LO v. WONG

FCMC 9860 of 2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 9860 OF 2005

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J U D G M E N T

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Introduction

1. The trial before this court was over the Petitioner’s application for ancillary relief.

History and Background of Marriage

2. The Petitioner wife (“W”) and the Respondent husband (“H”) were married on 6^th July 1979.  By the time the first petition was issued they had been married for 26 years.  There are two daughters from the marraige, both over 18 now, working and are able to support themselves.

3. H was born on 18^th January 1953 and is now 54; W born on 20^th May 1954 is now 53.  H is an engineer.  In fact he has spent 33 years with the same employer.  W has been a housewife except for the first 2 years of marriage when she worked as a secretary.  Thus H has been the only source of income for the family during the marriage.

4. H and W separated in November 2003 when W moved out of the matrimonial home.  W presented a petition for divorce on unreasonable behaviour in 2003.  Parties later came to consensus that a fresh petition would be filed on the ground of separation for 1 year with H’s consent for dissolution of the marriage.  On 6^th September 2005, W filed fresh petition for divorce according to the agreement. A Decree Nisi was granted to W on 6^th February 2006.  In her petition, W sought a lump sum of $4.5m and periodical payment for herself and the youngest daughter Sum (“ Sum”).

5. There were two orders for maintenance pending suit.  First was made on 18^th March 2004 by which H was ordered to pay $15,000 per month to W for her benefit and the daughters although they were over 18 at that time as they were still studying.  At the material time, W claimed that the total expenses were about $25,000 per month.  The second order was made on 7^th December 2005 under which H was to pay $19,522 per month for W plus W's medical expenses.  At that time the expenses of W was said to be $26,510 per month.  H also undertook to pay school fees and $3,000 as pocket money to Sum direct.

6. The family assets mainly consist of the former matrimonial home and the cash in the joint bank accounts.  The former matrimonial home situated at the Melody Garden in Tuen Mun was purchased in 1983 in joint names of the parties (“the Property”) for $290,000.  The agreed current market value of the Property is $1,560,000.  There is no outstanding mortgage now.  The cash in the joint accounts is about $1.626m.  H is expecting a substantial sum from his retirement scheme in 6 years time.

B.      Orders Proposed By The Parties

7. Although both parties agreed to the Property being sold, there was no agreement as to the division of the net sale proceeds.  H said each should receive 50% of the net sale proceeds.  In addition, 50% of the cash in parties’ joint bank account should go to W.  H also proposed that when he was to receive a pension from his employer in about 6 years’ time, W shall take 40% of the portion that would reflect the length of their marriage.  H further proposed that the money paid under the said two orders for maintenance pending suit should be deducted from the lump sum to be paid to W.

8. W’s proposal at the commencement of the trial was that she would take 50% of the family asset which was about $24m.  During the trail she proposed to receive half of the pension with advance payment to be made to her now.  At the conclusion of the trial, W adjusted her claim to 50% of the family asset and 50% of the pension of H. She suggested that apart from the share of asset immediately available such as the sale proceeds of the Property and the cash in the bank accounts, she should also receive $1.1m now as an advance payment of H’s pension and would account for the same when she was to take her share therefrom.  She said that in other word, she should receive now a total of $4m and would wait for the retirement of H to receive the balance of her share of his pension.  She said that the reason she asked for $4m now was that she needed about $2.5m to buy a flat for herself and Sum.

The Main Issues

9. The major issues in this case are : -

(A)     what is the size of the family assets, and

( B )     how they are to be distributed between the parties.

10. I now deal with the issues.

( A )     T he size of the family assets

11. H said that the assets of the family include the Property and the cash in the joint accounts and a portion of his pension fund that reflected the length of his marriage.

The Property

12. Although the market value of the Property was agreed to be about $1.56m, he said the net proceeds was about $1.45m as there would be payment for premium and legal expenses.

The Joint Bank Accounts

13. There are two bank accounts held in the joint name of parties.  One with Standard Charter Bank (“SCB”), the other with Bank of China (“BOC”) the total in these two bank accounts was $1.626m at the time of trial.

14. W’s position was that the family assets should be more than as disclosed by H.  Reasons for her saying so can be summarized as follows :

a.       there was a sum of $1.3m unaccounted for as shown in the bank records.  She produced some fixed deposit slips in 2001 and 2002 showing some savings of H and said that they were not accounted for in the bank accounts produced by H at the hearing.

b.       W also alleged that the money put in by H in his property purchased on 14^th June 2006 in Tung Chung (the Tung Chung Property) was more than he had admitted to the court, and secondly, there was no proof that he had paid $140,000 on decoration.  He was using this as a devise to hide his assets.

