 1998.  This was before the parties were married.  The husband would have been 17 years old at the time.  The mother did not leave anything to her husband in the will – i.e. to the husband’s Father. Probate was granted on the 15 August 2005.

8.  The reconciliation between the parties was short lived and on the 30 January/1 February 2006 the wife moved out with HY, this time on a permanent basis.  On the second occasion the parties had resided together for approximately 21 months.

9.  Three months later, the wife issued divorce proceedings based on the husband’s unreasonable behaviour. Initially these proceedings were defended.  Eventually the parties agreed to proceed on an undefended basis.  The issue of costs has yet to be resolved.  Arrangements for the child of the family were also disputed.  Eventually it was agreed that custody would vest in the wife with defined access to the husband.  Maintenance pending suit was also argued.  Initially the husband paid HK$7,000 per month on a voluntary basis.  The wife said that this was grossly inadequate and on the 20 September 2007 she issued an application for maintenance pending suit/interim maintenance.  She sought HK$10,000 per month.  In my order of the 20 September 2007, the wife was granted maintenance pending suit of HK$7,000 per month for herself, with an additional HK$2,000 per month for HY.  This was varied on the 17 January 2008, so that the wife and HY both received HK$4,500 per month each.

10.  The husband subsequently applied to vary the maintenance downwards to HK$5,000 per month or HK$2,500 per month each.  However he accepted, very sensibly, that this matter should more appropriately be dealt with in a final hearing for ancillary relief.  The decree nisi was pronounced on the 9 July 2008.  On the 24 July 2008 the wife issued an application for an avoidance of disposition order.  The husband seeks an order that the maintenance be reduced to HK$5,000 per month.  The wife now seeks an increase to HK$14,000 per month.

The husband’s case

11.   The husband’s case is that he and his elder brother entered into an informal arrangement with their father whereby they agreed that he would hold a life interest in the King’s Road property.  If the property were sold, 50% of the net proceeds would go to the father and 25% each to the husband and his elder brother.  The remainder of the estate was to be dealt with in the same way, i.e. it was to be split 50% to the father and 25% each to the husband and his elder brother.  The husband says that this agreement was entered into sometime after the grant of probate on the 15 August 2005, whereas the father says that the conversation took place at the end of 2004.

12.  Subsequently the elder brother entered into an agreement with his Uncle. It is accepted that the husband’s mother had purchased a factory unit with her own brother and that she subsequently sold her half share to him. The sum of HK$165,000 is still to be paid. The wife argues that the formal sale and purchase agreement should be rescinded. The elder brother says that he has agreed to accept payment of this sum over a three-year period.   

The wife’s case

13.  The wife disputes the husband’s version of events and says that the husband has entered into these agreements in order to defeat her claim for ancillary relief.  She claims a 50% share of the husband’s share of the assets.  No open offers were filed prior to the commencement of the trial.  When asked to file an open proposal with her closing she put her case as follows:

The Petitioner proposes to invite the Court to make an order that: -

1.  the Respondent do increase the monthly maintenance for the support of the Petitioner and the child from the sum of HK$9,000.00 to HK$14,000.00 or to any sum as the Court may think fit;

2.  the Respondent do pay the Petitioner (by instalments) a secured lump sum payment equivalent to 25% of the final value of the entire estate of his late mother or to any proportion as the Court may think fit;

3.  alternative to 2 above, a charge equivalent to 25% of the final value of the entire estate of the Respondent’s late mother be charged against the former matrimonial home in favour of the Petitioner, which charge shall not be enforced by the Petitioner until the father-in-law dies or until the Respondent and his family sell the property (whichever is the earlier);

4.  a section 17 order be granted in favour of the Petitioner in terms as prayed by her in paragraph 12 of her Affirmation filed with court on 24th July 2008;

5.  section 18 Declaration; and

6.  the Respondent do pay the Petitioner’s all costs of and incidental to these proceedings including all costs reserved (including the costs reserved in 11 Court Orders dated 17.7.2006, 18.10.2006, 12.2.2007, 11.5.2007, 24.8.2007, 25.2.2008, 14.3.2008, 10.6.2008, 9.7.2008, 1.8.2008 & 10.10.2008 respectively) to be taxed on party and party basis if not agreed, save the Petitioner’s own costs be taxed in accordance with Legal Aid Regulations.

The issues

·  Should the husband’s alleged agreements with his father be set aside under s.17 Matrimonial Property and Proceedings Ordinance, Cap 192?

·  How should the inherited property be regarded – as matrimonial or non-matrimonial property?

·  Bearing in mind the answer to these two questions, what is the computation of available assets for distribution?

·  How should those assets be divided bearing in mind the concepts of need, compensation and sharing, all of the factors set out in s.7 Matrimonial Proceedings and Property Ordinance, Cap. 192 and the overriding requirement of fairness?

·  How much maintenance should the husband now pay to the wife for herself and HY?

·  Who should pay the legal costs?

Should the husband’s alleged agreements with his father be set aside under s.17 Matrimonial Property and Proceedings Ordinance, Cap 192?

