LCSA v. AP

FCMC 2295/2014

[2019] HKFC 105

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO 2295 OF 2014

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J U D G M E N T

(ANCILLARY RELIEF)

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Index

Preliminaries

Background and salient facts of the case

The Wife’s case and her open proposal

The Husband’s case and his open proposal

The issues in dispute

The legal principles

Step 1: Ascertain the financial resources of the parties

(i)  How much of the Wife’s pension should be included

(ii)  Whether the Wife’s share of the inherited properties be included

(iii)  About MAL

-  Whether there is no full and frank disclosure

(iv)  Other matters

-  In relation to which bank balance be considered

-  In relation to whether the gain in selling the shares be included

-  In relation to the liabilities of the parties

(v)  Earning capacity

-  Earning capacity of the Wife

-  Earning capacity of the Husband

-  Conclusion of the value of the matrimonial assets

Step 2:  Financial needs of the parties and of the Children

-  Financial needs of the Wife and of the Children

-  Financial needs of the Husband

Step 3:  Whether this is a “needs based” case or sharing case

Step 4:  Whether departure from the equal sharing principle

-  Consider the s.7(1) factors

-  Consider conduct and all circumstances

Step 5:  Deciding the outcome

Observation

Costs

Orders

Preliminaries

1.  This is the ancillary relief trial between the Petitioner Wife (“Wife”) and the Respondent Husband (“Husband”). The Wife claims for ancillary relief for herself and the 2 children of the family (“Children”) after a failed Financial Dispute Resolution hearing.

2.  The trial had been fixed for 4 days.  Unfortunately, there was typhoon on the 1^st day and the trial commenced on the next day.  At the commencement of the trial, the Husband produced some new documents mainly about the education expenses of the Children.  With the consent by the Wife, the trial commenced, agreeing for those new documents to be produced. 

3.  The case could not finish within 3 days and was adjourned part-heard to December 2017.  At the part-heard hearing on 11 December 2017, the Husband produced further new documents, explaining that they were updated financial documents of the Husband and also produced an updated Table of Assets and Liabilities dated 8 December 2017 (details referred to paragraph 91 below).  Counsel for the Husband, Mr. Surman, explained that as the Husband was to continue giving evidence, he was under a duty to explain his updated financial situation (mainly about updated bank statements and his finance) and it was necessary to provide the documents for the Court’s consideration for ancillary relief matters.

4.  With Counsel for the Wife, Mr. Egerton, consented as to the producing of those documents, the trial continued.  However, the issue arose as to different cut off dates of the assets and liabilities of the parties, which was eventually agreed and resolved.

Background and salient facts of the case

5.  It is fair to describe this case as a high conflict case, especially in relation to the access issues of the Children. 

6.  At the commencement of the trial, the Wife is 55 years old.  She is a civil servant, earning a monthly salary of about HK$109,670 per month.  She was born in Hong Kong and pursued her university degree in the United Kingdom.

7.  The Husband is 54 years old at the commencement of the trial.  He was born in the United Kingdom and he graduated from a university in the United Kingdom.

8.  The parties met each other in 1982 while attending a university in the United Kingdom.  They were married in July 1988 in Hong Kong.  Two Children were born in the wedlock in 2000 and 2001 respectively.  At the commencement of the trial, the elder daughter is 17 years old and the younger daughter is 16 years old, both studying at an international school in Hong Kong.

9.  After the parties having completed their education at a university in the United Kingdom, the Wife returned to Hong Kong in 1985 to receive training provided by the Hong Kong government.  The Husband began his PhD studies in the United Kingdom.

10.  In September 1988, the Wife moved to the United Kingdom to live with the Husband, after she had completed her training with the Hong Kong government.

11.  In about January 1989, the Wife got a job as a geotechnical engineer, while the Husband got a job as a metal analyst.  In November 1989, they purchased a flat in Northampton in their joint names (“Northampton Flat”) and took out a 25-year endowment mortgage.

12.  In 1990, the Husband joined a mining company in the United Kingdom as a mineral exploration geologist.

13.  In September 1994, the Wife returned to Hong Kong to work as a geotechnical engineer with the Hong Kong government.  She has been employed by the Hong Kong government since then.

14.  In December 1994, the Husband resigned and relocated to Hong Kong.

15.  In January 1995, the Husband began working for a major Australian mining company based in Hong Kong exploring for minerals in China.  In March 1996, the Husband started part-time lectureship at the Department of Earth Science at the University of Hong Kong.  He also began working for a Hong Kong based engineering geology/drilling company on a part-time basis.

16.  In August 1996, the parties purchased a flat at Tower 23A (“T23A”) as their matrimonial home at the price of HK$3.95 million and took out a mortgage of HK$3.765 million.

17.  In March 1997, a limited company (“PL”) was incorporated by the Husband, which undertook consulting work mainly in China, IndoChina and Mongolia.

18.  In March 2000, the parties purchased another flat at Tower 18 (“T18”) at the price of HK$5.38 million, and it became their matrimonial home since then.  Parties paid HK$600,000 in cash and took out 2 separate loans, one with a mortgage of HK$3.166 million from a bank and the second one of HK$1.614 million from the Hong Kong government.

19.  In April 2000, the elder daughter was born and in May 2001, the younger daughter was born.

20.  In December 2001, the Northampton Flat was sold.  Proceeds were used towards family expenses and the endowment policy.  In November 2014, the endowment policy on the Northampton Flat matured and the proceeds of the endowment policy were subsequently divided between the parties in June 2015.

21.  In 2002 or 2003, the Husband carried out consultancy work for a Canadian company, looking for mining opportunities in Mongolia, and he was paid with shares of that company.

22.  In 2003 of 2004, the Husband established a mineral exploration company (“EAM”) registered in Hong Kong with partners from Canadian major mining company and began travelling extensively for his business, mostly to Mongolia.  In March 2005, EAM was listed on the Toronto Stock Exchange.

23.  In October 2004, the Wife and her siblings acquired the legal ownership of a property on Caine Road (“Caine Road Property”) and another property at Garfield (“Garfield Property”) from their father, with each holding 25% ownership.  

24.  In April 2005, the mortgage on T23A was fully paid off and it became mortgage free. The government loan on T18 was eventually paid off in July 2007.  Both T18 and T23A are now mortgage free.

25.  In November 2005, the Husband set up a limited company (AL), which is a company focusing on mineral exploration in Madagascar.  The Husband began regular travel to Madagascar after seed funding of HK$1 million from founding directors and also Hong Kong and UK friends, and family investors. 

26.  According to the Husband, in mid 2007, he raised the subject of relocating from Hong Kong to the United Kingdom, which the Wife had considered but did not commit.

27.  In July 2008, the Husband had an emotional breakdown whilst working in Madagascar, triggered by work load, work stress and global financial crisis impact preventing fund raising on AL.  

28.  In August 2008, a psychiatrist was consulted and the Husband was diagnosed with anxiety and depression.  His medical treatment began.  The Husband returned to work for AL as CEO in September 2008.  He stopped working again due to relapse of depression in January 2009.  He did not work until about July 2010.  Since 2008, the Husband has taken anti-depressant and sleep pills.  

29.  In October 2009, a property in the United Kingdom (“SP”) was purchased in parties’ joint names, which was fully funded by the sale proceeds generated from the sale of the Husband’s EAM shares.  According to the Husband, SP was bought with the intention to relocate the family to the United Kingdom.

30.  In November 2009, the Caine Road Property was sold.  After payment of HK$600,000 to the Wife’s father, the sale proceeds were divided between the Wife and her siblings and the Wife obtained HK$1,085,174.50.

31.  The Wife took 6 months off in 2010, from February to August, with no salary and no pension, to take care of the Husband during his relapse.   

32.  In July or September 2010, the Husband was asked to take over AL and resume the role of CEO.  He invested US$250,000 into AL to keep the company afloat, until a strategic Australian investor was found in March 2011.  The investor paid US$2 million for 25% in AL’s shareholdings, and assisted in the preparation for the listing of AL on the Australian Securities Exchange.  Eventually, in November 2011, AL is listed on the Australian Stock Exchange as AZK (“AZK”).

33.  In April 2012, the Husband resigned from AZK and stopped working again.

34.  In August 2012, a mutual friend of the parties was diagnosed with brain cancer following a stroke.  The Husband devoted his time to look after the mutual friend.  According to the Husband’s then understanding, the mutual friend was only expected to live for 3 to 4 months.  The Husband intended to become a principal carer, but the Wife objected because of financial impact to the family and time commitment involved.  It was not disputed that the Husband had raised funds for the treatment, operations and hospital costs of the mutual friend.

35.  On 13 February 2014, the mutual friend passed away.  The Husband was in grief.  The Husband was of the view that the Wife was indifferent towards the mutual friend’s death and was unsupportive to him, while the Wife said she understood the death of a mutual friend had caused much sadness to the Husband.

36.  It is the Husband’s case that in February 2014, the parties had arguments over the arrangement for the “Celebration of Life Ceremony” for the mutual friend, and the Wife had made comments which was the ultimate breaking point of the marriage according to the Husband.

37.  According to the Wife, in February 2014, there was abusive and violent behaviour by the Husband towards the Wife, the Children and the Wife’s family, such as bombarding the Wife with abusive messages, barricading the younger daughter in her room and threatening to beat her up, cutting the Wife’s clothes and chopping the younger daughter’s desk with a cleaver.

38.  The parties have separated since 28 February 2014.  The Wife and the Children remained living at T18, the former matrimonial home, while the Husband started living at T23A when he is in Hong Kong.

39.  The Wife petitioned for divorce on 28 February 2014 on the ground of unreasonable behavior of the Husband, together with an ex parte non-molestation injunction on the same day.  

40.  By the Consent Order dated 3 July 2014, the injunction has been extended until the grant of the Decree Absolute.  It was also ordered by consent that the Wife shall have custody, care and control of the Children. 

41.  Parties could not agree on the matter of access.  There were a total of 3 Children Dispute Resolution hearings on 3 September 2014, 9 December 2014 and 7 May 2014, which all failed.  There was a 3-day trial on access of the Children in April 2016.  After trial, it was ordered on 8 June 2016 that the Husband shall have access to the Children by e-mail through a dedicated e-mail.  Since about that time, there was no access at all between the Husband and the Children.  Background of the access issues can be referred to in Deputy District Judge A.N. Tse Ching’s Judgment dated 8 June 2016.

42.  From September 2014 to April 2015, the Husband engaged in part-time consultancy work for a limited company (“AME”) at HK$35,000 per month.

43.  In September 2014, a company was incorporated in the Seychelles (“CC”), of which the Husband is the sole shareholder and director of the company.

44.  According to the Husband, in October 2014, the bank account of PL, a company incorporated by the Husband in March 1997, was closed due to below balance funds.  It is the Husband’s case that the company had been dormant since 2008.

45.  Decree Nisi was pronounced on 19 January 2015. 

46.  In mid 2015, the Husband bought shares of AL from former AL employees who could not open share trading accounts and were unable to liquidate shares they had earned.  AZK and a company reached agreement on terms of the acquisition of that company.  AL completed its acquisition of that company, which was then renamed as BRN (“BRN”).

