LYH v. YHKB

FCMC 2164/2009

[2021] HKFC 262

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2164 OF 2009

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JUDGMENT

(Ancillary relief: Further claim for sharing of assets upon original consent

order was set aside; compensation caused by non-disclosure and delay)

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An overview

1.  Following the breakdown of their roughly 20-years’ of marriage, the petitioner (whom I will still call her the “wife” for convenience) and the respondent (whom I will address him as the “husband” for convenience) settled the former’s claim for ancillary relief pursuant to a consent order made by HHJ Bruno Chan (as he then was) on 14 June 2010 (“Consent Order”), which was subsequently varied pursuant to another consent order made on 22 September 2010 (“Varied Consent Order”).

2.  At the time when the consent summons leading to the Consent Order was signed, both parties relied on a report dated 29 March 2010 and prepared by a Mr Lee, the director of Tact Management Limited (“Lee”). The report set out the net asset value of the parties’ assets, including the valuation of various family companies as at 31 December 2009 (“Tact Report”), which was in the sum of $60,185,420, with breakdown as follows:

Items	Net asset value (HKD)
Business of EEL and the E Group held jointly by the parties	$21,650,282
Business of TT Investment Ltd held jointly by the parties	$16,767,346
Business of other private companies held solely by the husband	$1,000,000
PRC properties held solely by the husband	$14,380,193
Bank balances/fixed deposit held jointly by the parties	$4,729,074
Motor car owned solely by the husband	$240,000
PRC car licence held solely by the husband	$350,000
MPF of the husband	$270,959
Insurance held by the husband	$509,386
Shares/funds held by the husband	$45,180
Club membership held by the husband	$243,000
TOTAL:	$60,185,420

3.  The Consent Order provides that the parties basically shared their net assets stated in the Tact Report in equal shares. The wife was to receive a lump sum payment of $30,000,000, composing of cash payment and transfer of the former matrimonial home to her, whereas the husband was to keep various family companies, including the flagship company (“EEL”) under the E Group (“E Group”), all of which were set up during their marriage. EEL carried on its business as a distributor of high-end electronic components providing general purpose invertors for wind and solar power applications.

4.  The Consent Order also entails an arrangement for the husband to transfer 3 workshops at Hewlett Centre (“3 Workshops”) to the wife within 2 months from decree absolute in order to secure his payment of $9,200,000 out of $30,000,000. The 3 Workshops were to be transferred back to him upon payment of the said sum of $9,200,000 within 6 months of decree absolute.

5.  However, on 7 September 2010, the husband informed the wife that he could not arrange the re-mortgage of the 3 Workshops and thus invited her to agree to vary the Consent Order by dispensing with the said transfer. In return, she was able to receive $5,000,000 forthwith and the balance of $4,200,000 within 6 months from decree absolute. The suggestion was accepted by her and thus the Varied Consent Order was made on 22 September 2010.

6.  On 4 October 2010, ie about 4 months after the Consent Order was made, or less than 2 weeks after the Varied Consent Order was made, the husband/EEL entered into an Asset Purchase Agreement (“APA”) to sell the “Assets” of the “Business” of EEL in relation to the distribution of products of EEL’s suppliers (“Infineon” and “CT-Concept”) and provision of related technical services in Hong Kong and the PRC to Avnet Technology HK Limited (“Avnet”), whose parent company is a US-listed company. In this judgment, I shall invariably refer to this transaction as the “sale of EEL” or the “sale of the business of EEL”.

7.  He also signed an employment agreement with Avnet on the same day (“Employment Agreement”) under which he shall work for Avnet for a term of 3 years commencing from 4 October 2010, which may be further renewed.

8.  Roughly about 1 month after the Varied Consent Order was made, he received $77,000,000 upfront and an inventory costs of $20,761,000 in October 2010 pursuant to the APA.

9.  In May 2011, the husband re-married with EEL’s former operation manager (“Madam D”), who was and still is the sole shareholder and director of DM Technology Ltd (“HK D-Max”) and Shenzhen DM Technology Ltd (“Shenzhen D-Dax”). These 2 companies purchased products of Infineon and CT-Concept from EEL (before the completion of the sale and purchase under the APA) and later from Avnet (after the completion of sale and purchase under the APA).

10.  Avnet came to know about the relationship between the husband and Madam D towards the end of 2011. The husband was summarily dismissed by Avnet in April 2012.

11.  In 2013, the husband and EEL commenced legal proceedings in Hong Kong against Avnet for breach of the Employment Agreement and the APA (“Consolidated Action”),[1] which was subsequently settled pursuant to a settlement agreement dated 5 June 2015. Under the settlement agreement, the husband/EEL received $38,000,000 from Avnet in June 2015, which was net to $37,400,000 after deduction of the legal costs.

12.  Hence, the husband received from Avnet a total of $135,161,000 (“Sum”), the breakdown of which is as follows:

	Items	Date	Amount (HKD)
(1)	Upfront price	4/10/2010	$77,000,000
(2)	Inventory costs	4/10/2010	$20,761,000
(3)	Net settlement sum paid by Avnet under the Consolidated Action[2]	17/6/2015	$37,400,000
		TOTAL:	$135,161,000

13.  It is indisputable that the negotiation and the subsequent deal between the husband/EEL and Avnet was never disclosed to the wife. She found it out herself in about July 2013. The circumstances leading to her discovery is rather irrelevant in this trial and thus I shall not expand on this.

14.  In October 2013, the wife sought leave to appeal against the Consent Order/Varied Consent Order on the ground of non-disclosure of the husband in the Family Court within these proceedings. Later, she commenced a fresh action in the District Court to set aside the Consent Order/Varied Consent Order[3] (See: de Lasala v de Lasala [1980] AC 546, Lui Sik-kuen alias Lui Lup-fun v Lee Suk-ling [1992] 2 HKLR 371, and WTOL v WYPP, CACV 241/2011, date of reasons for judgment 18 July 2012). This fresh action was then transferred to the Family Court,[4] which was subsequently transferred by HHJ Bruno Chan (as he then was) to the High Court in about April 2017. [5]

15.  On 4 December 2018, the parties appeared before B Chu J for trial. The husband conceded to the wife’s application of setting aside. Through his counsel (not the counsel now appearing before me), it was submitted to Her Ladyship that the husband “would not argue that there was no material non-disclosure”. In the result, the Consent Order/Varied Consent Order was set aside by consent on 4 December 2018, with costs borne by the husband (“Set Aside Order”).

16.  This is the trial of the wife’s claim for further financial relief for $67,580,500, representing half of the Sum, and for compensation of her loss of chance to invest in the landed properties in Hong Kong and China, insurance and bonds had she received the money earlier at $26,192,557, making her total claim to be around $93,770,000.

Open offer of the parties

17.  In gist, the wife says that the negotiation with Avnet for the sale and purchase of the business of EEL first took place before the Consent Order was made, but the husband failed to disclose the same to her. He continued not to disclose the negotiation to her at the time of the Varied Consent Order. Taking into account of the long marriage and her contribution to the family, she should be entitled to share half of the fruits of the sale of this family asset and be compensated for her loss of chance to invest had she received the award earlier. However, by way of open proposal, she is willing to accept $67,500,000 to settle her further claim for ancillary relief.

18.  The husband vehemently objects to her application. He claims that the Sum is post-separation or post-divorce asset, which is non-martial in nature, acquired by his own personal effort and industry, including consideration that he would not be able to conduct the business to be run by EEL in the next 3 years’ time. Besides, the Sum represents the projected profit to be earned by the business of EEL after their divorce and not mere use of asset created during marriage. He further argues that the wife does not have a proven history of active investment in landed properties or that there is/are other reasons for non-investment but surely not due to the allegation that she could not have shared or received the money earlier. However, for an amicable settlement, he openly offers to pay the wife a further lump sum of $10,000,000.

19.  Neither open proposal is accepted by the parties.

20.  There are 3 witnesses in this trial, namely the parties themselves and Lee. Lee is not only the author of the Tact Report, but he also assisted the husband in the deal concluded with Avnet.

The parties & their divorce

21.  No doubt, this case has a very convoluted history spanning over more than a decade. An agreed chronology dated 14 April 2021 was helpfully prepared by the parties, which I see no need to reproduce it in this judgement. I would merely set out some basic background facts as follows.

22.  The husband was born in 1958 and is now 63. As said, he got re-married with Madam D in 2011. They have 2 young children (born in December 2011 and August 2013 respectively). They now live in a semi-detached house in Yuen Long purchased by him in April 2011 for $23,000,000. The husband says that he has not taken up any full-time work since his employment was terminated by Avnet in 2012. He now mainly lives a retirement way of life by spending his time playing golf and travelling. He relies mainly on rental income (about $223,193 per month) and director’s remuneration (about $27,500 per month from EEL) to support himself and the 2 young children.

23.  The wife was born in 1962 and is now 59. She worked as the logistic officer until her retirement in 2016. She is now living in an apartment in Wong Tai Sin purchased by her in 2013 for $16,500,000, after the sale of the former matrimonial home.

24.  The parties were married in 1988. Two children, namely a son and a daughter, were born in 1990 and 1994 respectively. At the time of divorce, the son was over 18 but studying in the UK. The daughter was only 15 and studying in Hong Kong. By an order made by consent on 26 May 2009, sole custody was granted to the wife, with reasonable access to the husband. The children are now financially independent.

25.  During their marriage, EEL was incorporated in 1993. It was the flagship company of the E Group. The whole E Group consisted of 6 or 7 companies in Hong Kong and Shenzhen, including Shenzhen EEL. Besides, the husband owned other private companies held in his sole name.

26.  Both parties were the shareholders and directors of EEL. At first, the husband held 51% and the wife 49% of its shares. At the time of their divorce, their shareholding was respectively 70% (husband) and 30% (wife).

27.  Their relationship turned sour in 2007. The wife claimed that the husband had an affair with Madam D. On the other hand, the husband said that he was detained by the Chinese customs authorities in 2007 due to some seized imported electronic products, but the wife failed to go to see him in the prison of China or arrange the necessary funds to secure his release. He said that it was only due to Madam D’s effort that he was finally released.

28.  No matter what was true reason(s) causing the breakdown of their relationship, the husband moved out of the matrimonial home in March 2008.

29.  In February 2009, the wife filed her petition for divorce relying on the ground of behaviour of the husband. Decree nisi was granted 25 May 2009, which was made absolute on 6 July 2010. This was thus a long marriage of about 20 years.

The approach

30.  It is trite law to say that in any claim for ancillary relief, the court will usually consider the factors set out in section 7 of the Matrimonial Proceedings and Property Ordinance (“MPPO”) and the guiding principles in LKW v DD [2010] 13 HKCFAR 537.

31.  However, this case has its own special features for consideration.The parties had once a global settlement on their ancillary relief pursuant to the Consent Order/Varied Consent Order, and the undertakings and/or terms therein were already performed by them for more than 10 years. Subsequently, the Orders were set aside in whole by consent before B Chu J, but on the common understanding that they were agreeable not to interrupt with what had already been performed and that the wife was at liberty to make further ancillary relief claim. [6]

32.  It can be discerned that Her Ladyship made the Set Aside Order in the way it appeared, in order not to fetter the wide discretion of the Family Court in trying ancillary relief matter, including the approach to be undertaken.

33.  As to the approach to be undertaken by this court under the special features of this case, it seems that this is the first case ever in this jurisdiction that there is literally a re-hearing of ancillary relief after a consent order is set aside, and thus no local authorities on the approach to be undertaken is available. The court is instead provided with a number of English authorities.

34.  On one end of the spectrum, there are cases which decide that fraud will lead to an entitlement to have the claim heard afresh on current figures (See: Jenkins v Livesey (formerly Jenkins) [1985] AC 424; Smith v Smith [1992] Fam 69; Williams v Lindley [2005] EWCA Civ 103; [2005] 2 FLR 710).

35.  But on the other side of the spectrum, there are cases which say that there is no need to start the re-hearing from scratch.

36.  In Kingdon v Kingdon [2011] 1 FLR 1409, the husband and wife there were married in 1990 and separated in 2003. The wife was basically a home-maker taking care of 3 children and occasionally worked as a legal executive. The husband was a chartered account and financial director of KG Company. He later changed his job to become a finance director of another company called MPH. At the time when the parties settled their ancillary relief, the husband did not disclose that he was actually one of the investor of MPH, holding 10% of its shares. In 2006, he sold about half of his shares in MPH to KG for around £1.6 million. After repaying the bank loan (utilized to purchase the shares), he received a net sum of £1.3 million. The wife later found out the sale of shares and applied to appeal against the said consent order before a district judge due to material non-disclosure of the husband. The district judge did not set aside the whole consent order, but instead ordered the husband to pay an additional sum of £481,000 to the wife. The husband appealed against the order.

37.  Wilons LJ in giving judgment for the English Court of Appeal explained that in situation of setting aside a consent order due to non-disclosure or mis-representation, the consent order may not have to be set aside in whole, when “the order had been fully implemented and there was no need to reverse any part of its implementation”, and that when the non-disclosure was “of a discrete element of the husband’s assets and it generated a defect which could be cured by one simple enlargement”:

“J Point two: Rehearing

[32] The second point made by Mr Le Grice, foreshadowed at [3] above, is that, having found that the non-disclosure was material, the judge should have set aside the whole order dated 18 April 2005 and have given directions for the wife's application for ancillary relief to be re-heard on a future date on updated presentations by both parties of their current means and of all the other matters specified in s 25(2) of the Act of 1973. 'The exercise was defective so the court must start again' says Mr Le Grice. But might it not be more logical to say 'the exercise was defective so the court must adopt the optimum means of curing the defect'?

[33] There is a surprising dearth of authority on the course which the court should adopt in the wake of finding of material non-disclosure. Such authorities as exist relate to the course which the court should adopt in the wake of a finding, within the principles set out in Barder v Caluori[1988] AC 20, [1987] 2 WLR 1350, [1987] 2 FLR 480, that a new event has supervened so as to invalidate the foundation of an order for ancillary relief. Such authorities may well illumine the course to be adopted in cases of non-disclosure, although, as I will explain at [35], a valuable distinction has been drawn between them.