The law

14.  The wife issued an application pursuant to s.17 Matrimonial Proceedings and Property Ordinance, Cap. 192.  This section states as follows:

(1)  Where proceedings for relief under any of the relevant provisions of this Ordinance (hereafter in this section referred to as "financial provision") are brought by a person (hereafter in this section referred to as "the applicant") against any other person (hereafter in this section referred to as "the other party"), the court may, on an application by the applicant-

…

(b)  if it is satisfied that the other party has, with the intention aforesaid, made a disposition to which this paragraph applies and that if the disposition were set aside financial provision or different financial provision would be granted to the applicant, make an order setting aside the disposition and give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payment or the disposal of any property);

(2)  Paragraphs (b) and (c) of subsection (1) apply respectively to any disposition made by the other party (whether before or after the commencement of the proceedings for financial provision), not being a disposition made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any such intention as aforesaid on the part of the other party.

(3)  Where an application is made under this section with respect to a disposition which took place less than three years before the date of the application or to a disposition or other dealing with property which is about to take place and the court is satisfied-

(a)  in a case falling within subsection (1)(a) or (b), that the disposition or other dealing would (apart from this section) have the consequence, or

(b)  in a case falling within subsection (1)(c), that the disposition has had the consequence, of defeating the applicant's claim for financial provision, it shall be presumed, unless the contrary is shown, that the other party disposed of the property with the intention aforesaid or, as the case may be, is, with that intention, about to dispose of or deal with the property.

(4)  In this section-

"disposition" (財產處置) does not include any provision contained in a will or codicil but, with that exception, includes any conveyance, assurance or gift of property of any description, whether made by an instrument or otherwise;

"the relevant provisions of this Ordinance" (本條例的有關條文) means any of the provisions of sections 3, 4, 5, 6, 6A, 8, 11 (except subsection (6) ) and 15; (Amended 69 of 1997 s. 33)

and any reference to defeating an applicant's claim for financial provision is a reference to preventing financial provision from being granted to the applicant, or to the applicant for the benefit of a child of the family, or reducing the amount of any financial provision which might be so granted, or frustrating or impeding the enforcement of any order which might be or has been made at the instance of the applicant under the relevant provisions of this Ordinance.

15.  Therefore, the wife argues that if I am satisfied that the husband has made a disposition i.e. entered into an informal arrangement referred to above, with the intention of defeating her claim for ancillary relief, in whole or in part, then I may set that disposition aside. This is so if I am also satisfied that if I were to set aside the disposition aside different financial provision would then be made for the wife. Although the date of the actual conversation is unclear, it seems likely that it took place after the grant of the probate in August 2005. The wife issued her application to set the disposition aside in July 2008. Therefore it is presumed that the disposition took place with the intention of defeating the wife’s claim. The burden of proof rests on the husband. He has to show that this was not the case.

16.  Reference to the appropriate standard of proof can be found in Rayden, 18th edition, where it states as follows:

“Standard of proof

27.15  As to the standard of proof, the question to be asked by the judge after reviewing the evidence is: ‘Am I satisfied that the disposition was made with the intention of defeating the wife’s claim for ancillary relief? The standard of proof remains the balance of probabilities, although it has been said that since what has to be proved is not merely a dishonourable intention but a dishonest and fraudulent one, the evidence which is required to tip the balance has to be correspondingly more convincing. ‘Satisfied’ in this context means no more than that the judge has to make up his mind.”

17.  The wife has consistently argued as follows:

(i)  Regarding the Estate as a whole, I maintain that the Respondent should not unfairly benefit his father at the expense of me and the child. It is not right for him to share his half interest in the estate with his father allegedly made pursuant to a verbal agreement reached amongst himself, his father and his brother. The alleged agreement was made without my knowledge or consent. I dispute the existence of such a verbal agreement. I dispute its validity and lawfulness also. It is unfair to me that the Respondent’s father is allowed to live in the former matrimonial home for the rest of his life pursuant to the alleged agreement.

(ii)  Regarding the bank deposits of the Estate, I crave leave to refer to the English Translation of the Executor’s Statement made by the respondent’s elder brother… on 30th August 2006…. I stress that the Statement is a mere statement and its contents have never been affirmed by the Brother by way of an affidavit or affirmation as true and correct. Concerning the Expenses therein mentioned, I continue to challenge the reasonableness of items (2)-(5), and items (6)-(8) thereof, namely the alleged funeral expenses, religious rites and ceremonies, renovation of the former matrimonial home, etc.

(iii)  Moreover, as so advised by my existing lawyers, I would like to challenge the missing whereabouts of the following two bank deposits of the deceased also:-

Account no. 064-XXX-X-XXXXXX-X with The Bank of China (Hong Kong) Limited in the sum of $168,992.20 on the date of her death…

Account no. 376-X-XXXXXX-X with Standard Chartered Bank in the sum of $66,680.89 on the date of her death (*) respectively.