47.  In September 2015, the Husband started investing in a limited company (“MAL”) and provided consultancy services to MAL through his company CC.  From October 2015 to July 2016, the Husband had invested much money into MAL.  According to the Wife’s understanding, the Husband had invested around HK$4.8 million into MAL during this period and he had been earning HK$45,000 per month in management fees.  According to the Husband, he did make progressive investment into MAL. Regarding the management fees and expenses to be paid to him, they were accrued instead of being paid out because of a shortage of funds. 

48.  The Financial Dispute Resolution hearing was heard on 8 December 2015, which failed and the case was adjourned for trial hearing.  However, before trial was commenced, there were several pre-trial review hearings in which discovery and disclosure applications had been dealt with.   

49.  In June 2016, the Husband was appointed as a director of MAL.

50.  In September 2016, the Husband received CAD$130,000 as capital gain from his investment via MAL in late 2015 with the investment sum of CAD$30,000.  These funds were deposited into the Husband’s HSBC account in 2 tranches of CAD$67,500 each.  According to the Wife, the exact gain is unknown and whereabouts are not disclosed until by way of letter from the Husband’s solicitors dated 11 August 2017.    

51.  On 28 September 2016, the Wife requested the Husband to contribute to the maintenance of the Children by way of letter through parties’ solicitors.  The Husband replied to the Wife directly by e-mail and rejected the request.  There was no application for maintenance pending suit and therefore no such orders from the Court.

52.  In about January 2017, the Husband sold 2,700,000 BRN shares for AUD730,625.91 (before brokerage and fees were deducted).  A sum of AUD707,913 out of such proceeds was exchanged for the second tranche of SS shares.  The Husband had paid the majority of the second tranche (with the majority balance of funds for the first tranche of the SS shares provided by Mr. V, the one responsible for MAL).

53.  According to the Wife, in about early 2017, unknown to her, the Husband sold about 3,000,000 of his BRN shares, liquidating around HK$4.8 million, and he also sells UK shares, liquidating about HK$1.84 million.  The Husband then invested the HK$5.1 million into MAL.  To the Wife’s understanding, there was share swap between MAL and its parent company MAGL, and the Husband then became holder of 40% equity in MAGL through CC.  

54.  In April 2017, the Husband was notified that his mother, aged 90, was admitted to the Acute Medical Unit of a hospital in the United Kingdom suffering pneumonia and heart arythmia.  The Husband returned to the United Kingdom to see his mother in early May and the ancillary relief trial, which was originally scheduled to commence on 15 May 2017, was ordered by Judge Chan to be adjourned to August 2017, with costs thrown away by the adjournment be to the Wife.   

The Wife’s case and her open proposal

55.  At the commencement of the trial, the Wife’s open proposal were as follows :-

(a)  T18 be transferred to the Wife

(b)  The UK Property, SP, be transferred to the Husband

(c)  T23A be sold in the open market forthwith and with HK$5 million from the net sale proceeds to be set aside as a fund for the educational and maintenance expenses for the 2 Daughters, and the remaining balance be retained by the Husband.

(d)  Each party to retain all other assets in his or her sole name or held jointly with others.

(e)  Costs be paid by the Husband to the Wife.

56.  It was the Wife’s case that the total family assets are about HK$52.23 million of value (with detailed breakdown shown in the Wife’s Table dated 31 July 2017), comprising the following :-  

(a)  Joint assets of HK$29.81 million (comprising of the value of T18, T23A and SP)

(b)  Husband’s assets of HK$13.58 million

(c)  Wife’s assets of HK$8.82 million

57.  The Wife explains that HK$5 million is a reasonable sum for the education expenses and maintenance to the Children, considering that both of them shall study overseas in the United Kingdom, including all the costs of their education now and later in the United Kingdom until they finish their first Bachelor degree.  The Wife explains that there is the need to ring fence the HK$5 million in the interest of the Children, as there is no guarantee that the Husband will comply with court orders for maintenance for the Children.  In fact, the Husband has not contributed at all since the parties separated on 28 February 2014. 

58.  It is the Wife’s case that the sums totalling about HK$11,711,146.15 (being funds unilaterally invested into MAL by the Husband during these proceedings, unpaid management fees at the rate of HK$45,000 per month for 23 months and accrued but unpaid expenses reimbursements from MAL) should be added back to the matrimonial assets as the Husband has intentionally transferred assets to MAL in an attempt to prejudice the Wife’s claim for ancillary relief. 

59.  The Wife further submits that the amount of pension from the Hong Kong government should be calculated based on the cut-off date on 28 February 2014, the date of separation, making it about HK$1.9 million (but the Wife later agreed to take the sum of HK$3.6 million).  Regarding the sale proceeds of the Caine Road Property, it should not be added back in the matrimonial assets pot, as it has already been calculated and considered in the Wife’s finance as shown in the bank account balance. 

60.  Mr Egerton further submits that the Husband has much earning capacity.  Also considering the Husband’s contribution (or lack of contribution after the parties had separated) and his conduct in these proceedings, including the concealment or not having disclosed fully of the money invested into MAL, negative inference should be drawn against the Husband, which should be reflected either in the ancillary relief the Wife should obtain or in the order for costs.

61.  In the closing submissions, Mr Egerton had clarified that it was not the intention of the Wife to force sale of T23A, but the Wife asked for a sum of HK$5 million to be set aside, with both parties contributing half (ie. HK$2.5 million), and put into a designated bank account in the Wife’s sole name (“Children’s Fund Account”), which is to be used exclusively for the maintenance of the Children from September 2017 until each of them reaches the age of 18 or completes the first undergraduate degree, whichever is the later.  Upon the younger daughter finishing her first university degree, the balance of the Children’s Fund Account, if any, shall be shared equally by the Children.

62.  Besides, in the closing submissions, the Wife asks for :-

(a)  T18 to be transferred to her

(b)  The UK property, SP, be transferred to the Husband

(c)  Subject to the Husband’s payment of the HK$2.5 million as explained in paragraph 63 above, T23A be transferred to the Husband.  If the Husband fails to pay the said HK$2.5 million within 30 days, T23A shall be sold.  After deducting the costs of sale and having the sum of HK$5 million be deducted, the remaining balance shall be retained by the Husband.

(d)  A lump sum of HK$2,485,780 be paid by the Husband to the Wife, to reflect the 50/50 share of all the matrimonial assets.

The Husband’s case and his open proposal

63.  In the Husband’s Table of Assets and Liabilities dated 14 August 2017, the total matrimonial assets are HK$43,893,096.73.  It is the Husband’s open proposal before trial that :-

(a)  there should be a 50/50 division of the asset pot; and

(b)  that each party do contribute 50% towards each of the daughters’ reasonable educational and living expenses, up to and including the end of each daughter’s first undergraduate degree or until their 24^th birthday, whichever shall be the later in time.

64.  The Husband is a geologist by background and training.  He has been involved in the business of advice and professional services to mining operations for many years.  His area of experience in geology has involved project assessment of and at the pre-construction phase of the potential development of mineral extraction projects, studying and evaluation.  According to the Husband, this is always a high risk role.

65.  The Husband’s engagement or “employment” is via a company, CC, which he wholly owns.  He is of course not an employee at all, but rather in essence a self-employed service provider.  The Husband’s current monthly remuneration is HK$45,000, which is payable to CC.  This entire monthly sum of HK$45,000 is supposed to be paid by MAL.

66.  But the Husband explained that none of this HK$45,000 has been actually paid out by MAL.  It is accrued in the accounts of MAL and not actually paid out.  The reason is that MAL is in financial trouble and has no money and is valued at zero with the expert report.  The Husband further explained that both executive directors in MAL work under the same arrangement.

67.  It is the Husband’s stance that he has a weaker financial position compared to that of the Wife.  The Wife has a much greater degree of financial security, as she is a civil servant and she is entitled to pension when she retires in a few years’ time.

68.  It is the Husband’s case that despite the fact that he is in a much financially weaker situation, he is willing to share half of the Children’s reasonable educational expenses and reasonable living expenses, and therefore his proposal of 50/50 division of the matrimonial assets pot is reasonable.

69.  The Husband also submitted that with his medical problems, he could not be sure how much longer he will be able to continue working, at what level of engagement and whether he could succeed.

70.  During the trial, the Husband submitted that he wished to keep Tower T23A.  In the Husband’s evidence, he said in principle, he agreed to the sum of HK$5 million for the maintenance for the Children, which is to be shared equally with the Wife, as long as he is not required to sell T23A.  In the Husband’s evidence, he further explained that even if the mining industry is going downhill, he can sell some shares and provide funds for the Children’s education.

71.  At the resuming of the part-heard trial, in December 2017, the Husband had produced an updated Table of Assets and Liabilities dated 8 December 2017, with the total matrimonial assets being HK$47,472,548.79, and later another updated Table of Assets and Liabilities dated 15 December 2017, with the total matrimonial assets being HK$47,706,435.50 (which was later agreed to have missed out HK$4.955 million, and the amount was amended and agreed to be HK$52,661,435.50). In these 2 updated tables, the Husband had taken into account some of the money he had received from his investment and the amount of money he had invested in MAL. 

72.  The Table of Assets and Liabilities dated 15 December 2017 was agreed by the Wife (subject to some qualifications and adjustments which I will consider later in Step 1), in order to save the Court’s time and to serve as a starting point for the Court to consider the parties’ assets and liabilities in a manageable way. This will be further considered and analysed in paragraphs 92 to 97 below. 

73.  During the closing submissions, Mr. Surman produced yet another Table of Assets and Liabilities dated 15 February 2018, with the total matrimonial assets be reduced to HK$49,967,255.94, in essence, taking out the money invested into MAL and with the bank balance as at February 2018, which has been reduced with payment of various expenses.

74.  In the Closing submissions, the Husband repeated the same proposal as submitted before trial, ie. 50/50 division of the asset pot and that each party do contribute 50% towards each of the Daughters’ reasonable educational and living expenses, up to and including the end of each daughter’s first undergraduate degree or until their 24^th birthday, whichever shall be the later in time.

75.  However, at the same time, Mr. Surman asked the Court to consider, with the contributions to the Children’s educational / maintenance, instead of setting aside HK$5 million, there could be a variety of options open to the parties, including :-

“-  downsizing from the 4 bedroom fat of T18 that the Wife and the Children currently occupy;

-  the Wife realizing her equity in Garfield Property;

-  the Wife taking out a mortgage on T18 or Garfield Property;

-  the Wife keeping her pension but also funding the Children’s tertiary education.”

76.  Besides, Mr. Surman is also asking the Court to consider :-

“-  the value of T18 = value of T23 + SP

-  value of the Wife’s pension far outweighs the cost of overseas education”

77.  In relation to costs, the Husband asked for no order as to costs in relation to ancillary relief matters.

Issues in dispute

78.  In relation to the assets, parties have agreed to the following :-

(a)  Value of T18 at HK$14.68 million, free of mortgage

(b)  Value of T23A at HK$9.91 million, free of mortgage

(c)  The UK property, SP, is free of mortgage.  According to the single joint expert report, the value is GBP510,000 and parties had agreed the value of SP to be HK$5,195,000.

(d)  Value of the Garfield Property, at HK$3.4 million, which represents the Wife’s 25% shareholding of it

(e)  According to the single joint expert report, the value of MAL is zero.  

