YUE CHEN KUEI MEI v. YUE KWOK KEE, PETER

1993, No. 19
(Civil)

H E A D N O T E

Family law-ancillary relief-level applicable in Hong Kong is as set out in Section 7 of the Matrimonial Proceedings which is not the same as in the United Kingdom. Test is not that a wife should be placed as far as is possible in the same financial position as she would have been if the marriage had not broken down.

IN THE COURT OF APPEAL

1993 No. 19
(Civil)

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J U D G M E N T

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Penlington, J.A.: This is the judgment of the Court.

Background

1. By a petition dated the 16th of March 1990 Yue Chen Kuei Mei (the wife) sought dissolution of her marriage to Yue Kwok Kee, Peter (the husband) on the ground that the marriage had irretrievably broken down, that the husband had deserted her for a period of more than two years, i.e. from the 21st December 1984, and that the parties had lived apart for more than five years.

2. The wife in addition sought orders that :

(a) She be granted custody of their two children, a boy, Allan Yue, born on the 23rd May 1975 and a girl, Ginny Yue, born on the 14th of December 1976.

(b) She be paid a lump sum.

(c) She be awarded periodical payments and maintenance pending suit.

(d) An order that the husband transfer to her all his interest in flat E, 2nd floor, Block 2, Welcome Gardens, 39 Broadcast Drive, Kowloon together with carpark no. 9.

(e) The husband transfer to her his Mercedes Benz motor-car.

(f) The husband transfer to her all his shares in Burdine Company Ltd. (Burdine) and further that the husband cause Burdine to transfer to her all its interest in another flat, Unit 1, 5th Floor, Block II, Shatin Heights, together with carpark no. 16.

(g) Her costs.

3. The flat at Welcome Gardens is occupied by the wife and the two children and, up to 21st December 1984, by the husband. The other flat at Shatin is the husband's present home.

4. The wife is a native of Taiwan and has never worked in Hong Kong. She has occupied her time fully as a mother and housewife.

5. This appeal brought by the husband is solely concerned with the level of ancillary relief awarded under the provisions of the Matrimonial Proceedings and Property Ordinance Cap. 192.

The Evidence

6. In an affidavit of means sworn on the 26th April 1990 the husband deposed that his income was about $5,000 per month, plus free accommodation, utilities and rates which were paid by Burdine. He had no income from dividends. He was paying interest on mortgages on both flats of $18,000 p.m., which was coming from an overdraft account with the Nanyang Commercial Bank, $1,521 per quarter rates on the Welcome Gardens flat, and he paid the wife $3,500 p.m. for the support of herself and the children. He said his own expenses, including rates on the Shatin flat, were $5,975 p.m. He estimated the value of the Welcome Gardens flat at $1,300,000.

7. The husband exhibited to his affidavit of means recent bank statements which showed some substantial payments and, in particular, on the 19th of October 1990 an amount of $235,000 paid to the Royal Hong Kong Jockey Club which, it transpired, was the deposit required by the Club on the husband's application to purchase a race-horse. That amount was repaid into the account on the 3rd of December when the application was not successful.

8. The wife was granted a decree of divorce on the 17th October 1990 and then filed an affidavit in support of her application for ancillary relief. She said that she had been paid $3,500 p.m. by the husband since he deserted her in 1984 and she received $500 p.m. from rental of the Welcome Gardens carpark. Her monthly expenses were $6,630 (a figure which did not apparently include school fees) and she had had to borrow from her brother in Taiwan to make ends meet. She had a flat in Taipei, at 209, 4th Floor, 3rd lot, Xian Loong Rd, but it was occupied by her parents and she received no rent from the property. She went to Taiwan with the children once a year to see her family, her expenses being paid by her brothers and sisters.

9. The wife deposed that the husband had shares in the Hong Kong Electric Co. Ltd. and, via his mother's estate, in a private company, Sunbeam Manufacturing Co. Ltd. (Sunbeam), neither of which he had disclosed in his affidavit of means.

10. In response the husband affirmed a further affidavit in which he admitted that he had overlooked that he did hold 240 shares in Sunbeam jointly with his mother, who died in October 1989, and his brother Yue Kwok Hung. The shares were now held by him and his brother jointly. All dividends had been paid to his mother until her death, probate being granted in January 1991. He had never received any dividends and forgot about the Sunbeam shares when affirming his first affidavit. He was not aware of the value of the shares but his mother's interest (1/3 of 240 shares) had been accepted by the Inland & Revenue Dept., for estate duty purposes, at $1,210,000.