[34] In Smith v Smith (Smith and Others Intervening) [1992] Fam 69, [1991] 3 WLR 646, [1991] 2 FLR 432 the supervening event was the suicide of the wife five months after a needs-based award of capital to her. Butler-Sloss LJ held, at 76, 650 and 435G respectively, that 'the correct approach is to start again from the beginning' on the basis that the wife's needs were limited to five months; but she also held, at 77, 651 and 436B–437D respectively, that all the other matters specified in s 25(2) had again to be taken into account. Such was an exercise which, on the particular facts, this court considered itself able to conduct.

[35] In Williams v Lindley [2005] EWCA Civ 103, [2005] 2 FLR 710, the supervening events were the engagement of the wife to her employer one month after a needs-based award of capital to her and their marriage five months later. Applying its decision in Smith above, this court directed a rehearing of her application on an up-to-date reassessment of all the matters specified in the subsection. But the valuable distinction to which I have referred at [33] was drawn by Thorpe LJ in the preface to his conclusions, at [22], as follows:

'So I would emphasise that this case is to be clearly categorised as a supervening event case and not a case of a tainted order. Accordingly nothing that follows is to be understood to apply to taint cases where the procedure and adjudication may need to reflect the degree of turpitude of the party responsible for the taint.' (Italics supplied).

[36] Notwithstanding the distinction drawn by Thorpe LJ, I can well imagine cases of non-disclosure – for example where an applicant has secured a needs-based award without disclosure of a substantial asset or of an engagement to marry – in which the proper course is indeed to conduct the exercise under s 25 all over again on updated material. The same might apply to non-disclosure by a respondent which was so far-reaching as to have led the court to survey the entire financial landscape on a false basis. What I cannot accept is that the exercise will always have to be conducted again. The exercise certainly has to have been conducted. But it has been conducted; and the nature of the defect generated by the non-disclosure may – or may not – require the whole order to be set aside and the whole exercise to be conducted again.

[37] Take, then, the present case. In the exercise conducted, ultimately by consent, in 2005, what was the nature of the defect generated by the non-disclosure of the shares? The nature of the defect was the omission of a subparagraph in the part of the order which provided for the wife to receive a lump sum, namely of a subparagraph which provided for an extra, deferred, contingent element of lump sum referable to the shares. There is nothing wrong with the order dated 18 April 2005 save that it requires such an addition. There is no need to dismantle it: the need is to add to it. Indeed, in that in November 2006 the contingency arose, there is no further need to express the provision by way of a formula: the husband's net gain on the shares has been precisely quantified and whatever would have been the appropriate percentage expressed in the formula can be translated into a specific sum.

[38] I have come to the conclusion that the judge was entitled to proceed there and then to repair the defect by enlargement of the lump sum provision in the order dated 18 April 2005. The reasons for my conclusion are as follows:

(a) he had a discretion as to how best to proceed;

(b) in exercise of the discretion he was required to seek to deal with the case justly, and thus in a way which was proportionate to the complexity of the issues and which would save expense and ensure expedition: r 2.51D(1) – (3) of the FPR 1991;

(c) the non-disclosure was of a discrete element of the husband's assets and it generated a defect which could be cured by one simple enlargement, to be devised pursuant to the sharing principle, of provision in the order dated 18 April 2005: see [37] above;

(d) the order had been fully implemented and there was no need to reverse any part of its implementation; and

(e) the husband's lies in the proceedings in 2004–05, compounded by his further lies in the correspondence which preceded issue of the present proceedings, yielded a conclusion that, were there to be a second, updated, inquiry into all the matters specified in the subsection, no assertion on his part in relation to his financial circumstances, for example of any current inability to pay to the wife what would otherwise have been her appropriate share of the gain on the shares, would be likely to be accepted unless clearly established following protracted and costly examination. In the words of Thorpe LJ in Williams v Lindley, set out at [35] above, the procedure needed to reflect the degree of the husband's turpitude.

[39] To the above, however, I add an important rider: before adopting the course which he took, the judge had to be satisfied that the husband could reasonably make the extra payment of £481,000. In this respect, however, the judge was entitled to take a broad and robust approach. Less than four years earlier, when the husband was still in receipt of a substantial income from MPH, he had enjoyed a secret windfall of £1,268,000 in cash on sale of the shares. Without the need to have regard to the other assets which, following the order dated 18 April 2005, had remained to the husband, the judge was entitled to assume, in the absence of powerful prima facie evidence to the contrary, that he could still reasonably make the extra payment. No doubt he had chosen to make substantial payments into his personal pension scheme in and after 2006: we were told, for example, that, although pursuant to the order dated 18 April 2005 the value of the husband's pension rights had been divided equally, those of the wife were now worth £255,000 whereas those of the husband were now worth £758,000. No doubt, also, the husband, who was unemployed from July 2008 until recently (when he became engaged to work for six months for a total of £50,000) maintained himself during that interim – and met his obligations to the boys – to some extent out of capital. He also pressed upon the judge that losses in the fall of the stock market had not been fully recouped upon its subsequent revival and that, for reasons which he had to date failed to explain, he had paid £350,000 to a cohabitant upon the end of their relationship. None of this amounted to powerful prima facie evidence of his loss of ability reasonably to make such payment to the wife as was otherwise her entitlement.” (the underlined is my emphasis)

38.  In Sharland v Sharland [2016] AC 871, Baroness Hale commented that if it was possible to isolate the issues to which the non-disclosure or mis-representation related, it might not be necessary to start the renewed financial remedy proceedings from scratch. In this respect, the court enjoyed “enormous flexibility” to enable the procedure to fit the case:

“43. Finally, however, it should be emphasised that the fact that there has been misrepresentation or non-disclosure justifying the setting aside of an order does not mean that the renewed financial remedy proceedings must necessarily start from scratch. Much may remain uncontentious. It may be possible to isolate the issues to which the misrepresentation or non-disclosure relates and deal only with those. A good example of this is Kingdon v Kingdon [2011] 1 FLR 1409, where all the disclosed assets had been divided equally between the parties but the husband had concealed some shares which he had later sold at a considerable profit. The court left the rest of the order undisturbed but ordered a further lump sum to reflect the extent of the wife's claim to that profit. This court recently emphasized in Wyatt v Vince (Nos 1 and 2) [2015] 1 WLR 1228 the need for active case management of financial remedy proceedings, "which ... includes promptly identifying the issues, isolating those which need full investigation and tailoring future procedure accordingly": para 29. In other words, there is enormous flexibility to enable the procedure to fit the case. This applies just as much to cases of this sort as it does to any other.”

39.  There in Sharland, the parties were married in 1993 and separated in 2010. The husband ran a successful computer software business called AppSense. A valuation report was obtained on the value of the shares. Both experts approached the valuation on the basis that there was no plan for IPO (initial public offering). After the parties had given their oral evidence about the value of AppSense, they reached a settlement in that the wife would, among other things, get 30% of the net sale proceeds of AppSense shares in the shape of a deferred lump sum when the sale took place. The settlement was approved by the judge. But before the consent order was sealed, the wife found out that contrary to what the husband said in oral evidence, he had had discussions with investment bankers as part of the active preparation for IPO of AppSense, and that the value of his shares in AppSense was expected to be between USD750 million to USD1,000 million. The wife invited the judge not to seal the consent order, whereas the husband applied for her to show cause why the settlement order should not be sealed. The judge acceded to the husband’s application and sealed the consent order. The English Court of Appeal dismissed the wife’s appeal by majority. She then appealed to the Supreme Court. Her appeal was allowed and the case was returned to court below for further directions.

40.  In Goddard-Watts v Goddard-Watts [2016] EWHC 3000 (Fam), [2017] 2 FLR 114, the parties divorced in 2010 and obtained a final order on ancillary relief by consent to the total assets of about £16 million. In 2015, the wife successfully applied to set aside the consent order by reason of the husband’s non-disclosure of his interest in 2 trusts valued at £9.6 million and £4.14 million in 2010. The proceedings were remitted for a rehearing before Moylan J in 2016. Before the learnt judge, the parties agreed it was a sharing case, but differed as to the date at which the assets should be shared. The wife insisted that there should be an equal sharing of their current assets including the non-disclosed trusts, whereas the husband argued that she should receive a share of the value of the trust as at 2010, plus an amount to reflect the fact that she did not receive her share in 2010.

41.  Adopting the approach in Kingdon (supra) and the comment of Baroness Hale in Sharland (supra), Moylan J explained,

“88. I agree with Mr Pointer that I am conducting a rehearing. But I do not agree that, merely because this is a rehearing, the only way of achieving a fair outcome is to give the wife an award based on the current values of the assets. I must determine what is fair now and I must do so by reference to all the circumstances of the case. These include the current resources available to the parties but also the division which was effected in 2010 and the fact that this was procured by non-disclosure.”

42.  Taking into account all the circumstances of that case, Moylan J isolated the undisclosed trust assets in deciding apportionment but considered that the way the other resources had been divided remained fair. He determined that the wife should receive a further £6.42m, representing the share of the trust assets to which she would have been entitled had the trust assets been properly disclosed in the original proceedings, together with a discretionary uplift of £200,000 to reflect the delay in receiving that part of her entitlement.

43.  From the above English authorities, I venture to give the following summary on the approach to be taken in situation where non-disclosure and/or mis-representation triggers an application for setting aside the consent order and a re-hearing of ancillary relief:

(1)  Where there has been misrepresentation or non-disclosure justifying the setting aside of an order and re-hearing of the financial remedy, the court has enormous flexibility to decide how best to proceed, bearing in mind the need for active case management of financial remedy proceedings, which includes promptly identifying the issues, isolating those which need full investigation and tailoring future procedure accordingly;

(2)  When consent order has been fully implemented and there is no need to reverse any part of its implementation, and that when the non-disclosure is of a discrete element of the assets of the party guilty of non-disclosure and it generates a defect which can be cured by one simple enlargement, the consent order may not have to be set aside in whole;

(3)  In case of rehearing of financial remedy proceedings, it is not the case that the court must necessarily start from scratch. If it is possible to isolate the issues to which the misrepresentation or non-disclosure relates, the court may deal with those issues only.

44.  Locally, attention should be drawn to Practice Direction SL10.3 on “Guidance on Setting Aside a Consent Order on Ancillary Relief” which came into effect on 18 January 2019. Of particular relevance is paragraph 9 of the Practice Direction which provides that the court will have a very wide case management power. It may decide to have a full re-hearing of the ancillary relief matter, or may decide to set aside the whole or part of the original consent order:

“9. The court has a full range of case management powers and considerable discretion as to how to determine an action to set aside a consent order on ancillary relief, including where appropriate the power to strike out or summarily dispose of an application to set aside. If and when a ground for setting aside has been established, the court may decide to set aside the whole or part of the order there and then, or may delay doing so, especially if there are third party claims to the parties’ assets. Ordinarily, once the court has decided to set aside an order, the court would give directions for a full rehearing to re-determine the original ancillary relief proceedings or make such other orders as may be appropriate to dispose of the proceedings.” (the underlined is my emphasis)

45.  In this case, the parties hold the common ground that what have been implemented according to the Consent Order/Varied Consent Order should be left disturbed. They jointly identify the Sum received by the husband out of the sale of EEL as the discrete element of asset or isolated issue on which this court should focus and make determination. Such view is in line with the above English authorities and the wide discretion made available to the court under the said Practice Direction SL 10.3.

46.  Besides, the Consent Order/Varied Consent Order have been implemented for more than 10 years. It would not be time-and-costs-savings, and thus not in line with the guiding principles of Order 1A of the Rules of High Court of, for example, increasing the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the court, or promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings, to start from scratch and to carry a full-scale financial investigation of what transpired in between these 10 years.

47.  Due to the matters aforesaid, I agree that in this trial, there is no need for me to start from scratch but may focus on the isolated issue or discrete asset of the husband, ie the Sum. I will also, as the law required, take into account those relevant factors in section 7 of the MPPO.

Issues

48.  The parties have agreed a list of issues to try, which in my view, should boil down to one fundamental issue, namely whether the wife is entitled to share the Sum or any part of it, having regard to the relevant factors under section 7, the MPPO and the overall circumstances of the case; and if yes, what further ancillary relief should be made.

49.  To determine this fundamental issue, the court needs to decide on the following major factual issues:

(1)  When did the negotiation for the sale of the business of EEL started to take place? This issue has bearing on the question of non-disclosure on the part of the husband and the fairness of Consent Order/Varied Consent Order;

(2)  Whether the Sum were non-martial assets or post-separation acquests, and whether the wife is entitled to any portion of it;

(3)  Whether the value of the companies held by Madam D or any part thereof should be taken into account in computing the size of the husband’s current assets and/or his financial resources.

Some salient points

50.  At this stage, I wish to make the following salient points by way of general observation and/or comment which apply to the overall analysis of this case.

51.  First, Mr C Y Li, senior counsel for the husband, adamantly pointed out in his closing submission that the wife did not have any positive knowledge nor positive case as to when Avnet and the husband discussed the potential deal. However, in my view, she could not possibly have such personal knowledge, because it is indisputable that she did not take part in the daily operation or management of EEL and the E Group during the marriage. This is not detrimental to her claim in this trial, for it is well settled law that the husband has the positive duty to disclose the negotiation and/or the deal with Avnet if it took place any time before or at the time when the Consent Order and/or the Varied Consent Order was made.

52.  In L v L [2006] 1 HKFLR 121, Lam PJ (then Lam J) propounded loud and clear that the law imposed a positive duty on the parties to matrimonial cases to give disclosure, but not to adopt a wait and see approach with a hope that the opponent might fail to ask the right question.