79.  The parties did not submit an agreed list of issues in dispute, but instead submitted the respective list of issues in dispute in their respective Opening Submissions.  Despite expressed in different wordings, in essence, they could be understood as referring to the more or less the same issues, summarised as follows :-

(a)  What is the size of the matrimonial assets pot, with sub-issues of :-

(i)  How much of the Wife’s pension should be included

(ii)  Whether the Wife’s share in the inherited properties should be included

(iii)  In relation to MAL, (1) whether or not the Husband’s investment in or via MAL should be included, and if yes, what is the amount to be included; and (2) whether the accrued but unpaid income and reimbursements due to the Husband from MAL should be included.

(b) In relation to the Children, :-

(i)  what are the reasonable needs of the Children

(ii)  whether the parties should share equally the maintenance of the Children, or whether the Wife should share a greater part

(iii)  how the maintenance of the Children is to be ordered, by way of periodical payment or to have a sum set aside and ring-fenced

(c)  Whether there should be departure from the equal sharing of matrimonial assets.

80.  The Wife had agreed to the Husband’s Table of Assets and Liabilities dated 15 December 2017, with the total matrimonial assets agreed at HK$52,661,435.50.  However, the Husband later submitted another Table of Assets and Liabilities dated 15 February 2018, with the total matrimonial assets at HK$49,967,255.94.

81.  I have always understood that the parties are asking for a clean break of the spousal ancillary relief claim between them and there should be 50/50 share of the matrimonial assets, until at the Closing Submissions, Mr. Surman submitted that in the event that the Court is of the view that the assets are not sufficient to cover the needs of the parties, the Husband should have a bigger share of the matrimonial assets.  Alternatively, there should be periodical payments to the Husband.

82.  In the parties’ Closing Submissions, they have raised more issues in dispute than stated in their written Opening Submissions.  For completeness, having considered parties’ evidence and submissions, I am of the view that the following are issues in dispute :-  

(a)  What is the size of the matrimonial assets pot, with sub-issues of :-

(i)  How much of the Wife’s pension with the Hong Kong Government should be included.

(ii)  Whether the Wife’s share in the inherited properties, namely the Caine Road Property and the Garfield Property, should be included.

(iii)  In relation to MAL, (1) whether or not the Husband’s investment in or via MAL should be included, and if yes, what is the amount to be included; (2) whether the accrued but unpaid income and reimbursements due to the Husband from MAL should be included; and (3) whether there is full and frank disclosure of the Husband.

(iv)  Other matters including (1) as at which date about the amount of bank balance for the Husband; (2) whether the gain in selling the BRN shares be included; (3) the liabilities of the parties.

(v)  What is the earning capacity of the parties.

(b)  In relation to the reasonable needs, :-

(i)  what are the reasonable needs and amount of maintenance of the Children

(ii)  whether the parties should share equally the maintenance of the Children, or whether the Wife should share all or a greater part

(iii)  how the maintenance of the Children is to be ordered, by way of periodical payment or secured periodical payment or to have a sum set aside and ring-fenced

(c)  Whether this case be regarded as a “needs based case” or should the sharing principle be applied.

(d)  If the sharing principle be applied, whether there should be departure from the equal sharing of matrimonial assets.

The legal principles

83.  The jurisdiction of the Court in granting financial provision for a party and for a child of the family is governed by sections 4 and 5 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (“MPPO”). Pursuant to sections 6 and 6A of MPPO, the Court also has the power to grant orders for transfer, settlement or sale of properties.

84.  In deciding on ancillary relief claims between the parties to the marriage, the court is required by section 7(1) of MPPO to have regard to the conduct of the parties and all the circumstances of the case including the following matters :-

(a)  the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;

(b)  the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

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

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

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

(f)   the contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring of the family;

(g)  in the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

85.  In the case of LKW v DD [2010] 13 HKCFAR 537, the Court of Final Appeal has provided out 4 principles as to how section 7 of MPPO shall be approached, which are stated as follows :- 

(a)  The first is that the implicit objective of a section 7 exercise is to arrive at a distribution of assets which is fair as between the parties.

(b)  The second is that the concept of fairness requires the refutation of any gender or role discrimination.

(c)  The third principle is that, with a view to eliminating insidious discrimination and promoting fairness, judges should check their tentative views of distribution against a “yardstick of equal division” which should be departed from only for god, articulated reasons.

(d)  The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the courts) resources and to increase antagonism and discourage settlement.

86.  The Court of Final Appeal has further laid down the following 5 steps as to how the Court should exercise the discretion when considering section 7 as follows :-

(a)  The first step in the exercise is to ascertain the financial resources of each of the parties calculated as at the date of the hearing.

(b)  The next step is for the court to assess the parties’ financial needs;

(c)  If surplus assets would remain after the parties’ needs have been catered for, the next step in the exercise should generally be for the court to apply the sharing principle to the parties’ total assets, leaving the “needs” question previously considered to be dealt with under that principle.

(d)  The fourth step therefore involves considering whether good reasons exist for departing from the principle of equal division.

(e)  When deciding the outcome, the court is not bound to depart from equality in the division of the parties’ assets even if one or more of the factors considered are engaged on the facts.  The weight to be given to such considerations is a matter of discretion for the court.

87.  If the total resources is insufficient to go beyond or even to meet both parties’ needs, there is no room for the application of the sharing principle.  As explained in paragraph 74 of LKW v DD, “where the assets are meagre, a ‘clean break’ may not be possible and it may be necessary to have recourse to an order for periodical payments”.

88.  The duty to full and frank disclosure is emphasised in paragraph 73 of LKW v DD :-

“The parties have an important duty to ensure that the court has sufficient information regarding their assets. They must make full and frank disclosure and a party who fails to do so runs the risk of the court drawing adverse inferences and robustly attributing assets to him or her, or making adverse costs orders.”

89.  In the submissions, both Mr. Egerton and Mr. Surman had cited different cases.  The legal principles are not in dispute.  It is the application of the legal principles that is disputed. 

Step 1: Ascertain the financial resources of the parties

90.  In this step, the Court has to consider the size of the matrimonial assets pot, which include the sub-issues as summaried in paragraph 82 above, and also to consider the financial earning capacity of the parties (ie. section 7(1)(a) of MPPO). 

The size of the matrimonial assets pot

91.  About the size of the matrimonial assets pot, Counsel for the parties had prepared tables of assets and liabilities, intended for the Court’s easier reference. However, there is no agreed table of assets and liabilities, and there were different tables of assets and liabilities submitted, as follows :-

	Table by	Date	Amount of net assets (HK$)
(a)	Wife	31 Jul 2017	52,230,564.65
(b)	Husband	14 Aug 2017	43,893,096.73
(c)	Husband	8 Dec 2017	47,472,548.79
(d)	Husband	15 Dec 2017	47,706,435.50
	(which was agreed to have missed out HK$4.955m, and the amount was amended and agreed to be : HK$52,661,435.50)
(e)	Husband	15 Feb 2018	49,967,225.94

92.  Fortunately, the Wife had agreed on the Husband’s Table dated 15 December 2017, with the amount of net assets being HK$52,661,435.50, save that the Wife submitted that some amounts have to be included, such as the amount the Husband invested into MAL, and all the accrued but unpaid management fees and reimbursement owed to the Husband, and money unaccounted for, which I will consider and rule below.  The Wife also pointed out that the total amount of net assets of the Table of the Husband she agreed to is not much different from that of her Table. 

93.  At the Closing submissions, Mr. Surman provided another Table dated 15 February 2018, and asked the Court to accept the figures in it.  Mr. Egerton strongly objected to the using of the Table, as it is with reduced number of assets of the Husband and increased liabilities of the Husband, resulting in the overall decrease in the net value of the matrimonial assets.

94.  As summarised in paragraph 91 above, parties were unable to agree on the table of assets and liabilities and different tables of assets and liabilities had been produced, which do not assist the Court, but only causing confusion and complication.  I have to point out, the reason why it was accepted that the Husband produced further documents at the adjourned part-heard trial in December and the Updated Table of Assets and Liabilities in December 2017, as explained in paragraph 3 above, was upon the request of the Husband to provide his updated financial situation when he gave evidence, so that it will be fair to both parties and for the Court’s consideration for ancillary relief matters.  Mr. Surman had specifically submitted that the Wife was not asked to update her financial situation up to December 2017, and they are prepared to accept the Wife’s update of financial situation up to August 2017.  

95.  Parties’ financial circumstances may be changing and there has to be a cut off point for the Court’s consideration.  It is unfair to allow Mr. Surman to rely on the Table dated 15 February 2018, submitted at the Closing Submissions, which in effect would be allowing evidence to be given at the bar table.  It is also unfair to allow the Husband to update his balance as at February 2018, which at trial agreeing that they are prepared to accept the Wife’s financial situation up to August 2017. 

96.  As pointed out earlier on, because of the background of the case, the Wife gave evidence in August, while the trial part-heard in December and the Husband’s evidence was given in December.  It was with this special circumstances that the Husband was allowed to update his financial situation, resulting in the Table dated 15 December 2017, which the Wife had largely agreed.     

97.  Therefore, to start with, I will use the Table of Assets and Liabilities of the Husband dated 15 December 2017, which was largely agreed by the Wife, as a “working document”.  A summary of that table is reproduced below, with the items in dispute which I shall rule highlighted in bold and in italics :-

Items	Value (HK$)		Joint value
	Wife	Husband	(HK$)
Properties
- T18	7,340,000	7,340,000	14,680,000
- T23A	4,955,000	4,955,000	9,910,000
- SP (in UK)	2,597,500	2,597,000	5,195,000
- Garfield Property	3,400,000		3,400,000
Sub-total			33,185,000
Bank accounts
- Sub-total for the Wife:	2,306,816.97
- HSBC current		21,089.39
- HSBC Premier		0
- HSBC Advance HKG		0.04
- HSBC Advance USD		0.31
- HSBC Advance CAD		2,153,201.48
- HSBC Advance AUD		0.24
- HSBC Advance GBP		0
- HSBC (UK)91xxxxxx		36,895.46
- HSBC (UK)77xxxxxx		0
- Nationwide Isle of Man(1)		353.26
- Nationwide Isle of Man(2)		531.02
- Nationwide UK		5,818.40
- HSBC HK 128xxxxxxxxx		1.51
- HSBC (Canada)		369.12
- HSBC HK599xxxxxxxxxx		20.15
- HSBC HKG CC		0
- DBS Vickers Cash		3,706.59
- Barclays Marketmaster		0
- Barclays Smart Investor		1,037.34
- OCBC Wing Hang USD		5,954.75
- OCBC Wing Hang AUD		0
- OCBC Wing Hang GBP		0
- OCBC Wing Hang CAD		0
- OCBC Wing Hang HKD		59,800
- NAB AUD		0
- Sub-total for the Husband:		2,288,743.05
Sub-total:			4,595,560.02
Companies
- CC		0
- Funds invested into   Sotkamo via MAL		0
- Funds invested into ASM Ltd (UK)		2,078,000
- PG Ltd		0
- Funds invested into MAL		4,816,960
- MAL (AUD)		139.09
- MAL (CAD)		34,263.19
- MAL (CNY)		0
- MAL (EUR)		0
- MAL (GBP)		0
- MAL HKD		131,722.27
- MAL (SEK)		0
- MAL (USD)		2,007.41
Sub-total:			7,063,091.96
Investments
- Sub-total for Wife	1,977,461.77
- DBS Vickers/EAM		48,442.57
- DBS Vickers/M&S		11,035.84
- Barclays Marketmaster ac		0
- Barclays SmartInvestor ac		39,358.05
- AL		0
- BRN (held with CHESS)		263,253.75
- BRN (held with Paterson)		0
- Volt Power Group		17,748
- Hang Seng Bank		56,970
- Sub-total for Husband		436,808.21	2,414,269.98
Insurance
- Sub-total:	145,085.53		145,085.53
Monies owed to parties
- Unpaid management fees from MAL Aug to Nov 2017		180,000
- Accrued, unpaid expenses,  reimbursements from MAL		0
- Costs on account with solicitors		587,693.70
Sub-total:			767,693.70
Chattels, personal items and others
- Jewellery	55,000
- Car Volvo XC 60		88,834.50
- Watch		7,500
Sub-total:			151,334.50
Pension
- HKSAR pension   (commute 50%)	3,605,724.18
- ReAssure Ltd	493,568.43
- ReAssure Ltd	83,564.80
- MPF Super Trust		217,383.81
- Reassure Wealth Plan		106,950.71
- Reassure Wealth Plan		29,422.92
- Principal MPF Scheme		59,737.62
- Rio Tinto		662,404.06
Sub-total:	4,182,857.41	1,075,899.12	5,258,756.53
Total gross assets:			53,580,792.22
Less: Liabilities
- outstanding legal fees	(38,071.50)
- counsel’s refreshers for AR	0
- other items added together	(86,238.78)
Sub-total for Wife :	(124,310.28)
- SP: roof leak repair (front/kitchen)		(22,338.50)
- SP: roof leak repair (rear) and electronics		(31,170)
- SP: bathroom repair		(28,572.50)
- SP: famham stoves		(34,920.79)
- SP: tank replacement		(24,312.60)
- required personal cash injection to MAL		(190,000)
- estimated cost of the part-heard trial		(430,000)
- Other items added together		(33,732.05)
Sub-total:	(124,310.28)	(795,046.44)	(919,356.72)
Total net assets:			52,661,435.50

