HON TO LAI CHU v. HON WING CHUN

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JUDGMENT

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[Lump sum payment to wife not to be assessed by applying a multiplier to income deficiency.]

Roberts, C.J. -

Preliminary

1. On 15th March, 1985 a district judge made an order under section 4(1)(c) of the Matrimonial Proceedings and Property Ordinance (Cap. 192) for a lump sum payment by the respondent/husband to the petitioner/wife of $50,000.

2. On 27th March the respondent entered notice of appeal, without having first obtained leave either of the district judge or of` this court for that purpose.

3. When the matter came before us, objection was taken on behalf of the petitioner that no leave to appeal had been granted and that the application could therefore be no more than an application for leave to appeal out of time.

4. The petitioner also sought an order for security of costs.

5. We took the view that, since the respondent was in person, it would be unreasonable to allow the technical objection as to obtaining of leave to prevent us from hearing the merits of the matter.

6. In addition, since the presence of counsel for the petitioner showed that the major expenses of a substantive appeal must already have been incurred, we decided to hear the respondent's application for leave to appeal and to treat it as the substantive hearing of the appeal itself.

Respondent's objections

7. The main criticism put forward by the respondent was that his financial circumstances were such that he was wholly unable to satisfy an order for the payment of $50,000. The most that he could manage, and this only by recourse to borrowing, was the sum of $10,000.

8. He repeated the substance of the evidence which he gave before the judge, to the effect that the resources which were available to him at the time of the order of 15th March were about $16,000. This had since been reduced to almost nothing because he had been unable to return to his job in Africa, by reason of a prohibition order obtained by the petitioner on 15th March preventing him from leaving Hong Kong until the lump sum had been paid to the petitioner.

9. His second principal objection was that, in addition to his inability to pay more than the smaller sun referred to by him, the award of $50,000 had been wrongly calculated by the judge.

10. I explained to him the method by which the judge reached the sum which he had awarded. This involved applying to the income deficiency of the petitioner, a multiplying factor of 7, rather in the same manner as multipliers are applied to assess lost earnings in personal injury cases.

11. The respondent asked, rhetorically, why the judge should have taken a figure of 7 and on what reasoning did he base his choice of such a factor.

Assessment of resources of respondent

12. The respondent did not seriously challenge the assessment by the judge of the incomes of himself and the petitioner.

13. On the basis that his work in Africa would continue, the judge assessed his income as $7,833 per month and that of the petitioner as $2,800, a combined total of $10,633.

14. Thus one-third of the joint incomes would be $3,544. Taking the petitioner's income of $2,800, this left a shortfall of $744 per month.

15. We see no reason to differ from the judge's calculation of the income deficiency of the petitioner.

16. However, the judge then uses the income deficiency as the basis of his calculation of what he thinks an appropriate lump sum award should be to the petitioner.

17. Taking a monthly deficiency of $744, he accepts what he calls the method advanced by counsel for the petitioner. That is to say, he takes, having regard to the circumstances of the marriage, a multiplier of 7 which he applies to the deficiency of $744 per month so as to produce a figure of $62,496. Allowing discounts for the shortness of the marriage and for the fact that the petitioner would be obtaining a lump sum as against the fact that the respondent was accepting custody, care and control of the child, he reduces the $62,496 to a round figure of $50,000.

18. This method of calculation is one which is unknown to us, and, though it may have certain superficial advantages, we do not see how it can be fairly applied.

19. The difficulty is that where a judge is contemplating a lump sum payment, the main consideration must necessarily be the ability of the respondent to pay the lump sum which might be awarded.

20. The application of any multiplier, which depends on circumstances unconnected with the respondent's ability to pay, is likely in many cases to produce a result which is out of scale with the capital assets of the marriage.

21. This can be easily illustrated by the figures in this case. As will be seen, the respondent's total assets amounted to $121,000 of which, for various reasons, the judge found $100,000 was available. He might easily have accepted that $60,000 paid by the respondent to his sister and to Mr. Yim were genuine payments, thus leaving a balance in his bank account of $40,000.

22. Had he reached this result, the application of a multiplier of 7 would have produced a figure far in excess of the ability of the respondent to pay.

23. With some regret, since there are advantages in applying formulas which introduce some degree of certainty in these matters, we must come to the conclusion that a system of this kind is not appropriate to the calculation of lump sum payments in matrimonial proceedings.

Capital assets

24. The main asset of the respondent on 1st March was a balance of $121,408 to his credit with the Hongkong & Shanghai Bank. On that date, however, he withdrew $100,000. Subsequently, he withdrew a further $5,000 for solicitor's fees, leaving a balance, in round figures, of $16,000.

25. The judge considered the sums withdrawn by the respondent, which the latter explained as comprising a sum of $25,000 paid to his sister, a further $35,000 to a friend called Yim in repayment of a loan, and $40,000 which he handed to his mother for the maintenance of herself and the child of the marriage.

26. The judge reached the conclusion that $24,000 of the latter $40,000 was overpaid with a view to depleting his assets, so as to reduce the amount available for division between himself and the petitioner. He reached the same conclusion with regard to the payments to the sister and Yim.

27. Thus, he concluded, only $16,000 of the $116,000 which remained after payment of the solicitor's fees had been genuine payments, and $100,000 would be regarded by him as assets of the marriage for the purposes of assessing the proper amount of the lump sum payment.

28. In effect, therefore, though he has not used this method of arriving at his result, the judge has awarded to the wife half of the capital assets, bearing in mind the fact that there were, by agreement between the parties, to be no periodical payments.

29. In general, as has often been said, the correct starting point for an award of a lump sum payment is one-third of the value of the capital assets, a proportion which is to be varied upwards or downwards according to the circumstances of the marriage (see Wachtel v. Wachtel⁽¹⁾).

Background

30. The marriage took place in China in May 1979. The respondent took up employment on the West Coast of Africa in August 1981, since which time the parties have not lived together nor has the respondent paid any maintenance to the petitioner. The petitioner obtained a decree nisi on 23rd January, 1984 on the grounds of 2 years' desertion by the respondent. The custody and control of the daughter has been granted to the respondent.

31. By reason of the fact that the respondent paid no maintenance to the petitioner after August 1981, she can properly be said to have contributed to the savings of $121,000 to be found in the respondent's bank account on 1st March, 1984.

32. It is always a matter of considerable difficulty to give to these various factors their appropriate weight in monetary terms.

33. We have no reason to disagree with the judge's finding of fact that $100,000 of the sum standing to the respondent's credit in his bank account on 1st March, 1985, should be treated as the capital assets of the marriage.

34. We do not consider, however, that he would have reached such a high figure as $50,000 had he adopted the usual methods of assessment, rather than the multiplier system which we have felt obliged to regard as a wrong approach.

35. Taking as a starting point one third of the capital assets, we think it correct to round it down to $30,000, giving much weight to the facts that the marriage effectively ceased in August 1981, that the respondent has custody and control of the child of the marriage and that the petitioner is well able to maintain herself.

36. Accordingly, the appeal is allowed and the following order is substituted for the order of the district judge of 15th March, 1985 -

37. We suggest that the Director may like to consider whether he should exercise his power to reduce the sum to be retained by him, under Section 19B(a) of the Legal Aid Ordinance.

(1) [1973] 1 All E.R. 829.