The executor’s Statement mentioned in sub-paragraph (ii) above has failed to account for the whereabouts of the said two deposits, in the total sum of $235,673.09 ($168,992.20 + $66,680.89 = $235,673.09). The Respondent is put to the strict proof thereof.

(b)  A letter dated 30th November 2006 from Gary Tam & Co. written on my behalf.

(i)  regarding the Factory, I repeat that the Respondent should not unfairly benefit his father at the expense of me and the child by entering into the alleged verbal agreement with the Brother and his father. The alleged agreement between the Brother and his maternal uncle is unfair to me either. As a responsible executor duly appointed by the Court, the Brother should have promptly exercised his right to rescind under the Formal Sale and Purchase Agreement and to forfeit the deposit paid by the maternal uncle thereunder.

18.  The husband for his part has consistently put his case as follows:

1.16  The property known as “Flat X, King’s Road, Hong Kong” (“the matrimonial Home”) was in 1977 purchased by my father LWC (“my Father”) and my mother LCK (who died on 25th May 2004) (“my Mother”) at the price of HK$187,000 with their own funds, but registered in the sole name of my late Mother. Since the said purchase, I have been residing at the matrimonial Home with my Father, my late Mother, my elder brother LCY (“my Brother”). After my marriage, in addition to my said family members, the Petitioner and the Child had also lived in there until the Petitioner moved out with the Child in or about February 2006. I am still living with my Father and my Brother at the Matrimonial Home. By my late Mother’s will dated 15th September 1998, the Matrimonial home was bequeathed to my Brother and myself as joint tenants in equal shares, but the said gift must be subject to my Father’s prior interests and estates of and in the Matrimonial Home due to his contributions to the purchase price for it and to support the family in the past. A grant of Probate (with the said Will annexed) was granted to my Brother as Executor of the estate of my late Mother on 15th August 2005. Given that my Father’s prior rights and entitlement over the Matrimonial Home due to his past contributions as aforesaid, my Father, my Brother and I have understood and agreed that my Father should have the right to reside at the Matrimonial Home for the rest of his life and if in the event that the Matrimonial Home is to be sold during his lifetime, half of the net sale proceeds thereof should be distributed and paid to him. Therefore, each my Brother and I should only have 1/4th beneficial interest and share of and in the Matrimonial Home while my Father should have the remaining 2/4th beneficial interest and shares therein. I have recently been advised by some estate agents that the estimated market value of the Matrimonial Home is about HK$1.4 million. Accordingly, the estimated value of my share in the matrimonial Home would not exceed HK$350,000. The Matrimonial Home has still been held in the name of my Brother as Executor of the estate of my late Mother upon trust for the respective beneficial shares of himself, my Father and myself.

2.2  My late Mother also held 1/2nd share of another property known as “Factory No. X, Hong Man Street, Hong Kong” (“the Property”). The Property was on 14th April 1987 purchased by my late Mother and her brother Mr. LSH (“my Uncle”) as Tenants-in-Common in equal shares. However, by an agreement for sale and purchase dated 12th July 2002 and registered in the land registry by Memorial No. UBXXXXXX (“the said Agreement”), my late Mother agreed to sell and my Uncle agreed to purchase all her 1/2nd interest in the Property at the price of HK$570,000. To the best of my knowledge and belief, my Uncle has already paid up HK$405,000 in total and leaving HK$165,500 being the remaining balance of the purchase price still due and unpaid by him, and completion of the said sale and purchase is still pending the said unpaid balance to be fully paid. As my beneficial interests in the Property like the same situation as in the Matrimonial Home as hereinbefore-mentioned in 1.16, I should only have 1/4th interest in the unpaid balance of the purchase price (i.e. HK$165,500 x ¼ = HK$41,375) (“the said unpaid balance”) while my Brother should have 1/4th share of the said unpaid balance and my Father should have the remaining 2/4th shares thereof. My late Mother’s 1/2nd share of and in the Property is still being held in the name of my Brother as Executor of the estate of the late Mother pending completion of the said sale and purchase in accordance with the said Agreement.

19.  This argument has been supported by both the husband’s father and his elder brother. Initially they filed statements and then at the request of the wife who challenged those statements, they filed affirmations.

20.  The wife argues that the alleged oral agreements, if relevant, should be set aside. She argues that the husband entered into these agreements in order to defeat her claim.

21.  Is that correct? Did the husband enter into these oral agreements in order to defeat the wife’s claim? The intention does not need to be the only or primary intention. It can also be a subsidiary or secondary one. See Kemmis v Kemmis [1998] 1 WLR 1307. In that case it was found that it was enough if the intention played a substantial part in the husband’s intentions as a whole.

22.  Generally speaking I accept the husband’s version of events. I accept that he and his brother entered into an oral agreement with their father, shortly after his mother’s death, in order primarily to safeguard their father’s position. It seems to me that this was entirely reasonable and sensible. I accept that there was no reason for them to discuss this with the wife. Nor were they obliged to obtain her consent.

23.  But, it seems to me that an equally valid secondary outcome of this was that it could then be argued, as the husband has done, that the wife’s claim should prima facie, be reduced by half. I find that this secondary outcome did play a part in the husband’s intentions overall.