15. H prepared two tables (R12-13) at the trial to explain first whether there was $1.3m not accounted for.  H said that the bank records showed a drop of $946,178.  Records showed that the savings at the time of October 2004 was about $2.5m which went down to $1.6m in December 2006.  H was asked to go through the table prepared by W's lawyer produced as P2.  He told the court that from P2, it showed a deduction of $988,659 and not $1.3m.  He said that $988,659 was very close to the result from his own calculation prepared in R12 and R13.  The difference was about $40,000.  He went on to explain how this sum was spent in two years.  He said that in 2005 and 2006, his income could barely cover the normal expenses due to the education expenses incurred by the two daughters. The extra expenditure which had caused a reduction of $988,659 included the legal costs which was about $450,000 and the money he spent in purchasing the Tung Chung Property which amounted to about $447,915 (down payment, expenses and decoration).

16. Parties also had dispute over two sums once in the possession of W.  One was a sum of $200,000 said to be savings from household money given to W by H.  W’s version on this was that she did have such savings at one point in time but she had spent the sum on hiring private detectives to follow H.  Another sum was a sum of $300,000 which was a loan repayment from her sister to H.  she did not dispute this but said that she had repaid a loan of $200,000 owed to her sister out of the $300,000 and the balance was spent on attending the inauguration of the elder  daughter in England and also some expenses in relation to her parents.  She said that the reason for her to owe such loan to her sister was because H had refused to pay her household maintenance from February 2003 up to commencement of this suit and in fact up to the first order for maintenance pending suit made in March 2004, a period of 13 months.

Pension

17. H said that the pension he might be receiving at the time of retirement would be subject to all kinds of uncertainty such as the performance of the fund managers, how long H could keep the job and if employment was terminated prematurely, the cause of termination might also affect the sum he should be receiving.  H agreed however that as at end of 2006, the estimated sum was about $8.02m.  W’s position is that she should get half of the total of H’s pension.

Conclusion on the size of the family asset

The Property

18. I find that the family assets available as at today include the Property at the agreed net value of $1.45m.

Cash in the joint-name account s

19. As to the cash in the accounts, I accept that there is a total of about $1.626m in the bank accounts.  After hearing H’s evidence, I find him honest and truthful.  His evidence in court was supported by documents.  I accept his account for the “missing” $1.3m.  I accept his saying that the reduction in savings was not $1.3m but slightly under $1m.  I accept his saying that the sum was spent on legal fees and his purchase of the Tung Chung Property.  I also accept that those savings recorded in banking slips back in 2001 and 2002 were not spent or hidden by H but was transferred to their other bank accounts.

20. I would however say that the $450,000 legal costs paid by Hshould be accounted for and be counted as part of the family asset, otherwise, it will pre-empt or defeat any costs order to be made by the court, i.e. W is paying H’s costs anyway.  Further I find that the expenditure of $447,915 incurred for and arising from the purchase and the consequential occupation of the Tung Chung Property should be accounted for by H as such should be spent from his own share of the family assets.  I do not see why H’s purchase of a new property should come from the family assts and not from his own resources.  H had stayed in the Property for not a short time after the separation and the Property could have catered for his need for accommodation.

Savings of $200,000 spent by W

21. I do not accept W’s saying about the $200,000 spent on hiring private detectives.  She could not give details of such expenditure let alone proof.  I find that W should account for the $200,000 of the family funds she said she had saved from the household monies.  Even she did spend such sum for such purpose as alleged, I do not agree that she should use the family asset to do something against the wish of H and yet H had to pay.

Repayment of $300,000 to H spent by W

22. As to the said sum of $300,000 not accounted for by W mentioned in paragraph 16.  I would not ask her to account for the same (except a sum of $24,000 being legal fees) because I accept that the sum was spent on the household during the time there was no maintenance from H and that she spent part of such sum on setting up a new home for herself and Sum.  I have read W’s affirmation dated 19^th February 2004, especially paragraph 11 and 17 therein in relation to W’s account for the $300,000 and her account for borrowing $200,000 from her sister as shown in P1.  I find that the account although rough could not be criticised as this happened some years ago and it was a hard fact that H had not paid maintenance for 13 months.

Pension Fund of H

23. I accept that the value of the pension fund at the date of hearing was about $8m but it’s growth would be dependent upon the performance of the fund manager and many other factors known or unknown.