11. The husband said that he did not accept that the wife received $200,000 from her brother and pointed out that there were no entries in her bank statements, which she had exhibited, showing foreign remittances. He said she had at one time told him she had investments in photo-printing and furniture making businesses and she owned not one but two flats in Taipei. The other one is 211, 4th floor, 3rd lot, Xian Loong Road. He put the value of the two flats at HK$4,300,000.

12. The husband also deposed that his holding of 7,500 shares in the H.K. Electric Co. were sold in May 1990. He produced accounts showing that two companies in which he was interested, Lucky Land Co. Ltd. and Burdine had losses for the year ending 31st March 1991 of $1,179,152 and $372,000 respectively. His other company, Petersen Tours Ltd. lost $379,000 during the same period and was now dormant. Lucky Land Co. Ltd., despite its name, did not own land but was a trading company while Burdine was the shell company which owns the flat at Shatin in which he lives.

13. The wife replied to that affidavit saying that she did not have any undisclosed income, that the $200,000 was the total amount lent on several occasions by her brother and confirming that she only had the one flat in Taipei, occupied by her parents.

14. Finally the husband in another affirmation said that he had retired in 1983 at a relatively early age from the Hong Kong and Shanghai Banking Corporation and received $323,619 from the Bank's provident fund. By this time his marriage was not happy and in 1984 he and his wife agreed to separate. He purchased the Welcome Gardens flat - the couple were then living in a flat at Beacon Hill - and the wife moved in there with the children. He agreed to pay her $3,500 p.m. maintenance and to pay the mortgage interest on the flat, plus rates. The wife could let out the carpark. The Beacon Hill flat was sold and he purchased the Shatin Heights flat in the name of Burdine with a loan from the Nanyang Commercial Bank. There was still $440,000 outstanding.

The Hearing

15. The application for ancillary relief was heard by District Judge Rattigan on the 14th November 1991, 3rd January and 6th March 1992. The wife gave evidence that she only had one flat in Taipei. She was shown documents of title relating to other properties which were registered in the same name as hers but denied they were her's. She said her flat was worth T$3,000.000.

16. The husband also gave evidence and said that Lucky Land Co. Ltd. was operating at a loss. Petersen Tours Ltd. was dormant. The flat in the name of Burdine was worth $2,600,000. There was a fixed loan of $500,000, now reduced to $440,000 plus an overdraft of $800,000. He had owed $400,000 to a Mr Denis Tsui and he had transferred half of the shares in Burdine to him as security for that debt on 31 July 1990, the day after the wife was granted her decree nisi, Mr Tsui being then concerned as to his security for the loan.

17. He agreed that in December 1990 he paid $235,000 to the Jockey Club as a deposit on the purchase of a race-horse. He had been a full member of the Club for some 20 years. The subscription was $500 p.m. He claimed that half the deposit for the race-horse had come from his mother.

18. The husband said that the Shatin flat was worth $2,600,000 and Welcome Gardens $1,700,000, a total of $4,300,000 on which some $1,200,000 was owing on mortgage or overdraft. He proposed to sell both properties, put the money on deposit and he could then pay the wife $10,000 p.m. He would cease trading. He said that he believed that the wife owned two flats in Taipei, each worth HK$4,000,000.

19. After the evidence had been called, counsel for the wife submitted that the wife should receive the Welcome Gardens flat free of encumbrances plus $10,000 p.m. i.e. $5,000 for each child until each completed his or her full-time education.

The judgment

20. Deputy Judge Rattigan on the 4th June 1992 ordered that the husband pay the wife $4,000 per month for herself and $3,000 for each child until they reach 21 or complete full time education. He was also to transfer to the wife, free of all encumbrances, the Welcome Gardens flat.

21. The judge clearly took a very unfavourable view of the husband. However he came to various conclusions of fact which were difficult to justify on the evidence and the husband was given leave to appeal against the order by Litton J.A. on the 20th January 1993.

22. The judge said: "By some strange coincidence the day after the Decree Nisi was pronounced the Respondent borrowed $400,000 from Mr Tsui who in turn got half the shares in Burdine Co." The judge had, in this passage, misconstrued the effect of the husband's evidence. His evidence was that the $400,000 was in fact owed to Mr Tsui well before 30 July 1990 (when the decree nisi was pronounced). There were no documents to support the loan and the judge was justified in looking at the evidence with some suspicion. There was however no assertion by the husband to the effect that the money was lent on the day after the decree.