98.  In this step, the court has to consider each of the sub-issues as summarised in paragraph 82 above in turn.

(i) How much of the Wife’s pension with the Hong Kong Government should be included

99.  There are several pension schemes of the Husband and the Wife.  The only pension scheme in dispute is the Wife’s pension with the Hong Kong Government.

100.  The Wife has started working for the Hong Kong Government since 1994.  When the Wife reaches the age of 60, ie. in year 2022, she shall retire and shall be entitled to pension from the Hong Kong Government. 

101.  It is the Wife’s evidence that at the time of retirement, she may choose to commute a certain percentage (with the maximum she could commute being 50%) of the pension into a lump sum pension gratuity, with the remaining part of the pension payable to her on a monthly basis until she passes away. 

102.  The Wife had demonstrated the calculation of pension receivable with supporting document, ie. the print-out of the calculation from the Civil Service Pension Calculator.  From the Wife’s explanation, if she commutes half of her pension at the time of retirement, it would be in the region of HK$3.6 million, and the monthly pension will be reduced to about HK$21,462 per month.  If the Wife chooses not to commute any part at all to be paid out in lump sum, the Wife shall receive about HK$40,000 per month.

103.  According to the Wife, she plans not to commute any at all.  The reason is that if she commutes 50% lump sum, she only gets about HK$21,462 per month, which is not sufficient to meet her monthly expenses and she would inevitably have to dip into her own savings to make ends meet.  If she opts not to commute anything at all, she shall receive about HK$40,000 per month, which is barely enough to meet her expenses. 

104.  The Wife further explains that the HK$3.6 million pension she expects to receive at the retirement age of 2022 in the form of maximum lump sum had already included a period of time of post-separation, which the Husband should not be entitled to.  If excluding the post-separation period, according to the Wife, the sum of pension to be taken into account should be about HK$1.9 million.  The Husband disagrees with the Wife’s position. 

105.  According to the Husband, the value of the pension should be valued as at the date of trial, but not the date of separation.  It is the Husband’s submissions that whether the Wife chooses to commute part of her pension upon retirement is a matter for her, but it is a benefit lost to the Husband. 

106.  According to Mr. Surman’s calculation, with the Wife’s calculation of HK$3.6 million having commuting 50% of the pension, by multiplying that by 2, the total pension to be considered should be HK$7.2 million (HK$3.6 million x 2). 

107.  Mr. Surman further submitted that the life expectancy for women in Hong Kong is now 87.3 years.  If retiring at 65, assuming the Wife commuted none of her pension and ignoring for the purposes of this calculation any increase in the pension (which would happen as Government pension are linked to cost of living indexes), the Wife would receive 22 years of pension at HK$42,000 per month that is a total of HK$11,088,000 (HK$42,000 x 12 months x 22 years).  As a result, as submitted by Mr. Surman, with HK$3.6 million included in the calculation, it only represents 50% of its true value.  The “true value being at least HK$7.2 million and arguably HK$11,088,000”.     

108.  I agree with the Husband that whether or not the Wife chooses to commute any part of her pension is her decision.  However, the Court has to consider the value of pension to be included as matrimonial assets in order to be fair to both parties.

109.  Having considered parties’ submissions and the background of the case, I rule that when considering the value of pension to be included as matrimonial assets, there should not be the distinction of pre- or post-separation, as this is a long marriage of more than 20 years.  In other words, when putting the sum of HK$3.6 million, or HK$7.2 million or HK$11.088 million into the calculation of matrimonial assets, a proportion should not be deducted to reflect the post-separation effort. 

110.  To ascertain the financial resources of the parties, the calculation should be as at the date of trial.  I have also reminded myself that with the divorce, section 7(1)(g) of MPPO regarding the hardship caused to the Husband with the lost of the benefit of the Wife’s pension will be relevant, and I will consider later in paragraph 195 below.  I will also consider the monthly pension the Wife shall receive will be the Wife’s future financial resources. 

111.  However, I disagree with Mr. Surman’s submissions that a total sum of HK$7.2 million or even HK$11.088 million should be included in the calculation of the matrimonial assets.

112.  It is not in dispute that if the Wife dies early after getting the 50% commuted (ie. about HK$3.6 million), the remaining 50% would not be given to the Wife or her estate.

113.  I accept the evidence of the Wife that the maximum amount she could commute at the time of retirement is only 50% of the pension.  I accept the submissions of Mr. Egerton that there is value to the remaining 50% of the pension, but it is not capital in nature, as the Wife cannot choose to take the 100% pension in the form of lump sum at the time of retirement.  In order to be fair to the parties, I am of the view that the entirety of the 50%, ie. HK$3,605,724.18 be included in the calculation of the matrimonial assets. 

(ii) Whether the Wife’s share in the inherited properties, namely the Caine Road Property and the Garfield Property, should be included

114.  With reference to paragraph 71 of LKW v DD, “at this stage, the court need not attempt to distinguish between matrimonial and non-matrimonial property, that being an exercise best undertaken (if necessary) when considering distribution of the assets”, which means the Wife’s share in the inherited properties should not be excluded at this stage.

115.  The background in relation to the Wife’s inherited properties is not in dispute and has not been challenged, which is explained in paragraphs 96 to 100 of the Wife’s 5^th Affidavit and is summarised as follows :-

(a)  The Wife’s parents owned 2 properties held in their joint names, namely the Caine Road Property and the Garfield Property.

(b)  After the Wife’s mother passed away in 2001, her father became the sole owner of the 2 properties.

(c)  In 2004, upon the request of the Wife’s father, the Wife and her siblings “bought” the 2 properties (without paying for the consideration at the time of purchase, but pay through the rental income generated from Garfield and the payment for the living expenses of the Wife’s father) at a purchase price of HK$1.8 million for the Caine Road Property and HK$3.3 million for the Garfield Property, with the Wife holding a 25% interest in each property. 

(d)  In 2009, the Caine Road Property was sold for HK$5.5 million.  After deducting HK$600,000 paid to the Wife’s father, the Wife received a sum of HK$1,085,174.50.

116.  It was not disputed that the Husband was aware of the sale of the Caine Road Property all along.  I accept the Wife’s explanation that over the years, the sale proceeds of the Caine Road Property had been absorbed into her savings and some have been used to support the family.  Therefore, the sale proceeds of HK$1,085,174.50 need not be added in the matrimonial assets pot again, as it is already reflected in the bank balance of the Wife.

117.  In relation to the Garfield Property, with reference to the valuation report, with the Wife holding 25%, I accept the value to be included in the matrimonial assets pot be HK$3,400,000.

(iii) About MAL

118.  About MAL, it is a Hong Kong registered limited company, with the registered office in Wan Chai.  MAL was established in 2007 by a Mr. V, the Husband’s Australian business partner.  Since September 2015, the Husband has started investing into MAL.  Pursuant to the Order of the Court, a single joint expert had been engaged to conduct the valuation report of MAL.  According to the expert report, the value assigned to MAL is zero. 

119.  The expert report is not challenged by the Wife.  What the Wife asks for is that the amount invested into MAL should be considered by the Court and be added back in the matrimonial assets pot.  Besides, the accrued but unpaid income and reimbursements due to the Husband from MAL should also be included.

120.  Further, the Wife is of the view that the Husband has not made full and frank disclosure, which the Court is entitled to draw adverse inference against the Husband. 

121.  It is the Husband’s case that all the project investments made by MAL are bona fide mineral exploration or mineral development companies in which MAL is a minority investor.  The Husband disagreed with the Wife’s allegation that the MAL investments were made as a means of blocking access to funds.

122.  The Husband explained that all the investments made by MAL were made after significant technical and commercial due diligence, but each project is struggling.  The balancing act attempted by MAL is that in industry downturns, whilst financing is harder, asset values are also depressed, giving MAL potential opportunity to participate in projects that in better times would be beyond its reach.  During cross-examination, the Husband explained and described the current status of each project as follows, which I quote from Mr. Surman’s Closing Submissions :-

“i) [SS]: a public company on the Nordic Growth Market in Finland – failed to secure full financing needed to proceed with planned development; financing efforts continue;

ii) [ASM]: a UK private company with which MAL negotiated a detailed Term Sheet for investment in a German mining re-start project – only succeeded in raising partial funds for Feasibility Study, with heavy conditions attached to investment, work is stalled and financing efforts continue;

iii) [MS]: a mining re-start opportunity in Australia owned by an Australian private equity fund – with drew a planned listing on the Australian securities Exchange (ASX) and continues to seek develop capital for restart;

iv) [AM]: a Canadian private company working on developing a low cost alluvial gold operation in Colombia – mining is stalled by the absence of a land owner agreement for the area of its mineral license.”

123.  In support of his case, the Husband produced an Exhibit R4 at trial (which consists of 6 pages of print out extracted from a report by Richard Schodde, whom the Husband described as “a well-known professional in the Canadian mining industry” and one other page about BRN shares) and explained that the mining industry has not been and is not doing very well. 

124.  Mr. Egerton acting for the Wife protested that Exhibit R4 was produced at such late stage, but eventually agreed to have the document produced as exhibit.  The Husband explained that he felt that the Court would not have an understanding of the mining industry and so he thought it helpful to explain what he does and the nature of the mining industry, which is not an industry in Hong Kong, so that the Court could be more familiar with it.  He further explained that the purpose of producing the 7 pages was to show the state of the mining industry.

125.  The Husband further explained, with reference to page 2 of Exhibit R4, that MAL does not have any skillset in North or South America, but they have people for Australia and Southeast Asia, and so the Husband has to stay in Hong Kong because MAL’s skills are in the region.  He claims that the physical office of MAL is in his home at T23A, where he and “his colleagues work”.