53.  His Lordship in another judgment in TDJ v WB (Variation of lump sum payable by instalments) [2014] HKFLR 184 reiterated the importance of full and frank disclosure which applied equally even to a variation application. There, a consent order was made for the husband to pay the wife a lump sum of $3.18 million, with $2.7 million payable within 30 days and the balance of $480,000 to be paid by way of equal instalments of $10,000 per month for 48 months. The husband later applied to be excused from paying of $480,000 on the basis that there was unforeseen increase of the children’s education expenses. The judge suspended the payment until the children finished secondary school. The wife appealed to the Court of Appeal on the limited issue if the judge had failed to consider the unsatisfactory account by the husband of the difference in his bank account between $1.86 million in June 2011 and $188,763 in May 2012. It was the argument of the husband before the Court of Appeal that the variation application was not concerned about the distribution of wealth upon divorce, and thus the issue of hidden assets was not a deciding factor because the parties had accepted before the said consent order on lump sum payment that each of them had given full disclosure of their respective assets.

54.  His Lordship in allowing the wife’s appeal, commented that a party in a variation application in ancillary relief is under the same duty to give full and frank disclosure on his means,

“15. We cannot accept the Petitioner’s argument that the allegation of hidden asset is not material for the purpose of his application to vary the Consent Lump Sum Order. As explained above, his means and financial resources are relevant considerations. If there were hidden assets which the Petitioner could utilise for meeting the unexpected education expenses, whether in part or in whole, this must be a relevant factor which the Judge should take into account in deciding whether to grant him a suspension of his obligation to pay the $10,000 monthly instalment.

16. Nor do we accept that the Respondent was somehow barred from challenging his means by reason of her agreement to the Consent Lump Sum Order. We do not think the Consent Lump Sum Order can give rise to any issue estoppel in terms of the means of the Petitioner in the hearing of the Petitioner’s application for variation. It is clear from the transcript that the Judge did not take such a view.

…

17. Considering the matter afresh, in view of the Petitioner’s failure to give a satisfactory account on the disposal of his money when it was within his power to produce proper evidence to support his case in this respect, the court should draw adverse inference against him as to his means. A party applying for variation of an order made in ancillary relief is under the same duty to give full and frank disclosure on his means as a party making the original application for financial relief. The law on such a duty in matrimonial litigation is well settled, see L v C [2007] 3 HKLRD 819 at paras 68 to 71. On the state of evidence before the court, we are not satisfied that the Petitioner did not have the means to continue with the monthly instalment payment of $10,000 to the Respondent even though his financial burden had been increased by the unexpected education expenses.” (the underlined is my emphasis)

55.  I do not hold the view that N v N (Periodical payments: non-disclosure) [2014] EWCA Civ 314, a case cited by Mr Li SC in his opening submission, comes to the assistance of the husband. In that case, it was held by the English Court of Appeal that there was no authority or within the English rules imposing a positive duty to disclose “any change” in financial circumstances throughout the “appellate” process. But here before me, this case is not in the “appellate” process. Further, while I agree that there may not be a duty on a party to disclose “any” change in one’s financial circumstances, there certainly is a positive duty for one to disclose a “material” change of circumstances in any application concerning ancillary relief matters at first instance level.

56.  It is thus very clear to me that merely on his own case, the husband had not disclosed the negotiation with Avnet to the wife when he proposed to vary the Consent Order on 7 September 2010, by which time the negotiation with Avnet was already well under way, with Avnet having already made an offer to buy at $40,000,000 and the husband counter-offering $90,000,000. When he signed and filed the consent summons leading to the Varied Consent Order by 15 September 2010, he continued to choose not to disclose to her that he had allegedly reached an oral agreement with Avnet in mid-September 2010 to sell the business of EEL at a substantial value which was about 484% of the net asset value of the business of EEL/the E Group given in the Tact Report. Undoubtedly, he failed to disclose material change of his financial circumstances.

57.  Second, there are several undertakings recorded in the recital paragraphs in the Consent Order which are highly relevant in this trial (collectively the “Undertakings”), and they are these:

(1)  The husband undertook to transfer the former matrimonial home (worth $10,500,000) to the wife at nil consideration within 1 month from decree absolute, but provided that the former matrimonial home would “continue to be pledged to secure banking facilities” for the whole E Group of companies “for 6 months” from divorce absolute.” (Recital E);

(2)  the husband undertook to transfer 3 Workshops at Hewlett Centre to the wife within 2 months from decree absolute at nil consideration as security for payment of $9,200,000, after which she would transfer the 3 Workshops back to him at a consideration of $9,200,000 “within 6 months” from decree absolute (Recitals H to J);

(3)  the husband undertook to procure the relevant banks to release and discharge the wife’s personal guarantee in respect of the E Group,[7] and Shanghai Commercial Bank Limited to release the AUD time deposit in the name of the wife The balance sum of $5,300,000, within 6 months from decree absolute (Recital M).

58.  The Undertakings are chronologically relevant and important because despite the fact the Consent Order was made on 14 June 2010 and the decree absolute was granted on 6 July 2010, the wife was required to continue to pledge her own assets already distributed to her pursuant to the Consent Order (ie the former matrimonial home and her AUD fixed deposit), as well as to maintain her personal guarantees, for the benefit of EEL and the E Group (which were distributed to/kept by the husband pursuant to their settlement) in the post-separation or post-divorce period for a period of 6 months from the date of decree absolute, namely up to January 2011 which on the face of it was beyond the date of the APA. With this continued arrangement or contribution made by her to EEL and the E Group well beyond the date of the Consent Order and/or the grant of the decree absolute, the husband’s argument of a long separation allegedly since 2008 and/or of decree absolute having already been granted when the APA was signed is, in my view, unable to take flight.

59.  Third, a number of observation/comment in relation to the Tact Report needs to be made at this stage.

60.  The first point to make is that the husband seemed to suggest in his 5^th affirmation that Lee was “jointly engaged” by both parties to compile the assets valuation of their assets.[8] But I do not accept this is the true position. In his solicitors’ letter dated 19 February 2010, the husband said that immediately after the hearing of 28 January 2010, “he” “already engaged” Lee to provide a report and certify the family’s assets value. In the affirmation of Lee dated 17 July 2020, he deposed at least twice that he was instructed by the husband, but not jointly by both parties.[9] Further, according to Lee, he was instructed by the husband to prepare a report on the “net asset value” of the parties; he was not engaged to do an assessment on “valuing the price” of EEL or the E Group for “sale purpose”, or on “valuing the business” as carried on by EEL or the E Group especially its/their “prospective profitability”.

61.  The second point is that it cannot be denied that the wife’s assets, such as the balances at her various bank accounts, stock and mandatory provident fund, as stated in her Form E dated 6 May 2009 in the total sum of $2,336,777, were not included in the Tact Report. I accept that the wife was not asked to provide information of her own assets when the Tact Report was prepared. In any event, the reason(s) as to why her assets were not included in the Tact Report, in my view, is peripheral to the issues of this case and will not have any meaningful bearing on the final ancillary relief order(s) to be given in this judgment. The amount of her assets via-a-vis the total assets involved in this case is rather insignificant as well.

62.  However, the husband is very adamant in his 5^th affirmation that he only came to realize in 2019 when the wife made application for further ancillary relief that the Tact Report did not include her assets under her sole name. I do not believe this allegation. As said, the Tact Report was commissioned by the husband. It was sent to him as early as 29 March 2010, which included the table (See: [2] of this judgment) that clearly showed that the assets under her sole name was not mentioned. It is very unlikely that he would not have read it, for he said in his solicitors’ letter of 19 February 2010 that it was “always” his plan to make his revised offer “with reference to” the Tact Report.

63.  The third point is about the net asset value of the family companies. It was said in the Tact Report that the net asset value of EEL was prepared based on the audit account of 1 January to 31 December 2009 and the un-audited management account as at 31 December 2009 provided by the husband. The asset value of EEL and the E Group was over $54,000,000, but it was reduced to the net sum of $21,650,282 only, because it was said that the husband and ED Ltd (EEL held 33% of the shares of ED Ltd) to owed the E Group total sums of $35,639,212, which had to be deducted from the value of EEL/the E Group.[10]

64.  Strangely, the husband’s Form E made in 2009 (at Part 2.13) did not state that he owed such substantial debt(s) to EEL/the E Group. Nevertheless, the wife had shared such alleged debts/liabilities, as their settlement was based on the figures provided in the Tact Report.

65.  The last but of the most importance, Mr Li SC asked me to take note that it was agreed by the wife that (i) a draft of the Tact Report was provided to her in about March 2010; (ii) between March 2010 to June 2010 (when the consent summons was signed), she had read the Tact Report but did not raise any query relating to it; and (iii) she accepted that the Tact Report did not have any error, omission or inaccuracies.

66.  However, in my view, such acceptance must be read in the bigger backdrop that she did not take part in the daily operation/management of EEL but was repeatedly told by the husband that “his businesses have been facing severe financial difficulties and their values have drastically dropped.”[11] Hence, she could not be in a position better than the husband to judge if EEL and/or the E Group should be valued at net asset value or other valuation methodology. By the same token, she could not be able to have any knowledge of any negotiation between the husband/EEL and Avnet on the potential acquisition of the business of EEL, unless and until the husband fulfilled his positive duty of full and frank disclosure there and then.

67.  Pausing here, I take note that both parties do not seek to challenge the valuation in the Tact Report in this trial. Despite this, the court still has to perform her quasi-inquisitorial duty under section 7 of the MPPO by taking into account “all the circumstances” of the case. Therefore, it is imperative for me to point out on her own motion the husband had failed to disclose in either the Tact Report or his 2009 Form E about his shareholding and directorship in Fusion Fuzion (Greater China) Limited, which shares were and/or should have substantial value. According to his 5^th affirmation, he had acquired over 1,066,425 shares in this company “back in 2007” and was subsequently appointed a director. He sold the shares in “April 2013” by partly exchanging these shares with the shares of another company called Fusion Fuzion Property Investment Limited, and partly by instalment repayments. Fusion Fuzion Property Investment Limited owned a workshop in Tuen Mun, and after the exchange of shares, the husband became the sole shareholder of Fusion Fuzion Property Investment Limited. Merely on the point alone, the Tact Report cannot be said as accurately and truly reflective of the husband’s assets as at 31 December 2009, due to his own material non-disclosure about the aforesaid Fusion Fuzion (Greater China) Limited. The Consent Order was thus made without the full and frank disclosure on the part of the husband to the wife and to the court.

Timeline of the negotiation with Avnet

68.  The major factual issue in this case is when the negotiation of the sale of the business of EEL first took place.

(i)  The parties’ respective case

69.  In gist, the husband said that Avnet first approached him on the possible acquisition of the business of EEL only after the Consent Order was made, and that the APA was signed only after the Varied Consent Order was made. He provided the following chronology at [69] of his 5^th affirmation filed on 26 February 2021:

Date	Remarks
26/2/2009	Petition
25/5/2009	Decree nisi
29/3/2010	Tact Report
11/6/2010	Filing of consent summons for global settlement of custody and ancillary relief
14/6/2010	Consent Order
6/7/2010	Decree absolute
Early July 2010	Avnet contacted the husband whether he was interested to sell the business of EEL
Early July 2010 – 21/7/2010	1 or 2 preliminary meetings with Avnet
21/7/2010	Preliminary meeting with Avnet attended by husband and Lee, and requested for due diligence investigation
After 21/7/2010 – mid Sept 2010	Due diligence investigation still undergoing, and so as the negotiation on the terms of the sale and the consideration
Mid Sept 2010	Oral agreement reached with Avnet on consideration of the sale, but due diligence still continuing
17/9/2010	1st draft of APA was sent to husband’s solicitors for consideration
30/9/2010	Husband and Avnet reached agreement on all the terms of the APA
4/10/2010	The APA and the Employment Agreement were signed

70.  He continued to depose in his 5^th affirmation these,

“69. …As can be understood from the Timeline, Avnet had not even contacted me about acquiring the Business of EEL in June 2020. The representatives of Avnet came to contact me in early July 2010 only making preliminary enquiry if I would be interested to sell certain business pf EEL to them. Avnet did not contact me before 30^th June 2010 because the fiscal year ends on 30^th June of each year and they would not make any acquisition in the month of June 2010.

70. It is clear from the Timeline that there was no way that I could have any knowledge that Avnet would want to buy the business of EEL when the [wife] and I settled her claim for ancillary relief and entered into the 11/6/2010 Consent Summons. The acquisition of the business of EEL by Avnet only happened after the said settlement. Facing the tremendous financial pressure for making payment to the [wife] under the [Consent Order], I eventually decided to sell the Business of EEL to Avnet. Indeed, the whole deal was no more than a windfall and I had never take the initiative to sell the Business of EEL at all.” (the underlined is my emphasis)

71.  The wife, however, suspected that the initial contact/discussion between the husband/EEL and Avnet was before the Consent Order was made.

(ii)  Discussion

72.  I gather from the cross-examination of the husband by Mr Richard Khaw SC for the wife that she is rather suspicious of whether it was the husband who first approached Avnet to discuss about the sale of the business of EEL, or vice versa. The husband insisted in his 5^th affirmation at [56] and [70] therein that it was Avnet who first approached him in early July 2010, and that he had never instituted to sell the business of EEL at all. He continued to say so in the first part of the cross-examination on this topic that he got no intention to sell EEL in early July 2010. However, this is in contradiction to his affirmation filed on 6 February 2014, in which he said at [9] therein that he actually used up around 85% of the cash flow of the E Group in order to pay the wife pursuant to the Consent Order which was detrimental to the operation of his business. Hence, “after careful consideration”, he found that he “must sell” a very substantial part of his business in order to continue with the company’s operation. [12]

73.  I tend to agree that there is contradiction of the husband’s evidence as to whether it was he or Avnet who took the initiative in the discussion of the sale and purchase of EEL. However, I do not need to make a clear ruling on this point, because I hold the view that no matter whether it was the husband who first approached Avnet, or vice versa, he bears the same positive duty to disclose it to the wife and to the court when/before the Consent Order/Varied Consent Order was made.

74.  Upon considering all evidence and the submission, I have the following observation and view.

75.  First, what the husband said in his 5^th affirmation at [70] above is inconsistent with his other affirmation/reply to the wife’s questionnaire(s). At [24] of his affirmation dated 20 June 2019, he said that according to his memory, the discussion with Avnet started sometimes in “late August/early September 2010”. He attempted to clarify in the witness box that by this, he meant that a proper offer was made by Avnet in late August/early September 2010. Yet, this attempted clarification is in stark contradiction with [36] of the same affirmation in which he said that it was about “late August/early September 2010” that he was merely “approached” by Avnet on the potential acquisition. Then, he changed to say in his reply dated 11 December 2019 to the wife’s questionnaire that it was “about June/July 2010” that Avnet approached him for preliminary discussion.