23. The judge then went on to find that Burdine, contrary to the husband's assertion, was trading because it had a debit in its accounts receivable for $805,436. That is clearly not a conclusion he was entitled to draw. The evidence regarding Burdine was that it was a company which owned the Shatin Heights flat and, by mortgaging that flat, had banking facilities. In the audited accounts for the year ending 31 March 1991 there is an item "current assets" amounting to $805,436 and, comprised within that, were two items: accounts receivable of $754,539 and directors' current account $48,421. The evidence was to the effect that Burdine had advanced substantial sums to Lucky Land to enable Lucky Land to trade. This is borne out by Lucky Land's financial statements for the same period which show liabilities amounting to $836,182: comprised within this are two sums : (1) directors' current account $265,288 and (ii) accounts payable $565,740. Lucky Land had no fixed assets (beyond furniture and fixtures) and no banking facilities. Lucky Land had, as at 31 March 1991, accumulated losses of $1,179,152. When asked about the accounts receivable of $754,539 in Burdine's accounts, the husband said he was "not an expert" and did not know where it came from; earlier he had said that there was "customers in debt to our company": surprising answers for an ex-banker, but the fact that a company has accounts receivable does not necessarily mean it is trading. Burdine's profit and loss account shows conclusively that it was not trading.

24. The judge then commented that the husband had failed to disclose his shares in H.K. Electric Company. The evidence, which was not disputed was that these had been sold in May 1990, a year before he made his first affirmation.

25. He went on to comment on the failure of the husband to disclose his interest in Sunbeam Manufacturing Ltd. and said that was extraordinary as the shares were worth $1,850,000. The evidence as to value was shadowy. There is an assertion in the wife's counsel's written material, put before the judge in his final submission, to the effect that the shares in Sunbeam Manufacturing Ltd. were worth $1,815,000 and no objections were raised by the husband's counsel to that material. But no accounts relating to Sunbeam Manufacturing nor any other material were before the judge. This was a private company. The husband deposed that he had held the shares jointly with his mother and his brother but never received any dividends. Probate of his mother's estate was not granted until 3rd January 1991 and he had forgotten to mention his interest in Sunbeam in his first affirmation in April 1991. There is nothing inherently improbable in the explanation.

26. The judge relied upon a schedule of the husband's assets produced by the wife's counsel totalling $5,630,906 and failed to observe that it was misleading. It includes the value of a half share in the mother's estate, amounting to $314,754, without taking into account the husband's assertion, supported to an extent by the exhibits before the court, that the cash had gone into the failed businesses of Lucky Land and Petersen Tours. The schedule also included Burdine's "current assets" of $805,436 without taking into account the fact that the bulk constituted of debts owed either by Lucky Land or by the husband himself: and, of course, by definition, Burdine's "assets" was not the husband's assets. The value of his shareholding in Burdine was not listed.

27. What clearly did influence the judge, and with some justification, was that the husband had paid out $235,000 as a deposit on a race-horse in on 19 October 1990 at a time when he said he was short of money. The judge also remarked that if the application had been successful no doubt there would have been heavy expenses for training fees etc. In taking an unfavourable view of his evidence the judge said "the husband is a man of some means. It is clear to me he is better off than he is prepared to admit. This is evidenced by his affidavits each one admitting a little more and then only after the wife has brought to his attention matters which he has not disclosed." The last sentence, it is submitted by counsel for the husband, is simply not correct; the husband has only filed a total of three affidavits and in the second one has made full and frank disclosure of his financial position; the third added no significant material. Whether the husband has made full are frank disclosure is not a matter we can judge, but we agree that the judge was not justified in concluding that the husband had been forced to make admissions bit by bit; this impeaches to some extent the judge's finding on the husband's general veracity.

28. There are other apparent errors in the judgment. The judge said that "the wife admits that the property she owns in Taipei has a value of $4 million Hong Kong". The wife did not say that. She valued her flat at $3 million Taiwan (the current exchange rate is HK$1: T$3). That evidence was not challenged. The judge, however, did go on to find that whatever its value the flat produced no income for the wife as it was occupied rent-free by her parents. However as the judge's finding was clearly contrary to the evidence and was important as regards the total assets of the parties we gave the wife leave to file a husband's notice in respect of that finding, which was done.