126.  However, I notice that it is the Husband’s evidence that most of MAL’s independent contractors are based in Australia.  There is also no evidence that MAL has any Hong Kong based colleagues or that such colleagues are working at T23A at the material times.

127.  During cross-examination, the Wife produced Exhibit P4, which is the complete and full report of the extracted pages produced by the Husband in Exhibit R4, which runs to 47 pages.  The Husband explained that he had picked only the pages that he thought were relevant.  He confirmed that he did not disclose any of the conclusions of the reports which state, in page 46 of the report, :-

“The long term outlook for exploration is positive. We are now at the bottom of the business circle and subject to an expected moderate improvement in commodity prices, global exploration expenditures are set to rise 60% over the next 4 years.”

128.  When the Husband was cross-examined of not having given the Court the full picture of the mining industry of the future and he was asked whether it would have been more helpful if he had provided the entirety of the report, including the conclusion, the Husband explained that “there is a gap in Richard Schodde’s expertise…… the truth is the financing environment has not improved, not to the extent of the projects that I’m involved in, those are the facts.”.

129.  I agree with Mr. Egerton’s submissions that the Husband had “cherry-picked” the pages from the report which were advantageous to him and deliberately left out the pages which were not.  Despite the Husband’s claim to be “helpful” to the Court by “explaining what he does and the nature of the mining industry”, it is apparent that the production of a few extracted pages, instead of the full report, is inconsistent to the practice and expectation of full and frank disclosure.  From reading the entirety of the report, I accept that the prospect of the industry and the Husband’s work is more positive than what the Husband had portrayed.

130.  In relation to MAL, the questions the Court has to consider are :- (1) whether or not the Husband’s investment in or via MAL should be included, and if yes, what is the amount to be included; and (2) whether the accrued but unpaid income and reimbursements due to the Husband from MAL should be included.  

131.  According to the expert report, the value of MAL is zero and therefore Mr. Surman submitted that no other value should be assigned to MAL.  However, it should be noted that the Wife does not seek to assign other value or to challenge the expert report.  What the Wife seeks is to have the amount of the Husband’s investment in MAL be added back as the matrimonial assets pot. 

132.  It should be noted that the Husband has not been in fixed salary employment throughout the years.  It is not disputed by the Wife that the Husband had been earning unstable income from investment in different business ventures.  If the Wife was to share in the Husband’s earning and profit in this pattern in the past, which she did, generally, the Husband should not be criticised if the business turns bad and loss is incurred.

133.  However, the Wife explained that there is a difference between the Husband’s investment in the past, which I accept, such as investing in EAM and AL, comparing to his investment in MAL.  The difference is that, with the Husband’s previous start-up companies, ie. EAM and AL, the Husband gave himself a lot of shares. He didn’t have to pay any investment sum as large as for MAL.  The Wife explained in her evidence that “because as a founder, I remember when they first started they assigned themselves with a number of shares.  Each founder got 2.3 m in shares.  Maybe they paid one dollar or one cent for it but the sum was so minimal that there was no significant impact.  We didn’t have to take money from our savings for that.”  Comparing to the investment in MAL, the Husband had cashed in more than HK$10 million, and put the money into one company, which had never been the case during the marriage.

134.  I can see the strength of the Wife’s argument.  According to the Wife, in addition to what the Husband had disclosed in his Table of Assets and Liabilities dated 15 December 2017 about the unpaid management fees due from MAL from August to November 2017 in the sum of HK$180,000, the Husband still has not include the following in the total sum of HK$1,519,548, which should be added back in the matrimonial assets pot :-

(a)  Accrued but unpaid management fees from September 2015 to March 2017 at HK$45,000 per month, in the total sum of HK$855,000.

(b)  Accrued but unpaid management fees from April 2017 to July 2017 at HK$45,000 per month, in the total sum of HK$180,000.

(c)  Accrued but unpaid expenses / reimbursement from MAL in the sum of HK$484,548.

135.  During cross-examination, Mr. Egerton put to the Husband a table, with the amount the Husband invested into MAL, marked as Exhibit P5, with the heading “Breakdown of H’s Investments into MAL”, which I reproduced below (except the page reference for each item) :-

Date	USD	AUD	GBP	CAD
12/10/2015	75,000
01/11/2015	75,000
Late 2015				30,000
24/12/2015	40,000
11/02/2016	50,000
09/03/2016		50,000
24/03/2016	50,000
08/04/2016	55,000
14/04/2016	82,000
15/04/2016	53,000
20.05/2016			28,000
22/06/2016			20,600
05/07/2016			14,000
Total	480,000	50,000	62,600	30,000
Exchange rate	7.8	5.9	9.6	5.9
Equivalent to HK$	3,744,000	295,000	600,960	177,000
Total sum to MAL between Oct 2015 to July 2016 = HK$4,816,960
	USD	AUD	GBP	HKD
08/02/2017		730,526.88
19/12/2016			49,999
20/12/2016			20,001
12/01/2017				433,256.35
Exchange rate	7.8	5.9	9.6	1
Equivalent to HK$		4,310,108.59	672,000	433,256.35
Total sum to MAL between Jan and Feb 2017 = HK$5,415,364.94

136.  It should be noted that each of the items was taken from the documents provided by the Husband, including his Form E dated 9 November 2015, Affidavit dated 2 November 2016, Answer to the Wife’s Questionnaire and the Husband’s updating disclosure dated 11 August 2017.  The page reference of each of the above items was included in Exhibit P5, which I do not trouble to repeat here.

137.  From the table, it could be seen that a total of HK$10,232,324 (HK$4,816,960 + HK$5,415,364) had been invested into MAL from end of 2015 to early 2017.  During cross-examination, the Husband had agreed that that is more or less the sums he had invested into MAL.

138.  It is alarming that such large investment (by different sums at different times) was made during the middle of the divorce proceedings.  What is more alarming is that, if the Husband is not making money or there is no prospect of making money with MAL, why such significant sums of money be invested into MAL. 

139.  The possible reasons could either be (a) the Husband has not been telling the whole truth about MAL and the Husband intends to dissipate the cash allegedly invested to avoid the Wife’s ancillary relief claim; or (b) if knowing that MAL is not making money or there is no prospect of making money or having reasonable return, but still genuinely investing huge amount of money, the act and decision of investing must be reckless and so reckless that amounts to being unreasonable and extravagant that the Court should draw inference and add back some amounts invested to the matrimonial assets pot.  

Whether there is full and frank disclosure of the Husband

140.  Mr. Egerton submitted that there was no full and frank disclosure, and very often, very late disclosure of the Husband about his finance and the amounts he has invested. In addition to what had been considered above, Mr. Egerton submitted that the lack of full and frank disclosure could be evidenced as follows:-   

(a)  With reference to the Husband’s 3^rd Form E dated 9 November 2015, he stated that he was unemployed and not a shareholder of any private companies but disclosed a 15% interest in MAL and he stated that he had no income and had been unemployed after April 2015.

(b)  By the time of his narrative affidavit of November 2015, the Husband stated that he “will own 40% of the MAL” parent company.

(c)  This 40% shareholding had increased to 99% by June 2017 but that was not disclosed until 18 August 2017, shortly before the trial began on 24 August 2017 and with no explanation for the delay in disclosure.

(d)  Importantly, it was the Wife who, through her own inquiries, identified the Husband as the Chief Executive Officer of MAL as disclosed in her narrative affidavit of September 2016.

(e)  The Husband had been asked questions in relation to MAL in the Wife’s questionnaire of 7 June 2016, but the Husband did not provide the Answers until 2 August 2017 when he produced a redacted document purportedly being a letter dated 28 July 2016 from Mr. V.

(f)  The Husband eventually produced an unredacted purported letter of 28 July 2016 from Mr. V, but without signature.

(g)  The Husband in cross-examination was invited to produce a signed unredacted copy of the letter of 28 July 2018 but he never produced any.

(h)  As shown in the unredacted letter, there were 5 accrued reimbursements of HK$312,404 in between September 2015 to June 2016.  There were also service fees payable to CC between September 2015 to July 2016 of HK$450,000.  It was submitted that part of this should have been but was not disclosed in the Husband’s 3^rd Form E of November 2015.

(i)  When being asked why he did not disclose the service fees in his 3^rd Form E, the Husband’s answer was that the service contract between himself and Mr. V was not signed until April 2016, and the contract had been “back-dated” to September 2015.   No evidence was provided to support the Husband’s version and the service contract was never disclosed.

(j)  The Husband produced further disclosure just before the 2^nd PTR on 27 March 2017, including a further purported letter from MAL / Mr. V dated 24 March 2017.  It was submitted that the purported letter is not on MAL’s company letter head and has no address, unlike the purported letter of 28 July 2016. It was also put to the Husband during cross-examination that the purported signature of Mr. V is very different in the 2 purported letters.

(k)  The letter of 24 March 2017 stated therein that further substantial injections into MAL of about HK$5.3 million between December 2016 and January 2017, ie. immediately after the 1^st PTR hearing on 10 November 2016.

(l)  It was submitted that without prior detailed disclosure or request for the Wife’s consent, the Husband had invested a further about HK$5.3 million which equates to approximately 10% of the family assets and effectively the sum which the Wife wishes to secure for the Children’s education and maintenance.  The Wife suggested that the Husband had caused a substantial amount of liquid cash to become unliquidated between the PTRs on 10 November 2016 and 27 March 2017.

(m)  It was also submitted that the Husband sold the Sotkamo shares in May and June 2017, but only disclosed such sale in August 2017, ie. 1 week before commencement of the trial.

141.  Having considered parties’ evidence and submissions, I have to say, the disclosure of the Husband is not satisfactory, in particular, there was no timely disclosure which he should have done.  With repeated last minute disclosure, not only is it unsatisfactory and possibly having incurred much more costs than the case should, it also puts the Wife in a position unable to verify the truthfulness of the information or documents disclosed.  I am of the view that there is no full and frank disclosure and the Court is entitled to draw adverse inference.

142.  However, it should be pointed out that, if without the Husband’s voluntary disclosure, the updated financial situation would not be disclosed.  For example, at the part-heard hearing, the Husband had voluntarily produced the updated Table of Assets and Liabilities dated 15 December 2017, which disclosed that :-

(a)  With the amount invested into Finland company Sotkamo via MAL in the sum of HK$5,422,361.82, “shares sold and funds returned in May-June 2017 to MAL in CAD (Disclosed CAD 1,064,704 Total) and then partly to AP HSBC Advance HKG in CAD)”;

(b)  The sum of HK$2,153,201.48 (as at 12 August 2017) was received, which was not disclosed in the earlier Table;

(c)  The funds invested into ASM Ltd (UK) in the sum of HK$2,078,000, which was not disclosed in the earlier Table, which the Husband explained that “MAL bought 2 million shares at GBP 0.1/share July 13, 2017.  Funds sourced from first tranche payment of Sotkamo Share sales (CAD 480,000) to MAL DBS on June 13, 2017”. 