76.  He gave yet another version in his 5^th affirmation at [70] above, namely Avnet had not even contacted him about acquiring the Business of EEL in “June” 2010 and that they came to contact him in “early July” 2010. He added that with the assistance of a document located by Lee from the papers of his office and called Project ET-Note on Due Diligence Responses from EEL (“DD Checklist”), he was able to recall that “the first substantive meeting” with Avnet took place on 21 July 2010.[13]

77.  While acknowledging that there might be some imperfections in the husband’s evidence, Mr Li SC invited the court to take into account that the deal with Avnet occurred over 10 years ago, such that the husband’ memory of the versions of events would inevitably be affected by the long passage of time. Senior counsel urged me to bear this in mind when assessing his credibility.

78.  I accept that this is not a memory test, but one must bear in mind that the issue as to when the husband/EEL was first approached by Avnet, or vice versa, for the sale and purchase of the business of EEL was surfaced as early as October 2013, or in any event by 21 July 2014. Way back in October 2013, the wife formally filed her summons for leave to appeal out of time of the Consent Order/Varied Consent Order, relying on the ground of the husband’s failure to disclose the deal with Avnet to her before the consent summons was signed and/or the Consent Order was made. Thereafter, her solicitors had, by their letters of 20 February 2014 and 21 July 2014, requested the husband for information/documents about the deal between him/EEL and Avnet.

79.  Hence, it is plain and obvious that the husband was and/or should be alerted, as early as October 2013 or in any event by 21 July 2014, that his discussion/negotiation/deal with Avnet, especially the timeline, would be a material issue before the court, at which time his memory in relation to the discussion/deal with Avnet should still be reasonably fresh in his mind. It is thus not logical nor reasonable for him to wait until this trial to recall what took place in 2010, and/or to argue on the long passage of time which has impeded his memory.

80.  Due to the matters aforesaid, I do not accept that the husband should be excused for the inconsistency in his evidence as to when the negotiation between him/EEL and Avnet first took place. This impedes significantly on his creditability on the timeline of the discussion/deal with Avnet.

81.  Secondly, the husband relied on Lee’s affirmation evidence which suggested that he approached Lee “sometime in July 2010” and told him that Avnet would be interested in acquiring the business of EEL on the condition that he and his various employees would have to come to work for Avnet and that he could no longer conduct the business of EEL. Lee also said in his affirmation that the DD Checklist was given to the husband and him by Avnet “shortly after” the 21 July 2010 meeting to remind them as to the outstanding documents and information, and that “formal due diligence” took place “sometime after” 21 July 2010. He recalled that negotiation took place from August 2010 and resulted in 1^st draft of APA in mid-September 2010.

82.  I accept that the husband lined up with Lee sometime in July 2010 for his assistance in the negotiation with Avnet. I also accept that the negotiation with Avnet intensified after the meeting of 21 July 2010. However, this does not shed any light on the issue as to when the husband was first approached by Avnet, or versa vice, on the potential sale and purchase of the business of EEL.

83.  Here, a closer look into the DD Checklist would reveal that:

(1)  It consisted of 12 pages in which as many as 89 items were listed for response of EEL. Yet, it is just “an excerpt” of “the Legal section and the human resources and administration part under the Business section in the Due Diligence Checklist”, which suggests that it is more likely than not that there was/were other parts/items of the Due Diligence Checklist but not included in this DD Checklist. This is very telling on the extensiveness of the due diligence exercise that was already in place by 21 July 2010;

(2)  The 89 items covered a wide range of topics, such as the corporate documents, overview of assets, contracts, disputes and litigation, intellectual property rights, loans and securities, information on human resources and administration;

(3)  Commercially important and/or sensitive information/documents were required to be disclosed, such as lists of all the contracts of EEL, including distribution contracts and customer contracts; loans and security agreements; a list of employees classified by their function, including their title, location and current fringe benefits. Some of these documents were described in the DD Checklist that they were “already” provided;

84.  The indisputable observation in the preceding paragraph does not sit well at all with the husband’s case that there were only 1 or 2 preliminary meetings with Avnet before 21 July 2010, nor does it fit well at all with his allegation that formal due diligence began only from 21 July 2010. His allegation that the negotiation “only became serious on or after the meeting on 21^st July 2010” flies in the face of the extensiveness and sensitivity of the documents sought from and already provided by EEL/the husband in the DD Checklist, which he alleged was given to Lee by Avnet sometime “after a meeting on 21 July 2010”. [14]

85.  For the matters aforesaid, it is highly likely that there were already serious discussion/negotiation between the husband/EEL and Avnet on the sale and purchase of the business of EEL well before 21 July 2010.

86.  Thirdly, I find that the husband was extremely evasive in providing information to the wife on his negotiation/deal with Avnet, in particularly as to when he and Avnet started preliminary discussion about the potential acquisition.

87.  As said, the wife formally filed her summons for leave to appeal out of time of the Consent Order/Varied Consent Order in October 2013, relying on the ground of his failure to disclose the deal with Avnet to her before the consent summons was signed and/or the Consent Order was made. He filed his affirmation in opposition to her application for leave to appeal on 6 February 2014 claiming this,

“18. I have not received any “serious offer” … before the Consent Summons was filed or even the Decree Absolute was granted. The correspondences leading up to the acquisition of [EEL]’s assets by Avnet would demonstrate that – but unfortunately a confidentiality agreement between myself and Avnet prevents the disclosure of such correspondences.”

88.  To note is that the husband did not say in the aforesaid response that he did not possess “the correspondences leading up to the acquisition”; he merely said that the confidentiality agreement with Avnet that prevented him from disclosing the same to the wife.

89.  Hence, the wife’s solicitors wrote on 20 February 2014 seeking discovery of:

(1)  all correspondences between husband/EEL and Avnet from March to October 2010 evidencing Avnet’s offer to purchase EEL’s business, and/or the offer from the husband/EEL to sell the same to Avnet (“Avnet Correspondences”);

(2)  a copy APA; and

(3)  EEL’s audited accounts of 2010 and 2011.

90.  The husband’s solicitors responded on 24 February 2014. Once again, the husband did not say that he was not in possession of the Avnet Correspondences. He merely said that he disagreed to make discovery because it was “not necessary, and in any event not sufficiently necessary to justify overriding confidentiality”.

91.  The wife then wrote back with cited authorities to rebut the argument on confidentiality on 21 July 2014.

92.  Thus, the husband, about 6 months since her first request for disclosure, finally provided a copy of APA and EEL’s audited accounts to her by his letter dated 19 August 2014. Importantly, on the Avnet Correspondences, his solicitors replied that “due to the lapse of time”, he needed “some more time, say 14 days, to retrieve the requested correspondences”. By this answer, it plainly suggests that it was not the case that he did not possess the Avnet Correspondences, but just that he needed time to retrieve them.

93.  When the Avnet Correspondences were not forthcoming from him despite his aforesaid reply, the wife took out a formal discovery summons on 30 October 2014.[15] Then, pursuant to a consent order, the husband filed his affirmation on the discovery on 1 December 2014.

94.  In the said affirmation, he, for the first time since the wife requested for the Avnet Correspondences in February 2014 and despite he explained in his solicitors’ letter in August 2014 that he needed time to retrieve the same, claimed that he was “not” in possession, custody or power of the Avnet Correspondences, because he had “returned” all confidential information to the US parent company of Avnet “immediately after the completion of the subject asset purchase” and when he “started to work as Avnet’s employee”. Then, he was summarily dismissed by Avnet in April 2012, upon which even his laptop was confiscated. In a word, none of the Avnet Correspondences could be found in his records, save and except a few emails or documents retrieved from his solicitors acting for him in the deal with Avnet.

95.  I am not allured to the explanation proffered by the husband in his aforesaid affirmation that he did not possess the Avnet Correspondences. Plainly, this allegation is in stark contradiction to his reply in his solicitors’ letter dated 19 August 2014. If (and just assuming) he had really returned the Avnet Correspondences to Avnet upon conclusion of the deal and when he started to work for Avnet, which was 4 October 2010, it is an affront to logic that he could not have said so earlier in his various letters or affirmation set out at [87] and [92] of this judgment.

96.  The confidentiality clauses of the APA (namely Clauses 13.1 to 13.4 therein) cannot assist him. These clauses do not impose an absolute bar to disclose confidential information concerning the deal. Such information may be disclosed under Clause 13.4 with the written approval of Avnet, or if required by the law or any competent regulatory body to disclose and upon promptly notification to Avnet.

97.  Moreover, the husband’s own witness, Lee, said under cross-examination that he was not aware of any confidentiality requirement or any need to return documents regarding the discussion on the sale of EEL to Avnet.

98.  Notably, the husband subsequently did and had disclosed the APA and some of the emails retrieved from his solicitors acting for him/EEL in the deal, which in turn weakens his argument on the confidentiality.

99.  Fourthly, as the court is required to take into account “all the circumstances” of the case pursuant to section 7 of the MPPO, I feel it obliged to analyse the timeline leading to the Consent Order which appears in the following.

100.  Procedurally, the parties filed their respective Form E in May/June 2009. The husband said in his Form E that the net value of his assets and the value of EEL were “to be confirmed”.

101.  The husband made his substantive offer to settle the wife’s ancillary relief claim by his solicitors’ letter dated 19 November 2009. [16] He offered to (i) transfer the Lung Poon Court property to her; (ii) pay her and the children a sum of $80,000 per month as their maintenance for 5 years; and (iii) to transfer the matrimonial home to her within 2 months but “subject to mortgage” which was to be discharged by him “within 2 years”. According to him, this was because the matrimonial home was “one of the basket of assets being pledged to secure bank facilities … for the whole [E Group]”.[17]

102.  This was rejected by the wife who made a counter-offer by letter on 24 November 2009. [18] Among other things, she sought (i) the matrimonial home be transferred to her free from mortgage within 2 months; (ii) a sum of $1,500,000 representing her interest in Lung Poon Court property; and (iii) a lump sum payment of $16,200,000; (iv) monthly maintenance of $50,000 per month for herself and $80,000 per month for the children.

103.  On 4 December 2009, the husband replied through his solicitors and literally rejected the wife’s counter-offer. He said that it was impractical for him to transfer the former matrimonial home to her free from mortgage, as it was “one in the basket of assets being pledged to secure banking facilities” for the E group. On the issue of lump sum payment, he said that the estimated the family assets was worth “about $20,000,000” only, as “the businesses have been facing severe financial difficulties and their values have drastically dropped”. He thus made a revised offer of $5,000,000 but to be paid by way of 40 instalments.

104.  The parties came before HHJ Bruno Chan (as he then was) in a financial dispute resolution (FDR) on 28 January 2010, which was partially conducted and adjourned to March 2010. During the intervening period, the husband instructed Lee to prepare the Tact Report to “certify the family’s assets value”. Importantly, he informed the wife on 19 February 2010 that he would make a revised offer “by the end of March 2010”, after obtaining the Tact Report as it was his plan to make his revised offer with reference to the Tact Report. [19] Subsequently, he obtained an order from the Family Court made on 4 March 2010 that he might file and serve the Tact Report by 1 April 2010. The FDR of 5 March 2010 was thus vacated and refixed to a date to be fixed.

105.  Although the Tact Report was sent to the husband on about 29 March 2010, he did not make any revised offer to the wife “by the end of March”, as what he had promised in his letter of 19 February 2010.

106.  In fact, he did not make any revised offer until 8 June 2010, which was more than 2 months since he received the Tact Report. By his solicitor’s letter of 8 June 2010, he substantially increased his offer to pay her $30,000,000 within 6 months from decree absolute in the manner suggested in the said letter.[20]

107.  Pausing here, it is imperative to point out that the husband allowed the wife a mere 2 days to consider his revised offer. At the end of his letter of 8 June 2010, he wrote,

“Please treat this as a matter of urgency and let us have your substantial reply by 10^th June 2010 at noon.” (the underlined is my emphasis)

108.  The husband was undoubtedly at a rush to settle the ancillary relief claim of the wife, because the correspondences between their solicitors reveal that apart from sending out the said letter of 8 June 2010, his solicitors also made telephone call(s) to the wife’s legal representative on the same day, despite that they had said in their letter that the wife could have until 10 June 2010 to reply. Then, within 24 hours after the letter of 8 June 2010, the husband’s solicitors sent a draft consent summons to the wife’s solicitors. On 11 June 2010, his solicitors sent the engrossed consent summons to the wife marked “urgent”. Subsequently, the consent summons was filed on the same day. The Consent Order was made 3 days later on 14 June 2010, together with a declaration under section 18, the MPPO.

109.  Then, for merely 14 days thereafter, ie on 28 June 2010, his solicitors wrote again to the wife’s legal team to enquire if and when she had applied for decree absolute.

110.  In my view, there was not any discernible reason at the material times that the husband was in such a hast to settle the wife’s ancillary relief claim and to push for the grant of decree absolute. There was not any suggestion from him that he needed to reach a financial agreement with the wife urgently in order to have smooth access to the children of the family. Custody and access posed no problem at the material times and was settled by consent. Neither was it his case that he was in a rush to obtain decree absolute so that he could get re-married with Madam D. It is his pleaded case in the Consolidated Action that he and Madam D began to develop a romantic relationship only in around late January to early February 2011.[21]

111.  Besides, the parties were due to return before HHJ Bruno Chan for another round of FDR on 15 June 2010. Yet, the husband was unwilling to wait until this adjourned FDR and in order to reach a deal with the wife, he acceded to her request for an immediate payment of $2,000,000 by cheque upon signing of the consent summons on 11 June 2010, despite that he had been proffering at the material times that the family businesses were facing “severe financial difficulties”.