Total

24. Total family asset excluding pension fund is $4,197,915 (being $1.45m + $1.626m + $447,915 + $450,000 + $200,000 + $24,000)

( B )     distribution of the family assets

25. As mentioned in the above, I have to consider the factors set out in s.7 of MPPO for distribution of family asset.

The Law

26. In considering the applications for ancillary relief, I will need to have regard to the matters set out in s. 7 (1) and 7 (2) of the Matrimonial Proceedings and Property Ordinance (“MPPO”), which I set out as follows :

“ 7.       Matters to which court is to have regard in deciding what orders to make under sections 4, 5 and 6

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

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

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

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

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

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

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

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

(2)        Without prejudice to subsection (3), it shall be the duty of the court in deciding whether to exercise its powers under section 5, 6 or 6A in relation to a child of the family and, if so, in what manner, to have regard to all the circumstances of the case including the following matters, that is to say –

(a)        the financial needs of the child;

(b)        the income, earning capacity (if any), property and other financial resources of the child;

(c)        any physical or mental disability of the child;

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

(e)        the manner in which he was being and in which the parties to the marriage expected him to be educated;

and so to exercise those powers as to place the child, so far as it is practicable and, having regard to the considerations mentioned in relation to the parties to the marriage in paragraphs (a) and (b) of subsection (1), just to do so, in the financial position in which the child would have been if the marriage had not broken down and each of those parties had properly discharged his or her financial obligations and responsibilities towards him”.

Conduct

27. The wife alleged that the marriage broke down due to H's association with his present girl friend.  This was denied by H.  It is trite law that unless the conduct is gross and obvious, it would not be taken into account when considering ancillary relief matters.  I accept H's saying that he only met his girl friend after the marriage has broken down.  Even if W is correct, it does not affect my decision in the distribution.  I notice that there was allegation of violence on H.  I also noticed that H had some allegation of violence against W.  These allegations were not picked by either parties and I would not apply such factor to the division of the family assets between the parties.

O ther s . 7 M atters

28. I now turn to consider the other s. 7 (1) and (2) matters set out in the Matrimonial Proceedings and Property Ordinance (“MPPO”).

(a)     Income, Earning Capacity, Property and other financial resources which each party has or is likely to have in the foreseeable future

H’s income / earning capacity

29. As said in above, H is an engineer, his salary is HK$ 72,709 per month since April 2006.  In addition to his salary, he receives an annual bonus which is about one month’s salary which brings the monthly total income to $78,768.  H also receives medical benefits, but is required to make contribution towards the provident fund.

30. H joined the company January 1974.  He is to retire at the age of 60 and there are about 6 years to come.

31. It was not disputed that that W has no income from employment.  H however suggested that there should be some contribution from the daughters especially the one who is living with her.  It is not disputed that the elder daughter would give W $2,000 per month but W said that the sum was for sundry items for the elder daughter herself only and she was not benefited by that $2,000.

H’s property and financial resources

32. Apart from his interest in the Property, H’s owns the Tung Chung Property with his girl friend as joint-tenant.  The purchase price was $1.8m in June 2006 and the outstanding mortgage is about $1.2m.  H said that the market value was $1.65m and therefore the net value of the Tung Chung Property is about $0.45m.

W’ property and financial resources

33. H did not dispute that W was holding half the interest in the Property.  Apart from her interest in the Property, W’s had also $17,000 in her two bank accounts with Bank of China as at December 2006.

(b)     Financial needs, obligations and responsibilities which each party has or is likely to have in the foreseeable future

34. W said that she had accommodation needs.  She is fond of a small flat not too old for herself together with Sum in Sheung Wan which is more convenient than Tuen Mun and is close to her relatives.

35. She set out her monthly expenses at a total of $25,562 with breakdowns in her 6th Affirmation dated 28^th December 2006 : -

(i)	General Expenses	Amount
	Item
	Rent	6,340
	Utilities (electricity, gas,  rates, water & telephone, including residential line, mobile, and long distance calls)	1,500
	Management fees	722
	Food and household expenses	2,600
	Meals outside home	3,400
	Transport	1,600
	Clothing & shoes	1,100
	Medical	3,000
	Entertainment, present, holiday	1,600
	Contribution to parents	3,000
	Part-time maid	400
	Miscellaneous	300
		Total: 25,562

36. In December 2006, W had about HK$8,000 outstanding in her credit account.  W claimed she also owed a sum of HK$85,000 to her two sisters.

37. For H, he said that he would get married in 12 months’ time and would need $70,000 as wedding expenses.  He set out his updated monthly expenditure in his 4^th Affirmation as at December 2006.  He also set out changes anticipated after getting married.