(d)  The amount of HK$4,816,960, being “Funds invested into MAL”, which was not included in the earlier Table and the Husband explained that that is the amount “up to 30 June 2016 as per MAL’s letter dated 28.07.2016.  See exhibit LCSA6-4 of W’s 6^th Affidavit dated 08.11.2016”.  (It should be noted that in the later Table dated 15 February 2018, the Husband retracted his position and submitted that this amount should not be included)

(e)  The sum of HK$180,000, being “Unpaid management fees from MAL from August to November 2017, which was not disclosed in earlier Table, and the Husband explained that “For August, September, October and November 2017@HKD45,000 per month”.

143.  The question is, what inference is to be drawn.  I have ruled that there is no full and frank disclosure.  But I am of the view that it is not fair to simply include all the money the Husband had invested into MAL.  Although value of MAL is zero as per the expert report, there must be potential of MAL in future and that’s the reason why the H has invested that much, has increased his shareholding from 40% to 99% ad intends to inject further money into MAL. 

144.  I am of the view that it is fair is to include the value as per the Husband’s position shown in his Table of Assets and Liabilities submitted and dated 15 December 2017, including the sum of HK$2,078,000 and HK$4,816,960. 

145.  In order not to double count, the accrued but unpaid income and reimbursements due to the Husband from MAL in the total sum of about HK$1.5 million, as explained by the Wife in paragraph 134 above, will not be included. 

Other matters

146.  There are other matters to consider, including (1) as at which date the amount of bank balance of the Husband is to be taken; (2) whether the gain in selling the BRN shares be included; (3) the liabilities of the parties.   

147.  In relation to as at which date the bank balance of the Husband is to be considered, it is Mr. Surman’s submissions that the Husband no longer has HK$2,153,201.48 as stated in the Table dated 15 August 2017 being bank balance in his HSBC account, and asked the Court to consider accepting that he only has HK$1,103,859.33 as at February 2018, at the time of the closing submissions and explained that “As at 12.2.2018, THE ACTUAL SUM at Feb 12, 2108 is reduced to CAD 179,430.97 (HK$1.15M equivalent) after payment of Divorce AR Trial Legal Fee + Contributions to keep MAL trading + SP Maintenance costs + Personal Living Cost”.  Therefore, the sum of HK$2,153,201.48, being the Husband’s HSBC Advance CAD, is to be reduced and replaced by HK$1,103,859.33.

148.  As I analysed in paragraphs 93 to 95 above, I disagree with Mr. Surman’s submissions in this regard.  It is noted that the HK$2.15 million was as at 12 August 2017, which is at the time when the trial commenced.  Subsequent to the date of the commencement of the trial, both parties may have paid off some expenses, say legal fees, and the bank balance will not be the same as at the date of the commencement of the trial.  Allowing the Husband to use a figure that is as at February 2018 and allowing only the Husband to use a reduced figure, representing the expenses spent after trial had commenced, will be unfair in the circumstances.

149.  In relation to whether the profit in selling the BRN shares be included, Mr. Surman submits that the profit was obtained with the Husband’s sole effort post-separation and the Wife had no contribution at all and therefore it should not be included.  With respect, I cannot agree.  It is not in dispute that when the Husband sold and received profit of the BRN shares, it was post-separation. However, the source of the money that the Husband invested into the BRN shares in the first place was from matrimonial assets and therefore, the profits gained should be included.

150.  In relation to the liabilities of the parties, my understanding is that the items in dispute are whether the parties’ legal costs be included, whether the amounts spent on the SP be included and whether the money to be further invested into MAL be included.

151.  About legal costs, it is the Husband’s position that Wife’s outstanding legal fees in the sum of HK$38,071.50 be included, but the sum of HK$300,000 for counsel’s refreshers for AR trial not included, while his legal fees of HK$430,000 be included.  The Wife’s stance is that equal treatment should be applied to both parties, which I agree.  I am of the view that it is only fair that the legal costs of both parties be excluded under the head of liabilities.

152.  About the money spent on SP, the Wife does not accept the Husband’s alleged liabilities in his December assets Tables in the total sum of HK$141,314.39.  The Wife submits that these were incurred deliberately to increase the Husband’s liabilities for the December part-heard trial.  In any event, the improvements to SP will increase the value of SP, which the Husband is insistent that he shall keep and he will be directly benefiting from these renovations.  The Wife only accepts the repair costs of SP as set out in the Husband’s Table in August in the sum of HK$58,438.  I agree with the Wife’s stance. 

153.  About the “required personal cash injection to MAL”, the Wife disagrees that it should be included as the matrimonial liabilities.  The Wife pointed out that there is no evidence provided and in any event, the injection of cash into MAL will either be considered a loan from the Husband to MAL or an investment.  In either case, I agree with the Wife that it should not be deducted from the matrimonial assets pot.

(v) Earning capacity of the parties

Earning capacity of the Wife

154.  The Wife earns about HK$109,670 per month as a senior geotechnical engineer with the Hong Kong government.  The Wife also receives an education allowance of HK$96,552 per year which is paid directly to the school of the Children. 

155.  The Wife will reach her retirement age in 2022 as a civil servant, at the age of 60.  It is the Husband’s case that the Wife can seek further employment in the private sector as a consultant, advisor or senior engineer in the geotechnical industry, and therefore the Wife’s earning capacity far exceeds the Respondent’s.  With the evidence before me, I am of the view that as the Wife has been working in the government all these years since 1994, with only local experience, and there is hardly any local mining work, I disagree that she can secure a similar job in the private sector when she retires.

156.  When the Wife retires, she will receive the pension as future financial resources, which I have analysed above and I am not going to repeat.

Earning capacity of the Husband

157.  The Husband is a geologist by background and training, but has been involved in the business of advice and professional services to mining operations for many years.  His area of experience in geology has involved project assessment of at the pre-construction phase the potential development of mineral extraction projects, studying and evaluation. 

158.  The Husband’s engagement in work is via a company, CC, which he wholly owns.  He is self-employed. 

159.  The Husband’s current monthly remuneration is HK$45,000, which is payable to CC. The entire sum of HK$45,000 is supposed to be paid by MAL.

160.  Mr. Surman submitted the following in relation to the earning capacity of the Husband :-

(a)  The work he is doing is always a high risk role.

(b)  Although a sum of HK$45,000 is supposed to be paid by MAL, none of this HK$45,000 is actually paid out by MAL.  It is accrued in the accounts of MAL and not actually paid out, because MAL is in financial trouble and has no money. According to the expert report, MAL is valued at HK$0.  Both executive directors in MAL work under the same arrangement.

(c)  The Husband has medical problems and works intermittently on projects.  The reason behind this part time work arrangement is because of his medical condition.

(d)  The Husband suffers from depression and takes daily anti-depressant medication.  He works on an intermittent basis to avoid “overload” and to avoid another medical collapse and avoiding avoidable stress that triggers the illness.

(e)  With the Husband’s health, which is fragile but stable with his daily medication, it is difficult to determine with any degree of precision how much longer he will be able to continue working and at what level of engagement and with what remuneration.     

161.  The Wife disagrees that the earning capacity is as low as submitted by Mr. Surman. It is submitted by Mr. Egerton that :-

(a)  The Husband is a highly talented businessman and a professional geologist in the mining sector, with his many years’ of experience in different locations of the world.  It is necessary for the Court to consider his well-established skills in investment and recognised ability to earn as much as he has done in the past years.

(b)  According to the Husband’s latest disclosure, he has now assumed full practical responsibility for MAL after the death of his business partner’s wife.  This was only made known to the Wife on 11 August 2017, less than 2 weeks before the trial.

(c)  The Husband alleges that he works part-time for MAL as a director and CEO via his 100% owned company CC.  Apart from the monthly management fees of HK$45,000, the Husband now owns 99.99% of the shares of MAL via CC.  Prior to 19 July 2017, the Husband only held 40% share on MAL.  Shortly before the trial in August 2017, the Husband disclosed that he “formally acquired” 99.99% of MAL via CC.  Obviously, the Husband’s involvement in MAL is substantial, more than just part-time.

162.  In relation to the Husband’s earning capacity, I have the following views :-

(a)  I accept that the Husband’s work is much more risky than the stable work of the Wife.

(b)  The Husband is a professional geologist in the mining industry, with vast experience, which can be shown in the chronology above.

(c)  The Husband’s medical history is not in dispute, which is stated in the chronology above.  He had depression, had relapse in the past and now on regular medication.  I accept that the Husband’s work and earning capacity may be affected by his medical condition, but I do not have any medical evidence as to how exactly his condition affects his work.   With the evidence before me, the work the Husband has engaged in all these years can be shown in the chronology. 

(d)  The earning capacity of the Husband should not be limited to the sum of HK$45,000 per month management fees he is entitled to get from MAL.  In the past years, the Husband has been making investments and investing in shares, which forms his income.  Although with no stable income, my understanding of the Husband’s evidence is that he is able to make contribution to the family financially not only in the general way by paying expenses, but also in important ways.  For example, it is the Husband’s case that:-

(i)  he had made some sums of repayments for T23A from 1997 to 1999, but the documents are in the Wife’s possession;

(ii)  the mortgage of T23A could not have been repaid in April 2005 without his lump sum payments;

(iii)  in July 2007, the mortgage of T18 could not have been repaid at that time without the lump sum payment from the Husband and the relevant financial records are remained in the Wife’s possession;

(iv)  in 2009, when the UK property, SP, was purchased, it was fully funded by the sale proceeds generated from the sale of the Husband’s EAM shares.

(e)  It is the Husband’s own evidence that his involvement in MAL has greatly increased from holding only 40% to 99.99 %.

(f)  With the Husband agreeing that he has invested about HK$10 million into MAL from end of 2015 to early 2017, and his increasing involvement in MAL, I am convinced that the Husband has earning capacity and he must be confident of his own ability to work in the foreseeable future.

163.  I am of the view that both the Husband and Wife have similar but different earning capacity.  With the Wife having a pension, her financial resources in future after retirement is secured.  In relation to the Husband, with the reasons aforesaid and considering all the evidence as a whole, including the risk factor in his work and his health condition, I am of the view that he has earning capacity sufficient to support his living in the foreseeable future. 

The matrimonial assets pot

164.  Therefore, my ruling of the matrimonial assets pot is summarised as follows :-

Items	Value (HK$)
Properties
- T18	14,680,000
- T23A	9,910,000
- SP (in UK)	5,195,000
- Garfield Property	3,400,000
Sub-total:	33,185,000
Bank accounts
- Sub-total for the Wife:	2,306,816.97
- Sub-total for the Husband:	2,288,743.05
Sub-total:	4,595,560.02
Companies
- H’s companies	7,063,091.96
Sub-total:	7,063,091.96
Investments
- Sub-total for Wife	1,977,461.77
- Sub-total for Husband	436,808.21
Sub-total:	2,414,269.98
Insurance
- Wife’s insurance	145,085.53
	145,085.53
Money owed to parties
- to Husband	587,693.70
Sub-total:	587,693.70
Chattels, personal items and others
- Jewellery of the Wife	55,000
- Car Volvo of the Husband	88,834.50
- Watch of the Husband	7,500
Sub-total:	151,334.50
Pension
- sub-total of the Wife	4,182,857.41
- sub-total of the Husband	1,075,899.12
Sub-total:	5,258,756.53
Total gross assets:	53,400,792.22
Less: Liabilities
- sub-total of the Wife	(86,238.78)
- sub-total of the Husband($33,732.05 + $58,436.40)	(92,168.45)
Sub-total:	(178,407.23)
Total net assets:	53,222,384.99

Step 2: Financial needs of the parties and of the children

Financial needs of the Wife and of the Children

165.  The Wife and the Children have been living in the matrimonial home, ie. T18, since the Children’s birth.  The monthly expenses of the Wife and the Children had been included in the Wife’s Form E, in the monthly sum of HK$117,860 (including general expenses of HK$25,610, personal expenses of HK$35,100 and Children expenses of HK$57,150).