112.  The only logical reason that one can distill from the overall picture set out above is that the husband was first approached by Avnet, or vice versa, before 8 June 2010 on the potential sale and purchase of the business of EEL, as a result of which he suddenly pushed hard to conclude, after more than 2 months’ silence, the settlement of her ancillary relief, as well as the divorce, urgently or as soon as possible, so that it could chronologically fit well with his artificial and wishful thinking that since the deal with Avnet was concluded after the Consent Order and/or decree absolute, the consideration received by him/EEL from Avnet was post-separation/post-divorce non- marital assets that the wife could not lay her hands on.

(iii)  My findings on the timeline of the negotiation with Avnet

113.  For all of the above matters, I conclude that it is more likely than not that the Avnet first approached the husband, or vice versa, before 8 June 2010 for the potential sale and purchase of EEL, but he intentionally failed to make full and frank disclosure of the same to the wife, who did not take part in the daily management of the family companies and thus not aware of the actual financial situation of the family companies.

114.  In my view, had he informed the wife about the preliminary negotiation with Avnet for the potential sale and purchase of EEL before or at the time when the consent summons leading to the Consent Order was signed, it is more likely than not that the wife would not have accepted the methodology of valuating EEL and the E Group by assessing the net asset value as in the Tact Report, and/or that she would probably not have agreed the settlement on her ancillary relief without making further discovery on the negotiation with Avnet.

115.  On the other hand, due to this non-disclosure of the husband, the court, when considering the consent summons leading to the Consent Order, was deprived of the important information on one of the factors for consideration under section 7 of the MPPO, namely the husband’s income and future financial resources.

116.  Even worse, according to his own case, before he invited the wife to sign the consent summons leading to the Varied Consent Order, he was already actively negotiating with Avnet for the sale of business of EEL. I shall adopt what I have said at [51] to [56] of this judgment. Further, upon due consideration of all the evidence and the overall circumstances of the case, I tend to agree with Mr Richard Khaw, senior counsel for the wife, that the true reason behind the husband’s request for variation of the Consent Order was that he failed to disclose to Avnet in the due diligence exercise about the intended transfer of the 3 Workshops to the wife pursuant to his undertakings in the Consent Order. In order not to cause any hiccups of the sale of EEL, he was adamant to vary the Consent Order by discharging the undertaking to transfer the 3 Workshops and by paying her upfront $5,000,000, despite his claim that he could not financially arrange for re-mortgage of the 3 Workshops.

Terms of the APA

117.  The APA was signed on 4 October 2010 between Avnet as the purchaser, EEL as the vendor and the husband as the guarantor. I will highlight some of the relevant terms of the APA in the following.

118.  “Business” is defined under Clause 1 as “the business of [EEL] in relation to the distribution of the products of Infineon and CT-Concept as well as the provision of related technical services in Hong Kong and the PRC”. Infineon and CT-Concept are the major suppliers of EEL for the Business.

119.  Pursuant to Clauses 2.1 and 2.2 of the APA, EEL shall sell and shall procure Shenzhen EEL to sell to Avnet the assets as follows (collectively the “Assets”):

(1)  the Inventory (which is sub-categorised into Old Inventory, Aged Inventory and New Inventory according to the date(s) they were acquired);

(2)  the goodwill of the Business with exclusive right to carry on the Business in succession of EEL;

(3)  the benefits of the Distribution Agreements (ie the distribution agreements the E Group entered into with or the authorization letters the E Group received from Infineon and CT-Concept;

(4)  the Employees, including the HK Employees and the PRC Employees currently employed by the E Group;

(5)  the Information, such as all files of operation owned by the E Group relating to the Business and the Assets including all certificates, files or records in connection with research and development, Customer Database (as defined in the APA), list of suppliers, procurement information, salary and benefit records, salary slips and other information relating to the Business;

(6)  all records and other documents relating to the Business;

(7)  all rights and benefits of any claims o the E Group subsisting at the completion of the sale under any warranty, term, condition, guarantee or indemnity in favour of the E Group in relation to the above items.

120.  Under Clause 4.1 of the APA, the total consideration for the transfer of the Assets shall comprise of:

(1)  A sum of $77,000,000 being the agreed consideration for all the Assets except the Inventory, payable on completion;

(2)  A sum of $20,761,000, being the agreed consideration of the Inventory payable on the Inventory Completion Date of 15 October 2010.

121.  Under Clause 5.1 and “as further consideration for the transfer of the Assets”, Avnet shall make 3 Earn-out Payments to EEL, in accordance with the formula set out in Clause 5.2 (“Earn-out Payment”), provided the said 3 Earn-out Payments shall not exceed $33,000,000 in total. The Earn-out Payments are also defined under Clause 1 as “an additional payment for purchase of the Assets”.

122.  Hence, the total consideration (excluding the inventory costs) under the APA was $110,000,000, with $77,000,000 to be paid upfront and a maximum of $33,000,000 to be paid over 3 years.

123.  Under Clause 5.4, EEL was entitled to an Earn-out Bonus of 19% of the Total Operating Profits minus $105,000,000, or $50,000,000, whichever is the lower (“Earn-out Bonus”).

Moneys received from Avnet

(i)  Respective stance of the parties

124.  The crux of the husband’s case is that the entire sum of $135,161,000 received by him/EEL is post-separation (as the parties separated in 2008) and/or post-divorce (as decree absolute was granted on 7 June 2010) “non-matrimonial” property which the wife should not be entitled to share. He provided his explanation in his 5^th affirmation, in particularly from [130] – [145] therein, which can be summarized as follows:

(1)  The sale of the business of EEL to Avnet did not come about until after the signing of the consent summons leading to the Consent Order, by which time the question of ancillary relief was already settled, and he and the wife had already divorced, such that the moneys received from Avnet were “post-divorce accrual” that she was not entitled to share;

(2)  The consideration under the APA of $110,000,000 ($77,000,000+$33,000,000) was not meant to be what he owned in EEL or the E Group as at the time of the divorce. It was based on “projected future profit” of the Business for the next 3 years to come, ie 2011 – 2013. Since the parties had already divorced on 6 July 2010, the wife was not entitled to any part of it as this was a “post-divorce accrual”;

(3)  The 1^st payment of $77,000,000 from Avnet was the downpayment for consideration under the APA inclusive of a bundle of assets of EEL; such assets were already taken into account in the Tact Report in assessing the value of EEL which the wife had accepted as the value of EEL. The wife had got her fair share and agreed the Consent Order. It is thus unjustified for her to come back for another bite of the cherry;

(4)  In respect of the sum of $20,761,000, it was the consideration for the inventory largely consisted of inventory acquired by EEL “after the divorce”. The inventory of EEL as at 31 December 2009 was already included in the Tact Report, which means that the wife had already had her fair share to the inventory acquired before 31 December 2009;

(5)  The said net sum of $37,400,000 received by the husband/EEL out of the settlement of the Consolidated Action related to the Earn-out Payments and/or Bonuses paid to him under the APA, and his employment with Avnet. It was purely based on his “forecast on the future profits” and/or “were purely personal as meant to be paid for [his] own efforts and services made after the divorce”;

(6)  He was solely responsible for the management and operation of EEL and the E Group.The wife was a mere shareholder and director simply because the law there and then required private companies to have at least 2 directors and 2 shareholders. The development and success of EEL had predominately depended upon his personal efforts including in exploring and developing the China market.

125.  The husband further raised that if the wife was to share the sale proceeds of EEL, she should also be made to share the liabilities. He claimed that the sale proceeds were used to repay the liabilities of EEL as outlined at [44] of his opening submission.

126.  In response, the wife broadly said in her 8^th affirmation that:

(1)  the said sum of $77,000,000 was paid upfront for the sale of the business of EEL including its goodwill, clientele, employees and the distribution agreements with Infineon and CT Concept. All these were built up during the marriage and were the products of their joint endeavours in the family business. Clearly, it should be categorized as marital assets;

(2)  the inventory costs of $20,761,000 is an essential tool for the operation of the business of EEL, and thus is naturally part and parcel of the EEL. Further, the husband was not able to prove his case that 90% of the inventory was received after June 2010, since he failed to provide the stock records at the time of the Tact Report and the APA;

(3)  the Earn-out Payments and Earn-Out Bonus of $37,400,000 were part and parcel of the sale of EEL, as suggested in the definition clause of the APA.

127.  In his written note submitted to the court on Day 2 of this trial, Mr Li SC for the husband gave a summary of 4 propositions of their case:

(1)  The Sum is not matrimonial assets as they were acquired by the husband “after decree absolute”;

(2)  Further or in the alternative, the Sum was acquired by the husband “after separation” “by virtue of his personal industry and not mere use of an asset created during marriage. Hence, it should not be counted as matrimonial properties;

(3)  In addition to (1) and (2) above, it is only in “very rare case” would “post-separation” “non-matrimonial” property be shared;

(4)  In alternative to the above (1) to (3), property acquired “post-separation” should “not” be shared “equally” even if it was not non-matrimonial property.

(ii)  Applicable legal principles

128.  In LKW (supra), Riberio PJ articulated at [80]-[82] that the equal sharing principle to the parties’ total assets would generally apply “unless there is good reason” for departing from equal division (See also: WLK v TMC (2010) 13 HKCFAR 618 at [82]). His Lordship went on to identify the matters which might lead to a departure of the equal sharing principles at section E.5 of his judgment. Of relevance to this case may be the factor of “unilateral assets”. His Lordship explained as follows:

“E.5.a Source of assets as a material factor

87. The source of an asset may provide a reason for excluding it from the sharing principle on the basis that it is not an item of matrimonial property. Of course, in many cases, no question of any distinction between matrimonial and non-matrimonial property will arise. But where there are assets which may be capable of being so differentiated, section 7(1)(a) implicitly requires the court to consider whether any part of such assets ought in fairness to be excluded from the sharing principle. Differentiation might also be seen as a requirement of section 7(1)(f) if the source of a particular asset suggests that it is an independent and unmatched contribution by one of the parties.

88. However, the warning issued by Lord Nicholls [in Miller v Miller and McFarlane v McFarlane [2006] 2 AC 618] must be kept in mind. Effort and expense should not be wasted in trying to establish a sharp dividing line between what is and what is not matrimonial property:

“This difference in treatment of matrimonial property and non-matrimonial property might suggest that in every case a clear and precise boundary should be drawn between these two categories of property. This is not so. Fairness has a broad horizon. Sometimes, in the case of a business, it can be artificial to attempt to draw a sharp dividing line as at the parties' wedding day. Similarly the ‘equal sharing’ principle might suggest that each of the party's assets should be separately and exactly valued. But valuations are often a matter of opinion on which experts differ. A thorough investigation into these differences can be extremely expensive and of doubtful utility. The costs involved can quickly become disproportionate.”

89.The existing case-law identifies two classes of assets as possible candidates for exclusion on the basis of source. The first involves property acquired during the marriage by one of the parties from a source wholly external to the marriage, such as by gift or inheritance. The second involves assets derived from a business or an investment conducted solely by one party (sometimes called “unilateral assets”).

…

E.5.a.ii Unilateral assets

95.There has been a measure of disagreement in relation to unilateral assets. Baroness Hale was inclined to regard assets sourced from the business or investment activities solely of one of the parties, ie unilateral assets, as property potentially to be excluded from an equal division. She qualified this by saying: “The source of the assets may be taken into account but its importance will diminish over time”. By way of elaboration, her Ladyship stated:

“...the court is expressly required to take into account the duration of the marriage: section 25(2)(d). If the assets are not ‘family assets’, or not generated by the joint efforts of the parties, then the duration of the marriage may justify a departure from the yardstick of equality of division. ... This is simply to recognise that in a matrimonial property regime which still starts with the premise of separate property, there is still some scope for one party to acquire and retain separate property which is not automatically to be shared equally between them. The nature and the source of the property and the way the couple have run their lives may be taken into account in deciding how it should be shared.”

96.Lord Hoffmann and Lord Mance agreed with Baroness Hale while Lord Hope of Craighead agreed with both her Ladyship and Lord Nicholls. Lord Nicholls, however, did not agree with Baroness Hale on this point. He stated:

‘...the courts should be exceedingly slow to introduce, or reintroduce, a distinction between ‘family’ assets and ‘business or investment’ assets. In all cases the nature and source of the parties' property are matter to be taken into account when determining the requirements of fairness. The decision of Munby J in P v P (Inherited Property) [2005] 1 FLR 576 regarding a family farm is an instance. But ‘business and investment’ assets can be the financial fruits of a marriage partnership as much as ‘family’ assets. The equal sharing principle applies to the former as well as the latter. The rationale underlying the sharing principle is as much applicable to ‘business and investment’ assets as to ‘family’ assets.”

97.The difference of opinion is relatively narrow as it only relates to cases where the marriage is of short duration. The merits of the competing views are open to debate and it is not necessary to reach a firm conclusion in this judgment. I will content myself with saying that I am tentatively inclined to prefer Lord Nicholls’s approach as being simpler to operate and as avoiding the possible re-introduction of a discriminatory element into the exercise.

98.It should be noted that these refinements are not generally applicable to the matrimonial home and other assets which have been intended for and devoted to family use.” (the underlined is my emphasis)

129.  In another judgement of Kan Lai Kwan v Poon Lok To Otto (2014) 17 HKCFAR 414, Riberio PJ had to consider if the increased profits of the husband’s Analogue Group after the parties’ separation should provide a ground for departure from the equal sharing principle. Upon considering the 2 lines of different approaches adopted by the English courts as in Rossi v Rossi [2006] EWHC 1482 (Fam), [2007] 1 FLR 790 and in Cowan v Cowan [2002] Fam 97, His Lordship preferred the approach in Rossi v Rossi (supra). His Lordship explained the legal principles in this way:

“128. When considering ancillary relief, the financial position is generally approached on the basis of the values existing at the date when the hearing takes place.

129. Where, however, there has been a substantial period of separation prior to the hearing and where during that period, there has been a steep increase in the value of the matrimonial assets attributable to the independent business or professional efforts by one spouse, unmatched by any contribution from the other spouse, grounds may exist for departing from equality. In some such cases, fairness may dictate that the non-contributing spouse has no claim to share equally in the post-separation accrual to the matrimonial assets.