(i)	General Expenses	Amount	Amount
	Item	[As at Dec 2006]	[After remarriage]
	Mortgage	13,444
	Utilities for the Property (electricity, gas, rates, water & telephone, including residential line, mobile, and long distance calls)	735	0
	Management fees	719	0
	Utilities for the Tung Chung Property (electricity, gas, rates water & telephone, including residential line, mobile, and long distance calls)	1,000	1,000
	Management fees	1,020	1,020
	Food	1,500	4,500
	household expenses	1,000	4,000
	Meals outside home	5,000	4,000
	Transport	1,200	1,200
	Clothing & shoes	2,000	2,000
	Personal grooming	1,000	1,000
	Entertainment, present,	4,000	5,000
	Holiday	1,000	3,000
	Dental	400	400
	Tax	8,778	8,778
	Insurance premia	9,968	9,968
	Maintenance pending suit	19,522	0
	Contribution to parents	9,000	9,000
	Contribution to MPF	3,635	3,635
	Medical expenses for W	2,770	0
	Contribution to future wife		7,000
	Total:	87,691	65,501

38. H said that his liabilities amounted to $233,997 in his 4th affirmation made in December 2006.

39. H challenged W’s expenses for being exaggerated, in particular, the expenditure for food and household expenses and meals out of home all by herself amounts to $6,000.

40. I agree with H that W’s budget for future is on the high side but same applies to H himself.  I am of the view that a reasonable amount for W living expenses should be about HK$8,000 excluding expenditure on accommodation which would be provided for separately.  I say that expenditure on utilities be reduced to $800, food to $3,000, transport to $600, clothing & shoe to $400, medical to $1,500, entertainment to 1,000, miscellaneous $800.  The reasonable expenses for H and his future wife as a family to be $55,000 including mortgage payment, tax and MPF contribution per month.  I see that there are rooms for adjustment on items like food, entertainment and holiday etc.

41. I find H’s liabilities not debt that incurred from insufficient income or too much outgoings in his day to day living.  The biggest portion of such liabilities are salary tax and insurance premium payable which is within his financial plan.

42. As to W’s liabilities, I do not find that she has proved her debt owed to her two sisters.  Even from her own version, these debt would only be payable when she could afford to do so.  As I find that her expenditure has been on the high side, she should settle such debt by herself as she said such debt were incurred from insufficient maintenance to cover her expenditure.

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

43. Although H is a professional with a secured job and steady income, their standard of living was one with cautious budgeting during the time of marriage.  W said that she was given $15,000 per month for the household expenses and H would take care of the rest.  Out of this $15,000 she said she spent $9,000 on the family only.  The family stayed in the Property which was about 800 sq ft in size, not situated in a convenient location.  It is a property of the Home Purchase Scheme run by the government.  The market value ($1.65m) today also shows that it is not one of those luxurious apartment by private land developers where most professionals would aspire to accommodate their family.

44. After separation, W rented a place of the size of 466 sq. ft at a monthly rental of $6,340.  H stayed in the Property until the purchase of the Tung Chung Property in December 2006.  The Tung Chung Property was purchased at the price of $1.8m, also situated at a location not known for its convenience.

45. I am of the view that both may have to compromise in their standard of living after separation due to the fact that the income of H might not be enough to support two separate families at the same rate and standard prior to the separation.

(d)     Age of the parties and duration of the marriage

46. H is now 54, and W is 53, and their marital relationship lasted over 26 years.  It is a marriage of substantial length.

(e)     Any physical or mental disability of either of the parties

47. H did not dispute that W had some emotional illness which had to be treated.  H alleged that there was no sufficient evidence on her heart decease.  I accept that W is not enjoying good health and has to be under constant medical care at least for the time being.  I say so because there is no evidence to show that her depression is incurable.  Dr Yee was of the opinion when writing a report for W on 10^th November 2005 that it would be unlikely that she could secure any open employment due to limitation by the illness in near future.  It is hopeful that after the suit with H, she could start afresh in many aspects and that could help her in her emotion problem.  I would however bear this in mind when distributing the assets.

(f)      Contributions made by each party to the welfare of the family, including any contribution made by looking after the home or caring for the family

48. Only H had worked during their marriage.  W had been a housewife taking care of the family and brought up two daughters who have now started their own career.  She said she had made some financial contribution to the purchase of the Property, that was $40,000 from the sale of her own jewellery, that was not challenged by H.  I accept that she had made same contributions to the family as H had done during this marriage towards the welfare of the family.