166.  It is not the monthly expense of the Wife and the Children that was challenged.  The Husband disputed the HK$ 5 million to be ring fenced for the Children as suggested by the Wife.

167.  According to the Wife, there is the financial need of HK$5 million for the Children until they finish their first degree.  The Wife explains that the Children are now studying in a prestigious international school in Hong Kong and both of them are doing well.  The Children shall finish secondary education in mid 2018 and 2019 respectively.  Both the Children aspire to further their study in the United Kingdom for tertiary education. 

168.  In the Wife’s evidence, she had explained about the calculation of the HK$5 million, including the costs of the 3-year study in UK and the expenses before going to UK.  With reference to the expenses in the Wife’s Form E, before going to UK, the elder daughter’s expenses from September 2017 to August 2018 is about HK$445,340, while that of the younger daughter from September 2017 to August 2019 is about HK$890,670. There are the additional costs for the younger daughter’s sailing expense, in the sum of about HK$136,800.

169.  In relation to the expenses in the United Kingdom, initially, the Wife explained the calculation based on 4-year of university degree in the United Kingdom, which was greatly challenged by the Husband.  Subsequently, the Wife agreed to adjust her calculation based on a 3-year course in United Kingdom for both Children.

170.  The Wife explained and compared different universities in UK which the Children intend to pursue.  Mr. Egerton had summaried the evidence by way of a table attached to his Closing submissions.  For the elder daughter, the total costs of the 3-year degree range from HK$1,416,000 to HK$1,606,000.  For the younger daughter, the total costs of the 3-year degree range from HK$1,445,000 to HK$1,791,000.  These calculation of costs include tuition fee, accommodation, travelling to and from Hong Kong, transportation, food, heating, utilities, leisure and personal items, books / equipment, toiletries and laundry, entertainment, insurance mobile, TV licence, internet etc.

171.  The Wife further explained that if the younger daughter shall study medicine at Oxford University, it will cost about HK$3,507,000.  In that case, the total expenses needed will far exceed HK$5 million, and she is willing to make up the short fall.

172.  My understanding is that the Husband had different views, especially at the beginning, which are summarised below :-

(a)  The Wife is exaggerating the expenses for the Children, especially by taking into account the Children need a 4-year, instead of a 3-year, degree in the United Kingdom.

(b)  The Husband is of the view that the Children could and should do part-time job to earn their living, or at least pay some parts of their expenses, while studying university at the same time, and therefore the amounts needed could be reduced.

(c)  If the younger daughter is going to study medicine, she should choose to study in Hong Kong, instead of in the United Kingdom, so as to avoid conversion courses and potential visa and employment issues after qualifying. 

(d)  Both Children could choose to study in Hong Kong, instead of in the United Kingdom. If the Children study in Hong Kong, the Husband can afford to pay half of the maintenance.  If they choose to study in the United Kingdom, it may not be affordable.     

173.  But eventually, towards the end of the Husband’s evidence, he agreed that he could live with the figure of HK$5 million, on the basis that he shall get T23A and there is no forced sale of T23A.  

174.  My understanding of the Husband’s evidence is that he agrees that the Children are bright and academically capable and he is willing to contribute to their maintenance.  He accepts that the Children aspire to study in UK and it is very likely that they will get admitted to a university in the UK.  With the background of the Children, they are not qualified as local students, and will have to be admitted as overseas students in the universities in the United Kingdom. 

175.  At the Closing Submissions, Mr. Surman submitted the following :-

(a)  As the courses and institutions of the Children are not fixed yet, costs are only estimation and maybe inflated. 

(b)  Payments should be made against know, real fee costs when offers have been made and accepted.   

(c)  A lump sum payment would in effect allow the Wife to avoid making any payments until after an excessive “educational up front sum” is exhausted.

(d)  Payment should be made on a monthly basis, with expenditure accounted for. 

(e)  The Children should take responsibility for some of their personal and social expenses by taking part-time or holiday jobs.

176.  I am of the view that the Court has to make a ruling at this stage about the reasonable needs and amount of maintenance of the Children.  Given the background of the parties, it is not practical at all to wait until actual payment has incurred and then with expenditure be accounted for, and then requesting the Husband to pay for his part. 

177.  I accept that the Children are bright academically and both of them aspire to further their studies in the United Kingdom.  I also accept that they are very likely to be accepted by a university in the United Kingdom.

178.  Having considered the parties’ submissions and based on the evidence before me, especially in view of the Husband’s evidence, I am of the view that the estimation of HK$5 million being the total expenses for the 2 Children, including before and after going to the United Kingdom until they finish the first degree, is a reasonable sum of maintenance. 

179.  In relation to how that reasonable sum is to be ordered to be paid, I will consider that in Step 5 (about deciding the outcome) below.     

Needs of the Husband

180.  The monthly expenses of the Husband are stated in his Form E.  As the Husband is staying in both the United Kingdom and in Hong Kong, he had included his expenses spent in both the United Kingdom and in Hong Kong.  His total monthly expenses are HK$43,750, including household expenses of GBP970 and HK$8,000, and personal expenses of GBP1,350 and HK$8,000.

181.  The Husband’s financial needs had not been much challenged.  The only issue the Wife has raised concern is the Husband’s allegation of the need to keep both T23A and SP.  According to the Husband, he needs to work in T23A, which was disagreed by the Wife.  The challenge by the Wife, as submitted by Mr. Egerton, is summarised below :-

(a)  T23A is a residential property and therefore the Husband is not permitted to purportedly use it as his office with employees present.  To do so will be in breach of the Deed of Mutual Covenant.

(b)  The Husband was asked in questionnaires as long ago as in July 2016 of how much time he was spending in the United Kingdom.  He refused to provide a full run of his credit card statements which would have shown where he has been incurring the majority of his living expenses.  When the Husband finally provided credit card statements from 2014 to 2015 (but not the full run of all credit cards), the statements revealed substantial spending in the United Kingdom and limited spending in Hong Kong.

(c)  From the Husband’s immigration records, which were provided on 17 January 2018, it is apparent that he has spent the majority of his time outside Hong Kong since the beginning of 2016, ie. the time when he began to be more involved in MAL. Mr. Egerton had provided an analysis of the immigration records, and with a table annexed to his Closing Submissions as Annex D.  In gist, the number of days the Husband was in Hong Kong is as follows :-

(i)  Feb 2014 to Dec 2014, 177 days

(ii)  in 2015, 234 days

(iii)  in 2016, 89 days

(iv)  In 2017, up to the date of the December part-heard trial, 88 days. 

182.  From the evidence, I agree that there is the accommodation needs of the Husband, but I agree with Mr. Egerton’s submissions and I have reservation as to whether the Husband needs both a home in Hong Kong at T23A and to work with his employees therein, and also a home in the United Kingdom.

Step 3: Whether this case be regarded as a “needs based” case or should the sharing principle be applied

183.  Having analysed and ruled above about the total assets of the family, and the financial resources and earning capacity of the parties on one hand, and the needs of the parties, including the needs of the Children, on the other hand, with all the evidence before me, I am of the view that there shall be surplus assets after the parties’ needs and the Children’s needs have been catered for.  I accept that this is not a “needs based” case, and the sharing principle should be applied. 

184.  Therefore, I will move on to the next 2 steps to consider whether there should be departure from the equal sharing principle and the outcome of this case. 

Step 4: whether there should be departure from the equal sharing principle

185.  In this step, I have to consider whether there are good reasons for departing from equal division of the matrimonial assets.  I refer to paragraphs 83 to 85 of LKW v DD, as follows :-

“83.  The fourth step therefore involves considering whether good reasons exist for departing from the principle of equal division. Any such departure means increasing or reducing one party’s share and correspondingly reducing or increasing the share of the other. The question for the court is whether the balance ought to be shifted from a point of equality to some other point in the circumstances of the case. This is necessarily a complex question which raises a range of separate issues.

84.  What then are potentially good reasons for such a departure? The answer is to be found in the terms of section 7 and the implicit objective of a fair distribution of the assets. Any of the matters listed in paragraphs (a) to (g) of section 7(1) may provide an appropriate reason, as may the “conduct of the parties” and “all the circumstances” referred to in section 7(1). The catch-all category of “all the circumstances” makes relevant any matter which bears on the fairness of the financial outcome in a matrimonial context.

85.  It is important to stress that while such factors, individually or cumulatively, are potentially capable of resulting in a departure from an equal division, a finding that one or more of those factors are engaged does not necessarily mean that a departure must occur.  The weight to be given to such factors is in the court’s discretion to be exercised in Step 5 as described in Section E.6 below.  It cannot be over-emphasised that the matter is fact-specific and discretionary.  The sharing principle must not be mechanistically applied.”

186.  I will now consider each of the section 7 factors of MPPO and to consider if there are any reasons to depart from the equal sharing principle. I have considered s.7(1)(a) in Step 1 above, which I will not repeat here.  I’ll now go through (b), (c), (d), (e), (f) and (g) in turn.

7(1)(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future

187.  The financial needs have been considered under Step 2 above.  For other obligations and responsibilities, the Wife and the Husband may have to take care of their respective aged father and mother.

188.  In addition, as the Wife has the custody, care and control of the Children, she has agreed in the event that there is insufficient maintenance from the Husband, she will make up the short fall.  In fact, it has been the Wife who has single-handedly supporting the household and Children expenses since at least when the parties separated.  

7(1)(c) the standard of living enjoyed by the family before the breakdown of the marriage

189.  It is not in dispute that the family have enjoyed a comfortable standard of living before the breakdown of the marriage.  Details had been given in their respective Form E, which I have considered.  Itis not in dispute and will not be repeated here.

7(1)(d) the age and duration of the marriage

190.  At the commencement of the trial, the Wife and the Husband was 55 and 54 years old respectively.  They were married in 1988 and separated in 2014.  This is a long marriage of more than 20 years, with 2 Children born in the wedlock.

7(1)(e) any physical or mental disability of either of the parties to the marriage

191.  The medical condition of the Husband had been stated in the chronology and repeated when considering the earning capacity of the Husband.  His condition, which is not in dispute, has been considered by the Court.

7(1)(f) the contributions made by each of the parties to the welfare of the family

192.  Both parties worked and had income.  It is the Wife’s case that she has been paying the expenses of the family regularly.  It is not in dispute about the work nature of the Husband all these years, which is unstable in nature.  But according to the Husband, he was able to pay off sums of the expenses and mortgage from time to time.  The Wife also agrees that was the pattern during marriage, so that she could give the Husband more breathing space to focus on his work, free from worry of paying family monthly expenses. 

193.  I am of the view that both had contributed to the welfare of the family during the marriage.

194.  It is the wife’s case that the Husband had not financially contributed at all to the family after the parties had separated, which is not in dispute.

7(1)(g) the value to either of the parties to the marriage of any benefit which, by reason of the dissolution that party will lose the chance of acquiring

195.  The Wife is entitled to a pension when she retires.  After the divorce, the Husband will lose the benefit.  I recognise that may be loss of benefit of the Wife’s pension, if the Wife dies early and her estate could be entitled to a maximum of 50% of the pension, ie. HK$3.6 million.  But it should be noted that the value of the pension had been included in the calculation of the matrimonial assets.