130.There are opposing arguments as to whether a spouse should be excluded in such cases. As Nicholas Mostyn QC explained in Rossi v Rossi:

“...it can legitimately be argued that the party in question has traded with the other party's undivided share and so should share with that party the profit that has been generated. On the other hand it can equally convincingly be said that the second party has not contributed to the industry or endeavour that gave rise to the profit or growth and so it is unfair that the second party should share to the same extent in that profit as the first who made all the effort....”

131.In Cowan v Cowan, Thorpe LJ favoured the former approach and visualized only rare and exceptional departures from equality by reason of post-separation accruals:

“The assessment of assets must be at the date of trial or appeal. The language of the statute requires that. Exceptions to that rule are rare and probably confined to cases where one party has deliberately or recklessly wasted assets in anticipation of trial. In this case the reality is that the husband traded his wife’s unascertained share as well as his own between separation and trial ... The wife's share went on risk and she is plainly entitled to what in the event has proved to be a substantial profit. If this factor has any relevance it is within the evaluation of the husband's exceptional contribution.”

132.His Lordship’s reference to “exceptional contribution” was a reference to cases where it can be established that the increase is only attributable to what has been called one spouse’s “stellar” contribution. As discussed in LKW v DD cases in that class are necessarily rare and exceptional. H makes no claim to “stellar contribution” in respect of the increased profits of the business in the present case.

133.The summary of the principles provided in Rossi v Rossi is broader than Thrope LJ’s stricter approach and is, in my view, preferable. It points to various factors relevant to deciding whether a post-separation accrual justifies departure from equality, including the length of the marriage and separation, the nature of the property accruing and the means or efforts by which it was acquired, and so forth. Of particular present relevance is the following passage:

‘Assets acquired or created by one party after (or during a period of) separation may qualify as non-matrimonial property if it can be said that the property in question was acquired or created by a party by virtue of his personal industry and not by use (other than incidental use) of an asset which has been created during the marriage and in respect of which the other party can validly assert an unascertained share. Obviously, passive economic growth on matrimonial property that arises after separation will not qualify as non-matrimonial property.’” (the underlined is my emphasis)

130.  It may be helpful here to set out the relevant parts of the judgment of Mostyn QC in Rossi v Rossi (supra) as follows:

“ 24.1 The statute requires all the assets to be valued at the date of trial.

24.2 For the purposes of establishing the matrimonial property in respect of which the yardstick of equality will 'forcefully' apply the value of assets brought into the marriage by gift and inheritance (other than the former matrimonial home), together with passive economic growth on those assets, should be excluded as non-matrimonial property.

24.3 Assets acquired or created by one party after (or during a period of) separation may qualify as non-matrimonial property if it can be said that the property in question was acquired or created by a party by virtue of his personal industry and not by use (other than incidental use) of an asset which has been created during the marriage and in respect of which the other party can validly assert an unascertained share. Obviously, passive economic growth on matrimonial property that arises after separation will not qualify as non-matrimonial property.

24.4 If the post-separation asset is a bonus or other earned income then it is obvious that if the payment relates to a period when the parties were cohabiting then the earner cannot claim it to be non-matrimonial. Even if the payment relates to a period immediately following separation I would myself say that it is too close to the marriage to justify categorisation as non-matrimonial. Moreover, I entirely agree with Coleridge J when he points out that during the period of separation the domestic party carries on making her non-financial contribution but cannot attribute a value thereto which justifies adjustment in her favour. Although there is an element of arbitrariness here, I myself would not allow a post-separation bonus to be classed as non-matrimonial unless it related to a period which commenced at least 12 months after the separation.

24.5 By this process the court should, without great difficulty, be able to separate the matrimonial and non-matrimonial property. The matrimonial property will in all likelihood be divided equally although there may be deviation from equal division: (a) if the marriage is short; and (b) part of the matrimonial property is 'non-business partnership, non-family assets' (or if the matrimonial property is represented by autonomous funds accumulated by dual earners).

24.6 The non-matrimonial property is not quarantined and excluded from the court's dispositive powers. It represents an unmatched contribution by the party who brings it to the marriage. The court will decide whether it should be shared and, if so, in what proportions. In so deciding it will have regard to the reality that the longer the marriage the more likely non-matrimonial property will become merged or entangled with matrimonial property. By contrast, in a short marriage case non-matrimonial assets are not likely to be shared unless needs require this.

24.7 In deciding whether a non-matrimonial post-separation accrual should be shared and, if so, in what proportions, the court will consider, among other things, whether the applicant has proceeded diligently with her claim; whether the party who has the benefit of the accrual has treated the other party fairly during the period of separation; and whether the money-making party has the prospect of making further gains or earnings after the division of the assets and, if so, whether the other party will be sharing in such future income or gains and if so in what proportions, for what period, and by what means.” (the underlined is my emphasis)

131.   Doing the best I can, I would summarise the principles enunciated from the above authorities as follows:

(1)  The sharing principle that the parties’ total assets be divided equally generally apply, “unless” there is “good reason” from departure;

(2)  if the source of a particular asset suggests that it is an “independent and unmatched contribution by one of the parties”, this may provide a reason for excluding it from the sharing principle on the basis that it is “not” an item of matrimonial property;

(3)  further or alternatively, assets acquired or created by one party after, or during a period of, separation may qualify as non-matrimonial property if it can be said that the property in question was acquired or created by a party “by virtue of his personal industry” and “not by use (other than incidental use) of an asset which has been created during the marriage”;

(4)  However, the non-matrimonial property is not quarantined and excluded from the court's dispositive powers. The court will have to consider various factors relevant to deciding whether a post-separation accrual justifies departure from equality, including the length of the marriage and separation, the nature of the property accruing and the means or efforts by which it was acquired.

(5)  Further, the importance of the “source” of an asset will “diminish over time”, so that the longer the marriage, the more likely non-matrimonial property will become merged or entangled with matrimonial property, and thus the lesser the importance of the source of such an asset as a reason for excluding it from the sharing principle.

(iii)  Overall analysis on the Sum ($135,161,000)

132.  The central theme of the husband in this case is that the discussion with Avnet on the sale of the business of EEL, the making of the APA and the Employment Agreement, and the receipt of the Sum all took place after the grant of the decree absolute. The wife should not be entitled to lay her hands on any of his assets accrued after the end of their marriage.

133.  In my view,it is trite law to require that the assets of the parties should be “calculated as at the date of the hearing” (See: LKW v DD (supra) at [71] therein). Hence, neither the date of the separation nor the date of the grant of the decree absolute can be arbitrarily taken as an absolute and conclusive point of time for the purpose of determining if an asset acquired after such date should be, or should not, be treated as a matrimonial property. Each case has to be decided on its own facts by taking into account the relevant factors under section 7 of the MPPO and all the circumstances of the case, with the ultimate goal to achieve a fair result.

134.  Even in H v H [2007] 2 FLR 548, a case cited by Mr Li SC for the husband purportedly to support the argument that assets obtained after the date of separation are not matrimonial assets, Charles J, albeit held that the husband’s post-separation bonuses of 2006 and 2007 could not be included within the matrimonial property to divided “equally”, awarded the wife a share of his future income and the product of his enhanced or greater income and earning capacity to which she had contributed. I do not see how H v H can assist the husband to advance his case any further.

135.  Moreover,given my findings at [113] to [116] of this judgment that the negotiation between the husband/EEL and Avnet first took place before the Consent Order (and thus the decree absolute) was made, but he intentionally failed to disclose the same to the wife, I have to say that under the circumstances of this case, the grant of the decree absolute poses little, if any, bearing on determining what is, or is not, marital assets. I am of the further view that it is not fair to refer to the date of the decree absolute only for the purpose of categorization of the parties’ assets into matrimonial or non-matrimonial property in this case.

136.  Besides, applying the above legal principles to the facts of this case, I wish to highlight the following points.

137.  First, one must not lose sight of the fact that the parties were married in 1988. But for their divorce, they had a long marriage of about 22 years up the decree absolute, or about 20 years up to the time when the husband moved out of the matrimonial home in 2008. I am not yet prepared to fully accept that they separated in 2008, despite the agreed chronology, because strangely, the husband continued to use the address of the former matrimonial home (which was wholly distributed to the wife under the Consent Order) as his own address in the APA and the Employment Agreement.

138.  Be that as it may, it is my view that even without taking into account the material non-disclosure of the husband on the negotiation/deal with Avnet, and merely presuming that the Sum was to be wholly taken as post-separation accrual, the factor of their long marriage carries a huge weight in the overall circumstances of the case. Importantly, the sale of the business of EEL (set up in 1993) was effected merely in October 2010, ie about 2.5 years after the alleged separation in 2008, which is relatively short when compared with the 20-year’s long of marriage before the allege separation.

139.  Second, I accept that although the wife worked full time during the marriage, she was the main carer of the children with the assistance of a maid. There is nothing objectionable for her to work and rely on the assistance of a maid when she was at work to take care of family chores and/or the children before she returned home from work. It is over simplistic and unfair for the husband to downplay her role as the main carer of the children merely because of the fact that she worked during daytime. If this logic bears any truth, does it mean that his participation/contribution to EEL or the E Group should also be minimized because he employed his staff in assisting him?

140.  The husband’s oral assertions in the witness box, such as he did household chores, came back from the PRC to Hong Kong to take care of the children regularly or often, or gave instructions to the maid since the wife did not speak English well, does not sit well at all with his 5^th affirmation, in which he said these,

“12. …I dedicated all my time and effort for running the business of EEL and very often had to work over 18 hours a day for 7 days in a row. In view of my long hours working for the business of EEL, I became spending less time with my child and the [wife] and my time around the home also became less…

…

14. …After setting up the Shenzhen office I spent most of my time there in order to get the new office onto the track. I was mostly living in Shenzhen in the first few years in order to find suitable staff and train them, get to know the market and for socializing with factories and people in the business. After setting up the Shenzhen office, I travelled between Hong Kong and Shenzhen to manage the businesses of EEL, leaving hardly any time to get a proper rest. Sometimes I had to stay in Shenzhen over weeks for overseeing the operations of the business. This rendered me with little spare time to see the [wife] and the children.

15. The more time I devoted in the businesses of EEL, the less time I had with the children and the [wife]….

…

18. …Subsequently I moved out of the matrimonial home in about February 2008 [which I had mistaken to have moved out in February 2010 as recounted in my 2^nd affirmation filed herein]. Thereafter I devoted all my time in businesses of EEL and rarely saw the children in order to avoid seeing the [wife].” (the underlined is my emphasis)

141.  Further, it is very telling that custody, care and control of the daughter was agreed by consent to be granted to the wife at the time of the divorce.

142.  The overall picture thus became clear. Since the setting up of the EEL in 1993, the husband devoted his time and effort in developing his career/business including opening up the China market whereby he had to spend a lot of his time in the China, which was made possible partly because the wife stationed in Hong Kong and looked after the family and their children who were still at their tender age. Had it not been this division of marital roles between them, the husband would not have been able to spend the vast amount of time in developing his career/business in Hong Kong as well as in the PRC.

143.  Riberio PJ explained clearly in LWK (supra), citing what Lord Nicholls said in Miller v Miller; McFarlane v McFarlane [2006] UKHK 24, that there is no place for discrimination of roles in matrimonial cases,

“…there is no place for discrimination between a husband and wife and their respective roles. Discrimination is the antithesis of fairness. In assessing the parties’ contribution to the family there should be no bias in favour of the money-earner and against the home-maker and the child-carer. This is a principle of universal application. It is applicable to all marriages.”

144.  Third, apart from the long marriage, it is imperative to note that EEL and the E Group were set up during their marriage; they were not brought into the marriage or set up after their separation. Both parties were the joint shareholders and joint directors. These companies flourished and grew substantially during their marriage, which business were subsequently sold to Avnet at a substantial price.

145.  The husband suggested in his 5^th affirmation that he was solely responsible for the management and operation of EEL and the E Group. The development and success of EEL had predominately depended upon his personal efforts in exploring and developing the China market, including the building up of business in the China market in 1994. The wife was a mere shareholder and director simply because the law there and then required private companies to have at least 2 directors and 2 shareholders.

146.  Although the wife did not take part in the daily operation/management of EEL and other family companies, I accept that the initial set-up capital of EEL came from the joint effort and/or joint account of the parties to which both of them contributed during their marriage. Notably, before EEL was set up in 1993, both parties were working. When their son was born in 1990, the average income of the husband was only $15,000 - $16,000 per month, while that of the wife was about $10,000 per month. Family expenses were shared out, as conceded by the husband in the cross-examination. [22] Further, even according to his own case in his 5^th affirmation, he did not have abundant financial resources at the time when EEL was set up, such that he was working literally like a one-man band:

“12. I did not have much financial resources for employing staffs to assist in the business at the time of setting up of EEL, I therefore had to [do] all bits and pieces of works around the company by myself…”

147.  Further, she contributed to their development by providing personal guarantees to secure the loans that were enjoyed by EEL and the other companies of the E Group, as well as by pledging her own AUD deposit as security with Shanghai Commercial Bank during the marriage.

148.  Fourth, even more so, the wife continued to provide personal guarantees, pledge her own AUD deposit and provide the former matrimonial home as security for the loans enjoyed by EEL/the E Group, despite the husband’s alleged separation in April 2008,[23] and/or after the grant of decree absolute. I reiterate the salient point set out at [57] to [58] of this judgment.

149.  Fifth, EEL provided one of the major source of the family expenses during the marriage. Not only did it pay the mortgage of the former matrimonial home, it also reimbursed family spending, such as meals out, children’s expenses like computers and study tours, upon the wife’s presentation of relevant receipts to the company accountant. There was thus clear mingling of the family expenses and the earnings of the EEL and the E Group.

(iv)  Analysis on the 3 separate payments

150.  Mr Li SC for the husband submitted that since the marital relationship of the parties had already ended by the time of the APA and the receipt of the Sum, it is necessary for the court to separate the Sum to each of its 3 constituent parts, and decide whether each component represent a post separation acquest.