Section 7, Matrimonial Proceedings and Property Ordinance

29. In addition to pointing out various findings of fact by the judge which were not justified by the evidence, Miss Longmore, counsel for the husband submitted that he has applied the wrong test in coming to his assessment of the ancillary relief. He said "It is my duty in so far as I can to leave the wife in the same position as she would have been in had this marriage not broken down, and each party performing their obligations under it".

30. In Hong Kong the relevant statutory provision, which is not the same as in the United Kingdom, is contained in Section 7 of the Matrimonial Proceedings and Property Ordinance Cap. 192 and in particular Subsection (1) which provides that it shall be the duty of the court to have regard to

"(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."

There is no equivalent in Hong Kong to Section 25 of the Matrimonial Causes Act 1925 (U.K.) which does require the court to put the parties in the same financial position they would have been in if the marriage had not broken down, so far as is possible.

Husband's case

31. Here, Miss Longmore submits, the judge has totally failed to have regard to the undisputed evidence that the husband is retired and is 59; his earning capacity is limited; and while he is a director of three companies, one is totally dormant, one is simply the vehicle for owning his flat and the third company is trading at a loss. Accounts and tax returns were produced and not challenged. There was no evidence to support the judge's finding that Burdine was trading (and certainly not trading at a profit).

32. It was further contended for the husband that the award of $10,000 per month maintenance for the wife and the children was wrong in principle. While the wife had asked for maintenance for herself and the children in her petition, she had also sought virtually all the husband's assets and clearly her claims in that document were exaggerated. In her first affidavit she assessed her monthly expenditure as $6,630 p.m. While the husband in the course of his evidence did say he could pay $10,000 per month maintenance that was on the basis that the Welcome Gardens and Shatin Heights flats be sold and the proceeds invested so as to produce income. The judge had been unduly influenced by the deposit made for a race-horse and by the transfer to Tsui of the shares in Burdine. He seemed to have thought that an outright transfer whereas the evidence was to the effect that it was simply to secure the indebtedness to Tsui. Arguably, that might have been over generous to Mr Tsui as the value of the Shatin flat far exceeded the debt; but that is as far as that piece of evidence could go. Miss Longmore suggested that on the basis of the value of the parties' total assets, some $8,300,000 less encumbrances $1,300,000, the order made gave the wife about 70% of those assets which was much too high. The wife should be allowed to continue living in the Welcome Gardens flat until Ginny was 21 and had completed her education. The property should then be sold and, the wife should receive 18% of the proceeds. The $10,000 p.m. maintenance ordered was based on a claim only made in final submissions by the wife's counsel after close of evidence and was for $5,000 for each child. Clearly it was too much, based on the undisputed evidence.

33. Maintenance should be no more than the wife herself stated to be her monthly expenditure.

34. The judge awarded the wife her costs of the hearing based on the husband's conduct. Miss Longmore submitted that the question of costs should be looked at on the basis that unless either side had been unreasonable in respect to the negotiations over the level of ancillary relief there should be no award of costs if the hearing was necessary to settle what were perfectly reasonable claims on each side, seeWright v Wright [1973] 1.W.L.R. 1145 per Latey J. That was the case here. Some reliance was also placed on the judge's erroneous statement in his decision that the children were born in 1985 and 1986, not 1975 and 1976. However we are satisfied that must be a pure typing error, unfortunate though it was. There was no dispute that the parties had separated since 1984.

Wife's case

35. For the wife Mr Cheung conceded that the judge's finding that the husband had borrowed $400,000 from Mr Tsui the day after the decree was made was not correct. $200,000 was borrowed some five years before and $200,000 three months before the decree. However the transfer of the Burdine shares to Mr Tsui was the day after the decree. The amount borrowed was in any event much less than the value of the Burdine shares. The deposit for the race-horse was a pure luxury and if the application had been successful further expenses would have been incurred. He contended that sale of the Welcome Gardens flat would mean in effect the break-up of the family; rented premises she could afford would be minute; and the facts here were different from Mesher v. Mesher and Hall (1980) 1 AER 126, relied on by Miss Longmore to support her argument that the Welcome Gardens flat should be sold when the children reach maturity and the proceeds should then be divided. In Mesher both parties had remarried. So far as the husband's argument that he was having to borrow on overdraft to meet current payments was concerned reliance was placed on J v J [1955] 2 AER 85 that in certain circumstances the ability of any party to pay maintenance should include the availability of overdraft facilities.