The Wife’s inherited properties

196.  In relation to the Wife’s inherited properties, ie. the cash received from the selling of the Caine Road Property and Garfield Property, they are non-matrimonial in nature.  However, there is no hard and fast rule of whether these inherited properties should be excluded.  An important factor which comes to play is the duration of marriage.  The importance of the source of the assets will diminish over time.

197.  In view of the long marriage of the parties, the year such properties were inherited and the circumstances of the case, I rule that the value of the Wife’s inherited properties should be considered in the matrimonial assets pot.  Referring to paragraphs 115 to 117 above, in relation to the sale proceeds of the Caine Road Property, I accept that it has been reflected in the Wife’s bank balance already. In relation to the Garfield Property, I rule that the Wife’s share of value of HK$3.4 million should be included.   

Conduct of the parties and all the circumstances

198.  About conduct, it is the Wife's allegation that the Husband had mixed up matters of access with ancillary relief matters, and also with late disclosure and his conduct during the proceedings, much unnecessary costs had been incurred.  It is the Wife’s case that with the conduct of the Husband, including the way he refuses to try to settle the case reasonably, leading to huge amounts of costs spent.  E-mails had been shown in support of the parties’ stance.  Besides, it is the Wife’s case that by the Husband’s conduct in terms of not participating in the Children’s lives and not supporting them, the Wife is left with the responsibility of their upbringing and education, making a “ring-fenced” education fund necessary as the parties cannot work together.

199.  The Husband disagreed and explained that it was because of the Wife insisting on selling T23A that parties could not reach any agreement as to ancillary relief matters, which had led to the ancillary relief trial. 

200.  The Husband also alleged that it was the Wife who had initiated the divorce proceedings in a way which is damaging to the parties and to the Children.  

201.  It should be pointed out that there is no evidence that the Wife had hindered access.  After the trial on access, it was ordered by Deputy District Judge A.N. Tse Ching that the Husband shall have access of the Children by e-mail through a dedicated e-mail account.  If the Husband chooses not to contact the Children in the way allowed, the Wife is not to be blamed in that regard.

202.  I remind myself of the legal principles as stated in paragraphs 99 to 100 of LKW v DD :-

“99. Section 7(1) makes it the court’s duty to have regard to the conduct of the parties in exercising its discretionary jurisdiction. It is therefore in principle a factor which may, alone or in combination with others, result in a departure from an equal division.

100. However, the courts have recoiled from permitting the parties to indulge in a post mortem of their marriage in order to find fault with each other or to air “their mutual recriminations and go into their petty squabbles for days on end”. As Sir George Baker P stated in Campbell v Campbell, “...everything should be done by the court to avoid costly, indecent and time-wasting investigations” regarding conduct in relation to ancillary relief proceedings. Otherwise the court will be faced with “... a lengthy, costly and, most likely, profitless investigation stretching over days, when allegations and counter-allegations are made by the ex-spouses or spouses, one against the other.” These sentiments are just as pertinent today and are reflected in the fourth underpinning principle referred to above.”

203.  It is trite that “conduct” was only relevant to financial provision if it was “... both ‘obvious and gross’ so much so that to order one party to support another whose conduct falls into this category is repugnant to anyone's sense of justice.”

204.  There are numerous other allegations about conduct of the parties, with reference to e-mails and correspondence, which had been cross-examined and submitted by the respective counsel.  I am not going to repeat here.  The Court is not to conduct minute investigation as to the failure of the marriage.  In relation to the allegations of conduct, having considered the parties’ submissions, evidence and the circumstances of the case, I am of the view that there is no such conduct so obvious and gross in nature that should deviate from the equal sharing principle.

205.  However, there is one factual background that I have to consider, which may have some bearing on the outcome.  It is sad that there has been no access of the Children for a long time, since about the start of the divorce proceedings. But at the same time, it is not in dispute that since about the parties had separated in February 2014, the Husband had not contributed financially to the family or the Children.  The Wife had been the one solely responsible for the finance of the family, including all the expenses of the Children.

206.  Having considered all the circumstances of the case, I am of the view that the equality principle should not be departed.

Step 5: Deciding the outcome

207.  In this step, I need to step back and look at the overall impact of the factors found to be relevant.  It is no easy task in this case about the distribution of assets, especially in view of the long marriage, coupled with the parties’ relationship, the background and development of the case.  Considering all the above circumstances, I must have the principles of fairness in mind, even if considering the needs of the parties.

208.  With the background of the parties and this case in mind, I am of the view that the needs of the Children is paramount.  But at the same time, I remind myself not to overlook the accommodation and financial needs of the parties.   

209.  Considering the needs of the Children, with reference to Step 2, I have ruled that the reasonable needs for them are HK$5million.  

210.  With consideration of the evidence and submissions, especially in view of my analysis of the total matrimonial assets pot, the financial resources and the earning capacity of the parties, I am of the view that the HK$5 million should be shared equally between the parties.

211.  In view of the HK$5 million for the Children, I have considered especially the Husband’s evidence that he could live with the figure, as long as he is given T23A and there is no forced sale of it.   I have carefully considered the Husband’s position.  The Husband’s reason to keeping both properties of T23A and SP is that he needs T23A for work, so that it could facilitate his work and to earn income in future.  If there is forced sale of T23A now, that may affect his work, future income and earning capacity. 

212.  In the Husband’s evidence, he had explained that he could expect to sell some of the shares, but that may take a few months’ time and if the maintenance to be paid to the Children is ordered by way of a lump sum within a short time, his finance will be much affected.

213.  From the Husband’s evidence and form my ruling above, I am of the view that there is earning capacity of the Husband.  Together with his financial resources and his evidence that some of his shares could be sold in a few months’ time, I rule that the HK$2.5 million to be shared by the Husband be ordered not by way of a lump sum, but the Husband be allowed to pay by instalments, spread over a period of 4 years. 

214.  Further, in order to protect the interest of the Children, the amount to be paid for the Children’s maintenance shall be secured. 

215.  After considering the maintenance to the Children, about the spousal ancillary relief, I rule that there should be equal sharing between the parties of the net matrimonial assets pot, in full and final settlement for all the ancillary relief claims against each other on a clean break basis.  With what I have ruled as the total value of the matrimonial assets in paragraph 164 above, equal sharing shall mean each getting HK$26,611,192 (HK$53,222,384 / 2).

216.  With parties’ submissions considered, I shall rule that T18 be transferred to the Wife, with T23A and the UK property, SP, shall be transferred to the Husband. 

217.  By considering all other assets and liabilities of the parties, there is a small difference of HK$49,790 from the 50/50 equal sharing sum, with the Wife getting HK$26,660,982 and the Husband getting HK$26,561,402.  The difference could be viewed as minute in view of the total amount of the matrimonial assets pot.  I will take into consideration of the background and the fact that the Wife had been single-handedly supporting the family and the Children since at least the parties had separated.  The duration and the amount spent should not be underestimated.  But at the same time, I have also considered the Wife’s stable income.  Having considered all the circumstances as a whole, I am of the view that there should not be any further monetary adjustment between the parties.

218.  As I said the payment to the Children should be secured, I will order that upon the Husband completed paying his share of the HK$2.5 million, T23A be transferred to him.  A charge could be registered in the Land Registry against T23A.  In the meantime, if the Husband needs to have T23A re-mortgaged or sold, the Wife should co-operate as T23A is still in the parties’ joint names.  In the event that the Husband wishes to have T23A sold, the Wife should co-operate and the Husband is at liberty to have the remaining amount of the HK$2.5 million be paid forthwith from the sale proceeds.

219.  The Wife’s payment of her half share need not be secured, as the Wife has the custody, care and control of the Children, and she has always been the one paying for the household and Children expenses.

220.  This outcome may not please the parties, but in my view, this is the best that can be done in order to protect the interest of the Children, and at the same time to allow both parties to move on.  

Observation

221.  I was not involved in the access matters before trial.  But from parties’ submissions, I am aware that this is a high conflict case regarding access of the Children.

222.  When the case reaches the stage of trial before me, a total of about HK$5 million legal costs had already been incurred by both parties.  There are different allegations against each other in the past, with some allegations made at this ancillary relief trial, which I am not going to repeat here. 

223.  It is really disappointing that this case could not settle and the total costs involved up to about HK$5 million, which is more or less the same amount as I have ordered for the maintenance for the Children up to finishing their respective first Bachelor degree in the United Kingdom.  If both parties or either party could have been more practical, I am sure much less costs could be avoided.

224.  What had been done cannot be undone.  But it is never too late to re-build the relationship and bond between parents and Children.  It is hoped that with the end of the ancillary relief trial, it can mark the beginning of rebuilding the relationship between the Husband and the Children. 

225.  From the evidence of this case and with the observation of the parties giving evidence in Court, I form the view that both parties are very talented persons, with high educational qualification and good background.  In maintaining or rebuilding relationship with their Children, the Children will benefit, and it is hoped that it can also lead to a better and happier life to the Children and to the parties in the future.

Costs

226.  The Wife asks for costs. The Husband asks for no order as to costs.  The general legal principle is that costs should follow the event.  I have considered parties’ submissions, open proposal and the background of the case, in particular my observations above.  In view of my ruling, both parties win some and lose some.  I order no order as to costs on a nisi basis. 

Orders

227.  The Court will make the following orders :-

(a)  Within 30 days from the date of Decree Absolute, the Husband do transfer to the Wife all his title, share, estate, right and interest of and in the property T18.  The costs of and incidental to the transfer shall be borne by the Wife.

(b)  Within 30 days from the date of Decree Absolute, the Wife do transfer to the Husband all her title, share, estate, right and interest of and in the property of SP.  The costs of and incidental to the transfer shall be borne by the Husband.

(c)  Within 1 month, the Wife shall set up a Children’s Fund Account and shall inform the Husband forthwith the account number. 

(d)  The Husband and Wife shall each deposit HK$2.5 million into the Children’s Fund Account for the maintenance of the Children.  Payment shall be made over a period of 4 years (with 48 instalments), with the 1^st payment being 1 June 2019 in the sum of HK$52,000, and therefore on the 1^st day of each consecutive month for the 2^nd to 47^th instalments in the sum of HK$52,000 each and the last instalment (ie. 48^th instalment) in the sum of HK$56,000, until full payment of the sum of HK$2.5 million. 

(e)  The total sum of HK$5 million in the Children’s Fund Account shall be used exclusively by the Wife for the maintenance of the Children from September 2017 until each of the Children respectively reaches the age of 18 or completes the first undergraduate degree, whichever is the later.

(f)   Within 30 days of the Husband having fully paid his share of the total sum of HK$2.5 million to the Children’s Fund Account, the Wife shall transfer to the Husband all her title, share, estate, right and interest of and in the property of T23A.  The costs of and incidental to the transfer shall be borne by the Husband.  

(g)  In the event that there is surplus in the Children’s Fund Account, upon the younger daughter finishing her first university degree, the balance of the Children’s Fund Account, if any, shall be shared equally between the Children.

(h)  There be liberty to apply in relation to the implementation of the Order of the Court.

(i)  There be no order as to costs for the ancillary relief matters, including all costs reserved, which is a costs order nisi and shall be made absolute within 14 days.

228.  Lastly, I would also give the section 18 Declaration.