151.  In particularly, sensior counsel asked me to bear in mind that under the APA, inventories of EEL/the E Group were divided into 3 categories of New Inventory, Old Inventory and Aged Inventory depending on the date that they were received. A discounted rate was assigned to Old Inventory and Aged Inventory. Of relation is Old Inventory defined as inventories received on/before 31 December 2009 that would be valued at 20% of the original cost. According to the audited accounts of the E Group as at 31 December 2009, there were inventories worth $31,486,106 which would be categorized as “Old Inventory” under the APA. Thus, the value of these inventories for the purpose of Avent’s payment would only be 20% of their value, ie $6,297,221.20 ($31,486,106 x 20%). Besides, the husband recalled that at least 90% of the inventory that was transferred to Avnet was acquired “after June 2010”, but yet the parties were already separated in 2008. Mr Li SC submitted that it was very likely that none of the inventories transferred to Avnet could be traced back to the period before their separation. Hence, the inventory costs of $20,761,000 received from Avnet should be treated as a post-separation acquest.

152.  To begin with, I do not find this approach of differentiation of components of the payment of the Sum alluring in the circumstances of this case. I am of the view that the court is entitled to take a broad brush view of the Sum altogether. It needs to be reiterated, as this is very fundamental and important in the case, that pursuant to the Consent Order, the wife was required to continue to provide personal guarantees and to allow the former matrimonial home to secure the banking facilities enjoyed by EEL and the E Group even after the Consent Order and after decree absolute, for a period of 6 months from the date of the decree absolute. The APA and Employment Agreement were signed on 4 October 2010, which was merely about 3 months from the date of decree absolute. Plainly, the wife’s support and contribution to the husband/EEL/E Group continued in the post-separation and/or post-divorce period, such that any suggestion to deprive her of her entitlement to the fruits of the sale of the assets of EEL/the E Group would not be regarded as fair.

153.  However, if one really needs to go into details of the 3 categorisation of payment, I would hold the following views.

154.  First, Mr Li SC agreed in his closing submission, for this is also the husband’s evidence during cross-examination, that the sale of the assets under the APA included the goodwill, line of products, distribution agreements etc, which were all products of his work built up over 10 years or so, which meant that they were in place “during the parties’ marriage”. However, senior counsel argued that these “assets” by themselves do not have much value if they were not associated with the husband. They required his further effort and contribution in order to be of any value. Senior counsel thus said that the “work done by the husband post-separation would inevitably be reflected in the ‘value’ of the ‘assets’ in clause 2.2 of the APA.” (See: Evans v Evans [2013] 2 FLR 999 at [141] therein). Further, senior counsel advanced that aside from the inventory and employees (including the husband himself), the Business that was to be run by Avnet was hardly the same business of EEL, and that “it was the sort of new venture without connection to the assets of the marital partnership which should only in very rare case be shared (See: JL v SL (No 2) [2015] 2 FLR 1202 at [42] therein).

155.  With the greatest respect to Mr Li SC, I think it is a very bold submission to say that the “assets” that were sold to Avnet did not by themselves have much value. If this argument could stand, it would literally suggest that the consideration of Avnet’s deal (apart from the inventory costs) was related only to the husband’s skill. Yet, and without any disrespect to the husband, I am not convinced that he could be said as a “genius” in his field. In order to so qualify, “a person must have some exceptional natural capacity or intellectual or creative power or other natural ability which finds reflection in the exercise of an exceptional skill in a particular area of activity” (See: Cooper-Hohn v Hohn [2014] EWHC 4122 (Fam) at [283] therein).

156.  In fact, as revealed by the husband, what Avnet aimed at was to have a deal with a distributor of Infineon products for the China market. There were only 2 authorised distributors for China market at that time. When its negotiation with XX Electronics fallen through, Avnet then turned to EEL, the only other distributor for China market.

157.  In my judgment, it is plain and clear that the assets that were sold to Avnet pursuant to the APA, as well as EEL’s status of being one of the only 2 authorsied distributors for China market, were not only the fruits of efforts built up by the husband over the years, but also represented the wife’s continued support to him by taking care of the family/children so that he could focus on developing his career and devote all his time in building up the China market. Further, there was her tangible contribution to EEL by pooling their joint resources to pay the initial capital to set up EEL and by providing personal guarantees and pledging her AUD fixed deposit for the benefit of the family companies (See: [139] to [148] of this judgment).

158.  Second, I accept that inventory is an essential tool for the operation of a business, and thus the value of inventory should logically be part and parcel of the value of EEL. The husband, who was the key person running EEL, was not able to provide a single piece of stock records to substantiate his claim that most, if not all, of the inventory purchased by Avnet was received after June 2010. Besides, I have doubt that most of the inventories purchased by Avnet under the APA was New Inventory. Notably, the husband/EEL could not possibly have such substantial amount of money to purchase new inventories after the Consent Order up to 15 October 2010 (ie the Inventory Completion Date in the APA), because he said in his affirmation that he was facing the “tremendous financial pressure” for making payment to the wife under the Consent Order, and eventually he decided to sell the business of EEL.[24] He also deposed that “EEL was in severe financial difficulty with 85% liability over its assets.” [25] Mr Li SC’s reference to the value of the inventories in the audited financial statements of ELL as at 31 December 2009 is already considered by me,[26] but I do not think it helps to advance his case any further.

159.  Third, the overall evidence is very clear that the APA and the Employment Agreement is one whole package, in the sense that the APA was made on the basis that the husband and certain employees of EEL and Shenzhen EEL shall continue to work for Avnet. Rightly pointed out by Mr Khaw SC for the wife, the 3 Earn-out Payments are defined in the APA as “additional payment for the purchase of the Assets” (Clause 1.1) or “further consideration for the transfer of the Assets” (Clause 5.1). In the Consolidated Action, the husband pleaded in the consolidated statement of claim/consolidated reply that part of the consideration payable by Avnet was arranged to “take the forms” of Earn-out Payments and Bonuses.

160.  Above all, the husband himself expressly deposed without reservation in his 5^th affirmation that the said sum of $38,000,000 (net to $37,400,000 after deducting the legal costs) “can be taken as the Earn-out Payments and Earn-out Bonus” and “which should be paid to me under the APA”. [27] There is no mentioning that this sum or any part thereof was or might be related to his employment claim.

161.  Under such circumstances, I reject any suggestion that the Earn-out Payments and/or Bonuses should be treated differently from the consideration for the sale of the business of EEL. I also do not accede to any argument that part of the Earn-out Payments/Bonuses may be attributable to the husband’s employment claim.

(v)  My conclusion

162.  There are other points taken by the husband that the Sum or any parts, is non-matrimonial assets and/or post-separation acquest that should not be shared or should not be shared equally. I will not attempt to list out all these other points in this judgment. I am of the view that the analysis set out above is sufficient to resolve the issue. But for avoidance of doubt, I have considered all the points advanced by both parties on this topic, and in case of dispute, the court resolves the same in favour of the wife.

163.  For all the matters above, it is my finding that the Sum is the fruit of the sale of EEL built up and flourished by the joint effort of the parties during their long marriage of about 20 years, to which the wife continued to contribute, even after the Consent Order and the grant of decree absolute, by providing personal guarantees and pledging the former matrimonial home for its benefits. I have no doubt that the Sum is a matrimonial asset that should be shared by the parties. I can find no reason for departing from the equality principle, subject to the analysis in the next topic on the parties’ assets, in particularly the husband’s ability to pay.

The parties’ assets & financial resources

164.  The parties have prepared a joint table of agreed and/or disputed assets and liabilities dated 16 March 2021. The total undisputed assets are worth about $144, 285,000 as follows:

(1)  the husband’s total undisputed assets: $110,585,000;

(2)  the wife’s total undisputed assets: $33,700,000.

165.  It is a common ground that this case is not based on “needs”, but one of “sharing”, as the assets of the parties are substantial. Hence, I will not attempt to expand on the needs of the parties.

166.  The husband does not have any serious dispute as to the wife’s assets. The area of dispute lies on the question of whether the various Hong Kong and PRC companies held in the name of Madam D, the present wife of the husband, estimated to be worth at least about $32,364,000, should be taken as the assets of the husband.[28] The wife said that it should and thus making his total assets worth of over $142,949,000. The husband objected and said that he is not related or involved in any of the companies owned by Madam D and that they always enjoy independent finance. He further argued that if the wife insisted that Madam D’s companies are the husband’s assets, she has failed to join Madam D into these proceedings for the determination of the beneficial ownership of her companies.

167.  To begin with, I agree with Mr Khaw SC for the wife that it is not necessary to join Madam D under the facts of this case, as the wife is not seeking to transfer any of these companies to her as part of her ancillary relief claim (See: Behbehani v Behbehani [2019] EWCA Civ 2301 at [69]).

168.  Then, I have to bluntly say that I do not in a minute believe in what the husband said. His obvious and deliberate failure to fulfill his duty on the disclosure in relation to Madam D arouses a real and serious doubt that he has close connection with and/or interest in Madam D’s businesses. In so concluding, I take into account the following matters in their totality:

(1)  The husband moved out of the former matrimonial home in March 2008 and started to discuss divorce with the wife in April 2008. According to him, he was heart-broken for her inactiveness to see or help him when he was detained by the PRC customs authority; it was Madam D who came to his recuse. About a year after the husband moved out of the matrimonial home, Madam D left Shenzhen EEL in 2009 and set up D-Max. Also in 2009, the wife filed her petition for divorce. Admitted by the husband, D-Max was doing the same trade as EEL even before the sale of the business of EEL to Avnet, [29] and employed his former staff, Ms Yip, as its company secretary. It remains unknown and thus highly suspicious that Madam D was not subject to any non-competition clause and was allowed to carry on the same trade and hire the same staff of EEL immediately after she left Shenzhen EEL;

(2)  Under part 5.6 of his Form E, he was required to provide “brief details” of the “income and assets” of Madam D, in so far as they are known to him. There, he alleged that Madam D is “self-employed” but he has “no knowledge about her income”. Yet, this does not fit well with the fact that he has opted for joint tax assessment with her since 2017;

(3)  His allegation in his reply dated 11 December 2019 to the wife’s questionnaire that he has “no information” about her “businesses” and “companies” is in stark contradiction with what his own pleadings in the Consolidated Action. There, he was able to plead in his consolidated statement of claim that the business of D-Max and Shenzhen D-Max were not in competition with that of Avnet. He was also able to provide information about D-Max that it dealt with customers that Avnet was unwilling to trade and hence was not competing with Avnet;

(4)  He charged his own properties, namely his current home at Yuen Long and an industrial unit at Tai Lin Pai Road, Kwai Chung, to secure bank facilities for D-Max;

(5)  He allowed a property at Hewlett Centre, Kwun Tong, owned by his company, to be the registered address of D-Max; [30]

(6)  He used the address of the registered office of Shenzhen D-Max as his correspondence address in a rental agreement dated 18 July 2017 of one of his PRC properties.

169.  That said, however, I have to remind myself that the value of these companies held in the name of Madam D is provided by the wife who adopts the “subscribed capital” of these companies that she obtains from the National Credit Information Publicity System of the PRC as their estimated value. Their true and current value remain unknown to the court. Further, one may also have regard to the contribution of Madam D, apart from her legal ownership, to these companies. But since it is ruled that the husband has not fulfilled the duty of full and frank disclosure in respect of these companies held in the name of Madam D, and doing the best I can with these limited information, I shall draw the adverse influence that he has the financial ability to pay whatever further ancillary relief order made by me in this judgment without any impediment on his future financial needs.

170.  My analysis on the financial resources of the husband does not end here, as I wish to say a few words on his evidence as to how he spent the Sum.

171.  According to the agreed chronology, the sums of $77,000,000 and $20,761,000 were paid by Avnet “into the bank account of EEL” on 4 October 2010. The settlement sum of $38,000,000 in respect of the ligation with Avnet was paid to the husband’s solicitors who, after deducting their legal costs, gave the net sum of $37,400,000 “directly to the husband” 17 June 2015.

172.  Also from the agreed chronology, in the same years of 2010 and 2015 that Avnet made payments pursuant to the APA or the settlement agreement, the husband received dividends or repayment of loans from EEL to him in the total sum of $141,552,132 as follows:

(1)  Dividend of $105,000,000 received in 2010;

(2)  Dividend of $26,000,000 received in June 2015;

(3)  Repayment of loan of $10,552,132 in 2015.

173.  According to the husband, the need to make lump sum payment to the wife pursuant to the Consent Order had significantly drained up his finances. Further, after the making of the APA and his joining Avnet, EEL was literally not running any major business. Thus, it can safely be concluded that the dividends or repayment of loans from ELL as set out in the preceding paragraph was sourced from the Sum given by Avnet.

174.  According to his reply dated 11 December 2019 to the wife’s questionnaire (“Reply”), the husband claimed that the aforesaid dividend of $105,000,000 received in 2010 was used like this:

(1)  about $55,563,976 was used for repayment of debts owed by the husband to EEL;

(2)  about $7,462,456 was lent to EEL in 2011;

(3)  the balance (ie about $41,973,568) was used in his various business and investment, including CNY Accumulator (about $12,000,0000), Singapore school project (SGD2,000,000), USA properties ($2,730,000), “quickie cam” business for making digital signage ($1,050,000) and a golf club limited ($12,000,000).

175.  Hence, a total sum of $63,026,432 ($55,563,976 + $7,462,456) was claimed to be given back to EEL by way of repayment of loans or injection by the husband. The remaining $41,973,568 was kept by him for personal investment.

176.  This is to be contrasted with what he said in his 5^th affirmation. There, he claimed that he used the money received from Avnet to pay off the debts and liabilities of EEL and the E Group and injected some of the money into EEL, which can be seen from the audited account of EEL as at 31 December 2010 that:[31]

(1)  The bank borrowings as current liabilities were reduced by $36,951,330;

(2)  The accounts payable was reduced by $10,358,447;

(3)  The bank borrowings as long term liabilities were reduced by $19,307,382;

(4)  The cash in hand equivalents increased by $32,899,556.

177.  The above figures in the preceding paragraph show that about $99,516,715 was used to either pay off the debts/liabilities of EEL, or injected into EEL by the husband.