Payments made under the two Orders for Maintenance Pending Suit

49. I understand that H asked that payment made under the two orders on maintenance pending suit be deducted from any award of lump sum to be made.  In my judgment that should not be right as it would have denied the reasonable requirement of W in the past two years and if such deduction was made, that would reduce her share by a substantial portion and would have left her future reasonable requirements not attended to.  I have also looked into this application of H from a point of view that whether, if it is found that there was excessive spending, the excessive part of the expenditure should be refunded.  There might be slight exaggeration on the expenses of W, that is not so serious that she should be ordered to account for such sum.  The adjustments suggested by me in paragraph 40 is for future reference and not to take retrospective effect.  I do not agree to such an order to be made.

H. CONCLUSION

50. I find that the worth of the family assets is approximately $4.2m in paragraph 24 above.  Both parties agreed to have a clean break.

51.  Both parties have agreed that the Property should be sold.  I will make an order that such sale to take place within 3 months after the pronouncement of the Decree Absolute.  I order that H shall have the conduct of the sale.

52.  Having considered all the s. 7 matters and all the circumstances of this case, I am of the view that W should receive a lump sum of $2.3m out of the family assets which are immediately available for distribution.  Since she should account for $224,000 (paragraphs 21 – 22 refers), she should receive $2,076,000.  The reason for such distribution is that I agree she needs a small flat, and I believe a sum of $1.6 would represent a fair amount for her to buy a flat of the size 400 – 500 sq ft at a location not as convenient as in Sheung Wan but not as inconvenient as in Tuen Mun.  The remaining is for her maintenance up to the time she gets her share of H’s pension fund.  This should be enough to cater for W’s reasonable requirements.  She might however wish to spend a little more on the flat, if so, that is her personal choice.  Or she might feel more secured to have some spare cash in her hand.  Having weighed for when she receives her share of H’s pension.

53. As to her share of H’s pension fund, I find that the length of the marriage is about 70% of H’s years of employment (26 years / 39 years).  I consider that at the time of his retirement, H would still have mortgage to pay.  The outstanding, calculated at the present rate, should be around $200,000 by that time and he would have his obligations towards his new family.  If however he spends not more that I find reasonable for him, he should have savings in the region of $1.5m by the time he retires.  Taking into consideration of all relevant factors, I find it appropriate to award to W 50% of 70% of the total pension fund H is to receive.

54. On the basis of a clean break principle, I order that a lump sum of $2,076,000 and an advancement of $300,000 is to be paid to W by H.  Such sums shall be paid by two instalments as there should not be sufficient cash in the family assets to make such payment before the sale of the Property.  I order that $1m should be paid to W immediately upon pronouncement of Decree Absolute for her to purchase a flat.  The balance would inevitably come from the proceeds of the sale of the Property which W might have to wait for a successful transaction with a purchaser.

I. ORDER

55. The effect of my order is as follows :

(i)      H shall pay to W a lump sum of $ 2,076,000.  First instalment, not less than $1m, should be paid within 7 days upon pronouncement of Decree Absolute; the second instalment, a sum of $1,076,000 being balance of the lump sum should be paid to W within 7 days upon completion of the sale of the Property.

(ii)      H shall pay to W a sum of $300,000 as advancement of W’s share of H’s pension fund together with the 2nd payment of lump sum mentioned in paragraph (i) above.

(iii)     The Property shall be sold within 3 months upon Decree Absolute of divorce at a price not lower than $1.56m in open market.  H shall have the conduct of the sale, and W shall sign all necessary documents to effect such sale.  Out of the net sale proceeds, after deducting premium payments and reasonable costs of and arising from such sale, a sum of $1,076,000 and a further sum of HK$300,000 shall be paid to W as the balance of lump sum mentioned in (i) and advancement of pension mentioned in paragraph (ii) hereinabove, and H is to keep the remaining. (If the net proceeds exceeds $1.45m, the balance shall be shared by parties equally.)

(iv)     W to receive 50% of 70% of H’s pension when H retires.

(v)     The interim maintenance order shall continue until 1st payment of the said lump sum, and any payment made after date of this order shall be accounted for by W and be deducted from the 1st lump sum payment.

(vi)     There be liberty to apply in relation to the implementation of the terms of the above order.

COSTS

56. As neither party can be said to have succeeded with their proposals, I make an order nisi that each is to be responsible for his / her own costs.  This order shall be made absolute and final within 21 days.

Other Matters

57.  I am satisfied that there are no children of the family to whom section 18 of Cap. 192 applies of.  I accordingly make a declaration to this effect.

58. I also make a declaration under s. 17A of the Matrimonial Causes Ordinance that the financial provision made for the Respondent is reasonable and fair or the best that can be made in the circumstances.