24.  Consequently, it seems to me that the husband’s 50% share in his mother’s estate should prima facie be included in the matrimonial pot.

How then should the inherited property be regarded – as matrimonial or non-matrimonial property?

The law

25.  I considered the issue of matrimonial and non-matrimonial property in SDY v KSLS (Ancillary Relief) [2008] HKFLR, 266 where it is stated as follows:

In Miller v Miller, McFarlane v McFarlane [2006] UKHL, 24, Lord Nicholls of Birkenhead said, when discussing the concepts of matrimonial and non-matrimonial property

A complication rears its head at this point. I have referred to the financial fruits of the marriage partnership. In some countries the law draws a sharp distinction between assets acquired during a marriage and other assets. In Scotland, for instance, one of the statutorily prescribed principles is that the parties should share the value of the "matrimonial property" equally or in such proportions as special circumstances may justify. Matrimonial property means the matrimonial home plus property acquired *634 during the marriage otherwise than by gift or inheritance: Family Law (Scotland) Act 1985, sections 9 and 10 . In England and Wales the Matrimonial Causes Act 1973 draws no such distinction. By section 25(2)(a) the court is bidden to have regard, quite generally, to the property and financial resources each of the parties to the marriage has or is likely to have in the foreseeable future.
22. This does not mean that, when exercising his discretion, a judge in this country must treat all property in the same way. The statute requires the court to have regard to all the circumstances of the case. One of the circumstances is that there is a real difference, a difference of source, between (1) property acquired during the marriage otherwise than by inheritance or gift, sometimes called the marital acquest but more usually the matrimonial property, and (2) other property. The former is the financial product of the parties' common endeavour, the latter is not. The parties' matrimonial home, even if this was brought into the marriage at the outset by one of the parties, usually has a central place in any marriage. So it should normally be treated as matrimonial property for this purpose. As already noted, in principle the entitlement of each party to a share of the matrimonial property is the same however long or short the marriage may have been. 23. The matter stands differently regarding property ("non-matrimonial property") the parties bring with them into the marriage or acquire by inheritance or gift during the marriage. Then the duration of the marriage will be highly relevant. The position regarding non-matrimonial property was summarised in the White case [2001] 1 AC 596, 610:

"Plainly, when present, this factor is one of the circumstances of the case. It represents a contribution made to the welfare of the family by one of the parties to the marriage. The judge should take it into account. He should decide how important it is in the particular case. The nature and value of the property, and the time when and circumstances in which the property was acquired, are among the relevant matters to be considered. However, in the ordinary course, this factor can be expected to carry little weight, if any, in a case where the claimant's financial needs cannot be met without recourse to this property." 24. In the case of a short marriage fairness may well require that the claimant should not be entitled to a share of the other's non-matrimonial property. The source of the asset may be a good reason for departing from equality. This reflects the instinctive feeling that parties will generally have less call upon each other on the breakdown of a short marriage.

25. With longer marriages the position is not so straightforward. Non-matrimonial property represents a contribution made to the marriage by one of the parties. Sometimes, as the years pass, the weight fairly to be attributed to this contribution will diminish, sometimes it will not. After many years of marriage the continuing weight to be attributed to modest savings introduced by one party at the outset of the marriage may well be different from the weight attributable to a valuable heirloom intended to be retained in specie. Some of the matters to be taken into account in this regard were mentioned in the above citation from the White case. To this non-exhaustive list should be added, as a relevant matter, the way the parties organised their financial affairs.

In Hong Kong, as in England and Wales there is no statutory distinction between matrimonial and non-matrimonial property. The distinction becomes important when considering all the circumstances of the case and the s.7 factors.

26.  Put simply the wife’s case is that the husband’s inheritance should be included in the assets available for distribution and that she should be entitled to 50% of that inheritance – i.e. “25% of the final value of the entire estate of his late mother...”. This is central, because apart from the inheritance, the husband owns very little in his own right and what he does own, such as his mandatory provident fund cannot be touched in the short term in any event.

27.  The husband, who is acting in person, puts his case in his closing as follows:

I hereby respond to the queries of the petitioner’s solicitor from my point of view, as follows:

With regard to Flat X, King’s Road, North Point (the Property). I disagree that it is matrimonial home. In my understanding, matrimonial home means a property co-owned by a couple or owned by either. The Property was purchased by my mother in 1977. It was also a reward of my hard-working parents. Neither did I nor my ex-wife (the petitioner) pay for the Property. It is therefore clear that the Property is co-owned by my parents only.

With regard to the factory property, I consider that the dispute raised by the petitioner’s solicitor is ridiculous. In 2002, my parents sold the factory property to my uncle in order to improve their cash flow. It is clear that my parents had sole discretion in so doing, as they were the owners of the factory property. The only point that may be arguable is the outstanding payment of $165,000 owed by my uncle. However, I consider that the property right and outstanding payment be separate issues. I understand that the current business environment of the Hong Kong industry is very difficult. Therefore, I consider that the agreement between my elder brother and uncle is a reasonable solution to the outstanding payment. By the way, I would like to point out that I have a close relationship with my uncle. I never forget what happened when I was a primary six pupil; my uncle immediately helped me obtain a form one place in a good secondary school when he had known that I had been allocated a place in a lower band secondary school. Truly, my uncle always takes care of me.