Decision

36. As in so often the case we have little doubt that neither party to this dispute has chosen to put all the relevant facts of his or her financial position before the court. The wife owns a flat in Taipei which even on her own estimate is valuable. She allows it to be used by her parents rent-free yet she says she has to accept loans from other members of her family who also must have responsibility for housing the parents. At the hearing the wife, through counsel, sought no maintenance for herself, but $5,000 per month for each child.

37. The husband's transfer of half his shares in Burdine to secure loans totalling $400,000 is not fully explained and his attempted purchase of a race-horse at a time when he says he was short of funds, and the companies were incurring heavy losses, suggests a life-style beyond his disclosed means. We do feel however that these two factors have played perhaps too much of a role in the judge's findings. He certainly was not entitled, on any view of the evidence, to come to the conclusion that the husband had borrowed $400,000 from Mr Tsui the day after the decree, had concealed a holding of shares in H.K. Electric Co. Ltd., or that Burdine was trading; the finding that the husband's shares in Sunbeam were worth $1,850,000 was based on shaky foundations. On the other hand he was also wrong to find that the wife's flat in Taipei was worth HK$4,000,000. We are also satisfied that the judge adopted the wrong legal test in finding that he should endeavour to put the wife into the same financial position she would have been in if the marriage had not broken down. That is not the law in Hong Kong and he should have had regard to the factors set out in Section 7(1) of the Matrimonial Proceedings and Property Ordinance. These conclusions nullify the basis of the judge's findings.

38. Both counsel are agreed that here is a family which has modest assets and as far as the wife is concerned very limited earning power. The husband's age would be against him in seeking employment. Fortunately the value of the assets, being principally residential property in Hong Kong, will have gone up greatly in value since these proceedings commenced but so have living expenses; no doubt there will also have been substantial legal costs. We have been urged that if we should find that the judge below has come to conclusions of fact to which he was not entitled, which we have, we should reach a decision ourselves as to the proper order and not remit the matter back to another judge with all the costs which that would entail. We agree that we should do so on the evidence before us as best we can.

39. We have no doubt that the wife should continue to live with the children in the Welcome Gardens flat until they are self-supporting and should have enough income to support them and herself until then. When that time comes she can continue living there or sell the flat and rent or buy a smaller one at her option and invest the proceeds but in any event maintenance should then cease.

40. As to the husband, if he contributes to the wife and the children until the children are self-sufficient he should then be relieved of further liability provided that the wife then has sufficient assets to support herself. This is looking quite a number of years into the future. It may not be realistic to expect her to go out to work at that time.

41. We would allow this appeal and quash the order made below. We would substitute an order that

a) That the husband to continue to pay the mortgage interest and rates on the Welcome Gardens flat until the daughter Ginny reaches the age of 21 or completes her full-time education, whichever is the later when he shall transfer the Welcome Gardens flat to the wife, free of all encumbrances.

b) The husband to pay the wife the sum of $2,500 per month for the maintenance of each child until such child reaches the age of 21 or completes his or her full time education, whichever is the later.

c) The husband to pay the wife the sum of $2,500 per month for her support until the Welcome Gardens flat is transferred to her.

Costs

42. We consider that the husband was not unreasonable in contesting the wife's claim to a large proportion of his assets and maintenance.

43. There was however no open offer made, often referred to as a "Calderbank" offer, by the husband and on the face of the record the wife was required to come to the court to get an order for maintenance for herself and the children. While in matrimonial disputes costs do not necessarily follow the event that is the normal order. It may, however, be changed by the behaviour of the parties in the conduct of the litigation. Here the judge found that conduct of the husband was such as to require that he pay the costs. Miss Longmore relied on Wright v Wright for the proposition that where each side has put forward reasonable arguments they should bear their own costs. However there can be no doubt that the trial judge has a very wide discretion on the question of costs. "It would be inappropriate and indeed unhelpful to seek to enumerate and possibly be thought to constrain in any way that wide exercise of discretion" per Butler-Sloss L.J. in Gojkovic v Gojkovic [1991] 3 W.L.R. 621. Despite the substantial errors in the judgment which vitiated the exercise of discretion to a large extent we would not disturb the order as to costs in the court below.

44. So far as the costs of this appeal are concerned the husband has succeeded to a limited extent. The wife has succeeded in the main question - what should happen to the Welcome Gardens flat, at least for the time being. We would make no order as to the costs of this appeal.

45. There will be an order that there be general liberty to apply for further directions.