178.  There is an obvious inconsistency the Reply and his 5^th affirmation as to how much he had allegedly used to repay the loans of and/or inject into EEL. The discrepancy as to the amount is huge, which is in the region of over $36,000,000.

179.  On the other hand, the husband alleged that he had lost about $38,780,000 through investments in CNY Accumulator, Singapore school project, USA properties, quickie.com and OG Ltd. However, except the loss about OG Ltd (in the sum of about $10,000,000), the husband has not provided any other or sufficient documentary proof of such alleged huge loss of his investment.

180.  The composite effect of the above observation creates a serious doubt as to whether and if so how the husband had spent/kept the Sum over the years. The court is bound to find that he has not made a full and frank discourse of the current position or whereabouts of the Sum or any part of it. The court is thus entitled to draw adverse influence against him, to the extent that he has the financial means to satisfy any lump sum payment ordered by the court in this judgment.

Compensation on loss of chance to invest

(i)   The parties’ stance

181.  It is the wife’s case that she is entitled to compensation for the reason that had it not been the husband’s material non-disclosure,

(1)  she should have received a much greater award for ancillary relief at a much earlier time;

(2)  she would have invested the additional funds and has therefore been deprived of the fruits of such investments.

182.  According to her, had she received a much greater award earlier, she would have invested in landed properties in Hong Kong (namely a 2-bedroom flat at Lion Rise, a 3-bedroom flat in Celestial Heights and a 3-bedroom flat at Ocean One) and in Shenzhen, China (ie the Jianzitang Village) (甲子塘村). She would also have invested in insurances and bonds. The intended investments in landed properties, she claims, would have increased in value over the years and would have earned rental income. The total investments that she would have been able to earn but for the husband’s material non-disclosure was $26,192,557, including: [32]

(1)	Likely investment gains in Hong Kong properties	$19,761,700
(2)	Likely investment gains in PRC properties (RMB 4,898,168)	$5,730,857
(3)	Likely investment gains in insurance and bonds	$700,000
	TOTAL:	$26,192,557

183.  In his closing submission, Mr Khaw SC for the wife puts forward some other alternative ways of calculating her loss as follows:

(1)  By adopting a post-judgment rate of 8% for 11 years, ie $59,470,840, due to the husband’s appalling non-disclosure conduct throughout these proceedings. Senior counsel submits that a non-discloser should not be allowed a better outcome if he had complied with the duty of full and frank disclosure (See: Moher v Moher [2020] 2 WLR 89 at [86]-[91] therein);

(2)  By adopting the conventional rate of 1% above the prime rate of 5% for 11 years, ie $44,867,710, as the law should routinely presumes a claimant would not employ money without making a reasonable return, recovering at least for its depreciation but also some profit. That represents commercial reality and everyday experience (See: Equitas Ltd v Walshan Bros & Co Ltd [2013] EWHC 3264 (Comm) at [123] therein);

(3)  By adopting an interest rate fixed deposit of about 2% per annum, ie $6,758,050;

(4)  By adopting the approach in Goddard-Watts (supra), but taking into account the extent of non-disclosure and length of the delay, which are both more serious and extensive, the court should award the wife 10% of $67,600,000, ie $6,760,000.

184.  In response to the wife’s case and her submission, Mr Li SC for the husband pointed out that the overall evidence shows that the wife was a very conservative investor who purchased only insurance and bonds. She adopted extremely basic and unreliable valuation method to assess the growth in valuation of the relevant properties. She relied on rental information which was just for listings, but not the actual rental in concluded rental transactions. The only one investment which might be regarded as a riskier investment with greater growth potential was her investment in TTS shares, but it was at a loss so far.

185.  Mr Li SC thus concluded that the wife’s compensation claim is grossly inflated. But should the court find that part of the said sum of $135,161,00 should be shared with the husband, the court should adopt an additional sum of 3% of the amount awarded in line with Goddard-Watts v Goddard-Watts (supra).

(ii)  Discussion

186.  As a starting point, the wife does not impress me to be an active investor in property market during the marriage. According to her, during the about 20-year-marriage, only 8 properties were purchased by her, among which only 1 property, namely a carpark, was purchased in her sole name in 2006. The remaining 7 properties, inclusive of the former matrimonial home, were purchased in sole name of the husband, or joint names of the parties or through the family companies.

187.  Second, she claims that her investment habit can be best demonstrated in her 2 Form Es. [33] But in her 2009 Form E, the total assets under her sole name were worth about $2,600,000, among which she kept about $1,820,000 in cash. It is telling that her cash component amounted to 70% of her total assets in her sole name.

188.  Then, in her updated Form E made in 2019, her total assets were about $37,925,000, comprising, inter alias, of her own residence ($16,550,000 million), cash ($4,640,000) and insurances and bonds ($12,070,000). It is indisputable that the cash and insurances/bonds are conservative investment items which took up about 44% of her total assets.

189.  Third, she suggested that had she received the money of Avnet earlier, she could have had more resources to make more large-scale investment in landed properties. She deposed in her 8^th affirmation these,

“107. ... if I had received the HK67.6 million earlier, I verily believe that:- (1) I would have maintained about HK$5 million as reserved capital; and (2) I would have invested most of my money in the property market, with the remaining sum in insurances and bonds…”

190.  In my view, though she did not receive her half share of the Avnet’s money in 2010, it remains true that she received $30 million after the Consent Order in 2010, of which about $19.5 million was in cash (the remaining $10.5 million was the former matrimonial home). If she really had the habit of investing in the property market, this sum of $19.5 million in cash would have provided sufficient source for some investment in property market in 2010. Notably, merely on her own case, Lion Rise was worth $6.99 million; Celestial Heights $18.4 million and Ocean One $10.54 million only as at 2012-2013. She had more than sufficient cash, as at 2010, to buy any one of these properties for investment purpose. The accommodation need of her and the children was of no concern, as the husband was required to transfer the former matrimonial home to her. Yet, she chose to invest more and first in insurance and bonds in 2010,[34] which is in contradiction with her preference of investment set out in her affirmation mentioned in the preceding paragraph.

191.  Fourth, Mr Li SC argued on behalf of the husband that the wife did not and/or would not have invested in the property market in Hong Kong, solely because of the double stamp duty policy that has been put in place by the government since February 2013.[35]

192.  Mr Khaw SC replied that it was likely that the wife would have purchased the said 3 properties mentioned aforesaid within these 30 months and before the double stamp duty policy was imposed in February 2013. He pointed out that the wife told in her oral evidence that had she received the money earlier, she would have purchased these 3 properties by paying double stamp duty.

193.  Upon due consideration, I do not believe that the wife would have bought these 3 properties within the said 30 months as submitted by Mr Khaw SC, because she focused on handling her emotional issue after the divorce. She says at [119] of her 8^th affirmation that,

“After settlement of the divorce proceedings, I took some time to take a break and handled my emotional health as I was on the edge of a mental breakdown. I attended counselling service ad recovered gradually…”

194.  Further, I reiterate my aforesaid observation that she chose to invest first and more in insurance and bonds, rather than in property market, in 2010, which is very telling. I repeat that the cash received by her as at 2010 after the Consent Order was more than sufficient for her to buy at least any one of the 3 properties without the need to raise a mortgage.

195.  I do not believe that she would have purchased the 3 properties any way by paying double stamp duty, had she received the additional award in 2010. Should this be her real plan/stance, there is no discernible reason why she failed to mention it in her 8^th affirmation.

196.  Fifth, the wife claims that she had the opportunity to purchase 13 flats in Jiazitang Village, Shenzhen, in 2014 through the introduction of her business partner. However, she decided not to go ahead with the investment because there was only “one Premises Permit” for the whole building, ie they would not be a separate Premise Permit for each unit. She says that this would mean that the investors have less protection and would face difficulty in re-selling the units. But had she received the additional award earlier, she would be less picky and be more willing to take on the risk.

197.  I express my doubt to the above evidence. Not only because I hold the view that the wife is very conservative in her investment and is not a risk-taker, but I also opine that if she was really serious about this investment, it would not be the case that she was unable to give more particulars and details of the investment and/or the development in the cross-examination by Mr Li SC.

198.  Finally, I tend to agree with the submission of Mr Li SC that the wife’s valuation method in assessing the growth in value of the 3 properties is “extremely basic” and “unreliable”. She relies on online data on transactions located by herself to arrive at the value of the said 3 properties as at 2012/2013 and currently. No formal valuation expert report is available. It is unclear if the data obtained by her online is comparable data or not.

199.  As to the alleged rental income that would have been enjoyed by her, had she received the money earlier and purchased the 3 properties earlier, it is again not reliable to base on her evidence, because the rental information produced by her were just for listings only; it is not concluded rentals.

(iii)  My conclusion

200.  For all the matters aforesaid, I conclude that the fairness dictates that the wife should be awarded a further amount to “reflect the fact that the wife ought to have received that element of her award earlier” (See: Goddard-Watts v Goddard-Watts (supra)), in particularly it is the court’s earlier findings that there is intentionally material non-disclosure on the part of the husband as to the deal with Avnet.

201.  However, I am of the view that the wife is unable to prove that she has suffered loss of over $26 million, had she received the additional award in 2010. Given my finding that she is a very conservative investment and is not a risk-taker, I conclude that it is more likely than not that she would have placed the additional award in a fixed deposit account generating guaranteed income in interest. The approach in Goddard-Watts (supra) is not considered by me to be a suitable approach in view of the investment pattern and habit of the wife in the overall circumstances of this case. Further, it does not occur to me that Goddard-Watts is lying down any general principles.

202.  Mr Khaw SC submits that an average of 2% per annum should be adopted as the rate for fixed deposit. Mr Li SC has not made any objection to this rate of 2% per se in his reply submission, though it is a common sense that the interest rate in the last 10 years in Hong Kong remains at a low level. I thus accept that an average rate of 2% per annum should be broadly adopted. On the other hand, in all fairness to the husband, I should take into account that as a matter of fact, the money from Avnet was paid to him partly in 2010 and partly in 2015. Balancing all these matters, I shall hence make a broad brush award of $12,000,000 to compensate the wife for the loss in placing the additional award in a fixed deposit, had she received the money earlier as follows:

(1)	($77,000,000 + $20,761,000) ÷ 2 x 2% x 11 years	$10,753,710
(2)	$37,400,000 ÷ 2 x 2% x 6 years	$2,244,000
		$12,997,710 (rounded down to $12,000,000)

Disposition

203.  Due to the matters set out above, the husband shall share half of the Sum with the wife, rounded down to $67,500,000, and pay her an additional of $12,000,000 on a clean break basis. The total lump sum is thus $79,500,000. Bearing in mind the forthcoming public holidays which may affect his arrangement for fund to pay the wife, I shall give the husband 60 days to satisfy this judgment.

204.  The wife is the overall winner of this trial. I see no reason why she should not be awarded the costs since the date of her summons dated 6 April 2019 for seeking further ancillary relief.

205.  The following is my orders:

(1)  The husband (respondent) do within 60 days from the date hereof make a lump sum payment of $79,500,000 to the wife (petitioner);

(2)  Upon payment of the aforesaid sum, any other ancillary relief claims between the parties do stand dismissed;

(3)  The husband shall pay the wife costs of and incidental to her summons filed on 6 April 2019, including this trial and all costs reserved, to be taxed if not agreed. Certificates for 2 counsel are granted. This is a nisi order, which shall be made absolute within 14 days from the date hereof.

206.  Lastly, I wish to express my gratitude to the counsel for respective parties for their valuable assistance rendered to me in this trial.

[1] HCA 1259/2013 and HCA 2507/2013.

[2] The total settlement sum received by the husband/EEL in the Consolidated Action is $38 million which is net to $37,600,000 after deducting his legal costs of the Consolidated Action.

[3] DCCJ 1494/2014.

[4] FCMP 269/2014.

[5] HCA 1430/2017.

[6] The Set Aside Order records that it was made upon the undertaking of the parties that “they shall continue to abide by the undertakings that they gave to the Court vide the Consent Order of His Honour Judge Bruno Chan dated 14 June 2010, as varied vide the Consent Order of the same judge dated 22 September 2010, both in FCMC 2164/2009, as well as all acts carried out in pursuant to the said undertakings” and upon the agreement of the parties that the wife “be at liberty to make any further application for financial relief”.

[7] For example, the wife’s personal guarantees with Bank of East Asia, the ICBC Guarantee for EEL at [B7/1614].

[8] 5^th affirmation of the husband [CB(1B)/173-174/§23-24].

[9] Lee’s affirmation [CB(1B)/242-243/§6(1) and (2)].

[10] [CB2/309-310].

[11] Letter from the husband’s solicitors dated 4 December 2009 [CB4/776].

[12] [CB3/541-542/§9].

[13] Husband’s 5^th affirmation [CB(1B)/189/§61].

[14] [CB(1B)/193/§68(2)] and [CB(1B)/189/§61].

[15] The summons was taken out under FCMP 269/2014.

[16] [CB4/771-772].

[17] [CB4/775].

[18] [CB4/773-774].

[19] [CB4/777].

[20] [CB4/782-784].

[21] Consolidated Reply at §10.3 [B4/922].

[22] Day 4 of the trial (AM session).

[23] See Recital (M) of the Consent Order and the banking facilities letter issued by Shanghai Commercial Bank dated 3/11/2009.

[24] [CB(1B)/252-10/§26].

[25] [CB(1B)/252-12/§31].

[26] See §89 of the husband’s written closing submission.

[27] [CB(1B)/231/§141].

[28] A list of 9 companies owned wholly or partially by Madam D in Hong Kong and the PRC is set out at [CB(1A)/44-45/§13].

[29] [CB(1A)/109-110].

[30] See the annual return of D-Max for the year of 2017.

[31] Husband’s 5^th affirmation [CB(1B)/205-206/§83].

[32] A summary of the claimed investment loss can be found in Schedule II attached to the wife’s written closing submission.

[33] Wife’s 8^th affirmation [CB(1B)/148-149/§111].

[34] See a table of insurances taken out by the wife after the Consent Order [CB(1B)/149-150/§114].

[35] Wife’s 8^th affirmation [CB(1B)/154-155/§124].