With regard to probate asset, I consider that the challenge of the petitioner’s solicitor is logically unsound and unreasonable. First of all, I fully trust my elder brother. Furthermore, the time my elder brother dealing with the probate asset is May 2004 (when my mother had just passed away). Please be reminded that there was neither litigation nor such dispute to appear until August 2005. Under normal circumstances, the probate asset could be settled by my father, my elder brother and me. Please also be reminded that I was called to appear in court in April 2006. It is therefore clear that there is no omission, but unreasonable challenges of the petitioner’s solicitor.

In response to the challenge to my father’s assets, I have to highlight my family’s life below. My parents married in 1969, and had martial life for 36 years. Since I had no longer been an infant, I knew they loved each other very much. I am always proud of living in my family that is harmonious and full of their great care and love.

When my mother was seriously ill and stayed in Grantham Hospital in 2002, I visited her after work every day. I never forget that when I visited my mother in the hospital on the fifth day of the Lunar New Year, she told me that being the wife of my father and with two children with him was the proudest of her life. She also told me that she was always proud of my father for his trust, support and unconditional dedication to her and the family. I was also known from my mother that in her life with him, my father was never mean with everything including money.

My mother loved my father very much too. When my father was seriously ill in 1997, my mother took greatest care of him every day. Unfortunately, my mother suffered from cervical cancer in 1998.

Finally, I must stress that I strongly believe that my parents’ assets were earned by themselves through their hard work and dedication to each other.

28.  I have a great deal of sympathy with the husband’s position. This is a short marriage between two young people, which produced one child. The fact is that the parties cohabited for less than 4 years in total. In such circumstances I agree that the instinctive feeling is that there should be less call on the husband’s assets than might otherwise have been the case, notwithstanding the fact that there is a young child to be catered for. This is partly because of the shortness of the marriage and partly because nearly all of the assets are inherited.

29.  In addition there are the other circumstances to be taken into account. The husband said that he understood why his mother had not included his father in the will. He said

I do understand why she did it this way. In 1998 my Mother was diagnosed with cervical cancer and my Father at that point in time was very sick.

30.  I accept entirely the evidence of both the husband and his father in this respect namely that as the father had been ill at the time that the mother’s will was drawn up and that the mother may have thought that this was the best way of securing the position going forward. I am sure that she knew that the son’s would ensure that their father was properly cared for. I accept that the father contributed fully to the assets held in the wife’s name and that this represented their own martial acquest, as it were. When asked about the assets the father said that he didn’t bother with any of these sorts of things. He left it all to his wife to organise, which she did. He said

We’re family – what’s the difference if it’s held in my name?

31.  I also accept the husband’s evidence that no arrangement was made with his father earlier, given that the whole family were coming to terms with their loss.

32.  The husband said,

In the year after my Mother passed away until 2005, my whole family lost interest in everything and didn’t bother to sort anything out…

And also

I was so upset…. I lost interest in everything

33.  This is, in my view, completely understandable. I also accept that both the husband’s father and mother contributed financially and otherwise to the assets, which were eventually held in the name of the mother only. The father no longer works and has not done so since 1998 when he retired because of ill health. He is in his early 60’s. He holds no other assets. He has no other place to live. He is entirely supported by the sons. He still suffers from ill health.

34.  I agree that the wife prima facie has a claim against the inherited property. I also accept that that property should not necessarily be quarantined from the matrimonial pot available for distribution at source. Certainly the wife has a claim against the King’s Road property – although the circumstances surrounding the inheritance of that property must also be taken into account. Reference to the factory and other inherited cash assets is set out below. Generally I accept that the circumstances of this case are such that it seems to me that it is only appropriate to depart from the yardstick of equality when coming to a decision over all.

Bearing in mind the answer to these two questions, what is the computation of available assets for distribution?

35.  Computation of available assets

Husband’s inherited assets

King’s Road Property- 50% - HK$2,153,000 HK$1,076,500

Factory – money due – 50% - HK$165,000 82,500

Cash – 50% - HK$50,000 25,000

Husband’s other assets

Mandatory Provident Fund 117,117

Insurance 5,395

Savings 31,800

TOTAL c. HK$1,338,300

Less credit card and other debt 63,800

TOTAL ASSETS HK$1,274,500

Wife’s assets

Savings HK$9,000

Mandatory Provident Fund HK$15,800

Less credit card debt HK$22,000

TOTAL ASSETS HK$6,000

COMBINED ASSETS HK$1,280,500

How should those assets be divided bearing in mind the concepts of need, compensation and sharing, all of the factors set out in s.7 Matrimonial Proceedings and Property Ordinance, Cap. 192 and the overriding requirement of fairness?

The law

36.  Generally speaking the law in Hong Kong has been clarified since the recent decision in DD v DKW (CACV no 91 of 2007). The Hon Mr. Justice Cheung JA set out in clear terms the applicable principles to be generally applied in ancillary relief cases. They are at para’s 69 and 70 of the judgment. I do not intend to repeat them in full here. However, in so far as this case is concerned I would like to highlight in particular the following paragraphs:

The applicable principles

69.  I am aware that Family Court judges are concerned with the practical application of the principles established in White and Miller. I will set out what I consider to be the relevant principles when the Court considers ancillary relief applications:

(1)  In the majority of the cases where the parties only have limited financial resources, the focus of the inquiry on fairness is to divide the assets of the parties so as to make provision for their housing and financial needs. It may be necessary to augment the available assets by making orders for periodical payments (Miller [11][12])....

(8)  The principle of fairness is to apply to all properties of the parties both ‘matrimonial’ (i.e. the product of both parties which also include the matrimonial home, even if this was brought into the marriage by one of parties) and ‘non-matrimonial’ (i.e. by inheritance and gift) (Miller [22]).

(9)  The equal sharing principle applies to both long and short marriages but in case of short marriage, the non-matrimonial property may be a good reason for departing from equality (Miller [24]; Charman [66]).

37.  The Hon Mr Justice Cheung JA identifies the relevant section 7 factors under the headings of need, compensation and sharing. The court shall take into account the s.7 factors when determining an application for ancillary relief. For ease of reference I have set them out again here.

(7)(1)  It shall be the duty of the court in deciding whether to exercise its powers under section 4, 6 or 6A in relation to a party to the marriage and, if so, in what manner, to have regard to the conduct of the parties and all the circumstances of the case including the following matters, that is to say-

(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;

(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;

(c)  the standard of living enjoyed by the family before the breakdown of the marriage;

(d)  the age of each party to the marriage and the duration of the marriage;

(e)  any physical or mental disability of either of the parties to the marriage;

(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;

(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.

The section 7 factors

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;

Property

King’s Road Property

38.  Although the parties lived in the King’s Road Property and to that extent it can be referred to as the matrimonial home, it is clear that it is not the matrimonial home, in the traditional sense of that term.

The factory

39.  I accept that it has been agreed between the family that, in the words of the elder brother:

(5)  regarding my late mother’s half share of interest in the Factory Unit as aforementioned, I knew that my late mother had signed an Agreement for Sale and Purchase with her natural younger brother Mr. LSH (“my Uncle”) before she died. Under the said agreement, she would sell all of her half share of interest in the Factory Unit to my Uncle for HK$570,000. As far as the payment is concerned, my late Mother allowed the balance of the purchase price to be paid by instalments. According to the bank payment records provided by my Uncle, I confirm that the amount that remains outstanding is HK$165,500, being the remaining balance of the purchase price still due and unpaid by him.

(6)  In or about mid-September 2005, my Uncle and I had a discussion over this matter. Because his company was in financial difficulties, his own half share of interest in Factory Unit has already been mortgaged to a bank to secure overdraft facilities. As he has to pay his company’s operating expenses and interests, he would not be able to settle the remaining balance of the purchase price on time for completing the sale and purchase of the Factory Unit. In order to avoid damaging the good relationship between our family and my Uncle that has been maintained over the years, and also to respect my late Mother’s decision which favoured the selling of the factory Unit to my Uncle, I decided not to exercise my power as the administrator to set side the said agreement with my Uncle, rather, I have come up with a verbal agreement with him that he could have more time to settle the outstanding payments and to complete the sale and purchase transaction within 3 years.

40.  I do not accept that it is reasonable to expect the elder brother to rescind the contract and to forfeit the deposit paid by the uncle.

Remaining inherited assets

41.  The husband relies on the statement of account from the probate. This states as follows:

1.	Accounts with Bank of China (Hong Kong) Limited	$
	a) Account No. 064-XXX-X-XXXXXX-X	3,748.13
	b) Account No. 064-XXX-X-XXXXXX-X	96.70
	c) Account No. 012-XXX-X-XXXXXX-X (RMB10,578.51)	10,171.80
	d) Account No. 064-XXX-X-XXXXXX-X - (CAD0.02) - (GBP2.08) - (NZD63.08) - (USD738.10)	0.13 28.60 336.19 5,720.87
	e) Account No. 012-XXX-XX-XXXXX-X	Nil
2.	Accounts with Hang Seng Bank Limited
	a) Account No. 220-X-XXXXXX	205,973.71
	b) Account No. 220-XXXXXX-XXX - (AUD21,239.52) - (USD0.04)	115,904.06 0.31
	c) Account No. 220-XXXXXX-XXX	Nil
3.	Accounts with Standard Chartered Bank
	a) Account No. 376-X-XXXXXX-X	Nil
	b) Account No. 376-X-XXXXXX-X (AUD26,274.95)	158,114
	c) Account No. 376-X-XXXXXX-X	Already closed on 31/8/2005
	d) Account No. 376-X-XXXXXX-X (USD609.12)	4,762.91
4.	Account No. 042-X-XXXXXX with The Hongkong and Shanghai Banking Corporation Limited	9,101.44
5.	Account No. 338XX-XXXXX-X with Shanghai Commercial Bank Limited	7,587.11

42.  The wife queries the whereabouts of certain funds and the fact that certain monies appear to have been removed from account no 064- XXX-X-XXXXXX-X with the bank of China and account no 376-X-XXXXXX-X with Standard Chartered Bank. The husband relies on the elder brother’s testimony, where he has produced accounts showing how the funds have been spent. The husband confirmed during cross-examination that he adopted his brother’s stance on this point. His brother stated as follows:

Particulars of my late Mother’s estate

My late Mother’s Bank Accounts

Bank	Account No.	A/C balance as at cancellation ($)
Bank of China (Hong Kong)	064-XXX-X-XXXXXX-X 064-XXX-X-XXXXXX-X 012-XXX-X-XXXXXX-X 064-XXX-X-XXXXXX-X 012-XXX-XX-XXXXX-X	3,748.13 96.70 10,171.85 6,085.79 Nil
Hang Seng Bank	220-X-XXXXXX 220-XXXXXX-XXX 220-XXXXXX-XXX	205,973.71 115,904.37 Nil
Standard Chartered Bank	376-X-XXXXXX-X 376-X-XXXXXX-X 376-X-XXXXXX-X 376-X-XXXXXX-X	Nil 158,114.77 4,762.91
HSBC	042-X-XXXXXX	9,101.44
Shanghai Commercial Bank	042-X-XXXXXX 338XX-XXXXX-X	9,101.44 7,857.11
		Total : $521,816.78
Expenses
(1) Legal costs for probate application		24,700.00
(2) My late mother's funeral expenses on May 04		170,000.00
(3) Religious rite and ceremony on July 04		10,000.00
(4) Religious rite and ceremony on July 05		10,000.00
(5) Religious rite and ceremony on July 06		10,000.00
(6) Expenses for washroom leakage repair		45,800.00
(7) Home renovation expenses		192,750.00
(8) Furniture & electric appliances		8,946.00
		Total : $472,196.00

Enclosed herewith are supporting invoices/documents of relevant expenses and outgoings including legal costs fee, Family Home renovation and repairing expenses, expenses for the purchase of household furniture and electric appliances, etc.

(8)  I will continue to be the trustee of the remaining balance of my late Mother’s estate and will administer all other expenditures in relation to my late Mother’s probate. I will distribute the remaining balance of the estate in accordance with my late mother’s will upon completion of the sale and purchase of the Factory Unit.

43.  In particular the wife challenged the whereabouts of approximately HK$200,000. She had asked for copies of bank statements but they had not been produced. I was asked to draw an adverse inference. When asked about this the husband said of the probate accounts

As far as I know this are the most up to date figures. As to what was in the accounts before that I have no idea.

44.  I intend to accept the probate figures as produced. Although I agree that the brother’s version of events has not been tested given that he did not appear in court to be cross examined, nevertheless his version of events, which has been adopted by the husband is, in my view, believable.

45.  Generally speaking I accept that there has been no distribution and that the funds referred to have been spent as indicated and the remainder retained by the family for future expenditure. Thus although I accept that the husband has a valid claim against approximately HK$50,000, I also accept that these funds cannot be utilized by him.

46.  During her examination in chief the wife was asked if she had anything to say about the expenses referred to by the elder brother and in particular the payment of the funeral expenses and annual payment for the religious rite. She said that she had nothing to say about that, or indeed anything further to add in relation to the so called missing HK$200,000.

Need

(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;

47.  It is clear that both parties need somewhere to live and sufficient money to live on. The wife requires a home for the parties’ son. The husband also has other family obligations. He partially supports his father’s living and while I accept that legally this obligation does not take precedence over his financial obligation towards the wife and their son, in the circumstances of this case this does appear to me to be a relevant factor and one that I have taken into account. The husband also needs money in order to fund his further education. He wishes to take a part time degree probably in quantity surveying – or something similar.

48.  The wife’s argues that fairness dictates that the inherited property should be included in the matrimonial pot. In this case though the wife is living in a public housing unit in Aberdeen, which was allotted to her after the maintenance pending suit hearing. Her own housing needs and those of HY have been met. If the mother were successful in her initial claim, then there would be no alternative but to sell the King’s Road Property – which is home, not only to the husband, but also to his father and brother. This cannot be either fair or reasonable in the circumstances of this case.

(c)  the standard of living enjoyed by the family before the breakdown of the marriage;

49.  I accept that standard of living enjoyed by the family was that of an average working class family in Hong Kong.

(d)  the age of each party to the marriage;

50.  Both parties are young and in relative good health – although the husband complains of stress related ailments.

(e) any physical or mental disability of either of the parties to the marriage;

51.  This is not relevant to the present application.

Compensation

The prospective financial disadvantage which upon divorce some parties face as a result of decisions which they took for the benefit of the family during marriage.

In short marriages the financial disadvantage a party suffered, if any, on entering into the marriage.

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 benefit of the chance of acquiring.

52.  The issue of compensation was not argued and on the facts of the case does not appear to be relevant.

Sharing

(f) the contribution 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;

53.  I accept that both parties made a valid contribution to the marriage.

(c)   the duration of the marriage;

54.  It has been suggested that this is not an unduly short marriage. I do not agree. It seems to me that a relationship of less than 5 years is relatively speaking, a short one. However, I agree that the existence of HY means that it is not a “short marriage” in the classic definition of the phrase i.e. short in length and childless.

Conduct of the parties, which it would be inequitable to disregard.

55.  This is not a relevant factor in this case. Both parties have made allegations against the other. I am not of the view that either side’s behaviour was such that it should be taken into account on a financial application.

Decision

56.  In view of my findings above, I will order that a charge in the sum of HK$200,000 be secured against the King’s Road Property, which charge shall not be enforced by the wife until the father-in-law dies or until the property is sold (whichever is the earlier). When departing from the yardstick of equality I have taken into account the shortness of the marriage and the fact that the main assets are inherited in any event. The secured amount of HK$200,000 seems to me to be a fair and reasonable solution in all the circumstances of the case. This figure represents just under 20% of the husband’s share of the main realizable asset – i.e. the King’s Road Property. I accept that the majority of the other funds are not immediately realizable. I have also found in the husband’s favour in relation to the value of the factory and the other cash assets, which were inherited.

How much maintenance should the husband now pay for the wife and HY?

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;

57.  At trial the wife said that she had outgoings of HK$9,228 per month, but that she needed an additional HK$5,000 per month in order to cover anticipated expenditure going forward.

58.  The husband presently earns in the region of HK$24,000 per month. He is a quantity surveyor by occupation. He says that it is a struggle for him to pay HK$9,000 per month and he asks that the maintenance be reduced to HK$5,000 per month. He puts his outgoings at just under HK$24,000 per month including the HK$9,000 per month that he presently pays as maintenance pending suit/interim maintenance. This amount does not include the repayment of some loans in the sum of HK$2,200 (Chong Hing Bank and Dah Sing Bank) plus a further loan with Bank of China. It also does not include anticipated expenditure to cover further study. The husband wishes to take a degree in quantity surveying – or something similar.

59.  The husband accuses the wife of bad faith. He says that when she applied to increase the maintenance pending suit that she was infact working part time and that shortly after the hearing she moved to a public housing unit, which decreased her outgoings over all. In addition once the son started Primary 1 the fees for schooling also decreased.

60.  Of his own earning capacity the husband claims that he may be in imminent danger of losing his job. However for the time being he is gainfully employed. If his circumstances were to change he would need to come to court and seek a variation, but not before.

61.  The wife for her part says that she cannot work. She says that she has a limited education and that she has to care for her son, who is suffering from a learning disorder. She produced a letter from the school dated the 15 December 2008 which said that he might have a “speed and learning problem”. The wife confirmed that he was in all day school, leaving home at 7:00 am and returning between 4:00 – 5:00 pm. She confirmed that he went to and from school by school bus. She said that she was not required to assist him in studying in school. He attends some extra curricular activities including taekwondo on a Friday afternoon. This is also held at school. She also confirmed that the husband sees the son once a week – normally on a Sunday.

62.  It is not disputed that the wife previously worked. The husband says that she worked at one point as a saleslady in a jewellery store earning some HK$7,500 per month. She also worked part time in a bakery and most recently as a part time domestic helper earning HK$50 per hour.

63.  The wife is young and in good health. I do not accept that her son needs her constant care. In any event he is out at school for most of the day. It seems to me that she does have an earning capacity and one that she should now realize. I am very disturbed by the fact that she seems to have chosen not to work – even as a part time domestic helper, following the increase in the maintenance payments.

64.  I also accept that it is difficult for the husband to maintain payments at HK$9,000 per month.

Decision

65.  In the circumstances I will reduce the maintenance to HK$7,000 per month – i.e. HK$3,500 for the wife and HK$3,500 for the son, such payments to come into effect on the 1 May 2009. I am satisfied that the wife should be able to earn enough on a part time basis to supplement her income.

Who should pay the legal costs?

66.  Given that neither side has been totally successful I intend to make an order nisi, to be made absolute in 14 days time, that there should be no order as to costs, including all costs reserved – as set out in paragraph 13 (6) above. I appreciate that the wife is legally aided, however, it seems to me that the wife has had a rather unrealistic view of her case throughout. She has pursued it with scant regard of the realities of the situation. I appreciate that at the end of the day, because of the statutory charge, she is unlikely to receive very much – if anything at all by way of a lump sum. But I am afraid that if she complains about this – she really only has herself to blame. Future litigants should be warned. There is always a duty to conduct litigation sensibly and to try to reach settlement wherever possible. Unfortunately this was not at all evident in this case.