DD v. LKW

CACV 91/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 91 OF 2007

(ON APPEAL FROM FCJA 597 OF 2003)

BETWEEN

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J U D G M E N T

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Hon Cheung JA :

1. This appeal raises important issues on how financial provisions should be made for the spouses on divorce.

The proceedings

2. The parties were former husband and wife.  For ease of reference I will continue to refer them as husband and wife.  On 6 February 1996 the parties married in Hong Kong.  They were separated on 1 June 2002.  They had no children.  On 6 June 2003 they jointly applied for divorce.  The wife was the 1^st applicant and the husband the 2^nd applicant.  In the joint application the parties also asked the Court to make the terms of an agreement (‘the agreement’) dated 2 June 2003 reached between them on the division of the matrimonial assets an order of the court.  On 5 September 2003 a divorce decree nisi was pronounced but the consideration of the financial arrangement was adjourned.  After the decree nisi the wife alleged that there was material non-disclosure by the husband when they entered into the agreement and she refused to comply with the agreement and sought ancillary relief against the husband.  On 26 January 2004 the decree absolute was pronounced. 

The order

3. The wife proceeded with her application for ancillary relief.  On 30 June 2006 after a 22-day hearing Deputy District Judge Kot made orders for the financial provision for the wife.  The Judge held that the husband had total assets of HK$4,650,000.00.  The wife was entitled to one third of it in the sum of HK$1,550,000.00.  As the wife had already received HK$758,000.00 from the husband, he was ordered to pay her HK$792,000.00. 

4. As the parties were still living in the same matrimonial home although leading separate lives, the Judge ordered that the wife was required to leave the matrimonial home within two months.  The husband was required to pay the wife HK$792,000.00 at the time when she left the matrimonial home in complete and final settlement of the wife’s claim.

The appeal 

5. Both parties sought leave to appeal from the Judge but were refused.  The wife further sought leave from this Court.  This Court (Cheung and Yuen JJA) granted leave as we held that it was necessary to consider the application of the House of Lord’s decision of White v. White [2001] 1 A.C. 596.  The husband did not pursue the leave application.  Although both parties were not legally represented in the appeal, this Court had the benefit of the assistance of Ms Anita Yip, acting as Friend of the Court.

The agreement

6. The Judge clearly was of the view that the agreement was not binding on the parties as she proceeded to make financial provisions for the wife.  The agreement is also not relevant for this appeal.  It will be briefly mentioned here because it contained figures which are relevant for understanding the orders made by the Judge.  

7. Under the terms of the agreement the husband would pay the wife HK$1,016,000.00.  This sum was made up as follows :

(1)     HK$150,000 which was to be paid by the husband into a joint account of the parties on the day when they presented the divorce petition.  This sum was to be released to the wife upon obtaining the decree absolute.

(2)     The husband was to pay maintenance of HK$6,000.00 per month for 36 months, making a total of HK$216,000.00.  In order to guarantee this payment the husband was required to deposit HK$108,000.00 into the parties’ joint account.

(3)     The husband would pay the wife HK$650,000.00 to acquire the wife’s half interest in the matrimonial home at Sea Crest Villa, Sham Tseng (深井浪翠園) which was registered in their joint names and valued at HK$1,300,000.00.

(4)     The wife could continue to stay in the former matrimonial home for two years after the decree absolute.

8. Pursuant to the agreement the husband did deposit HK$150,000.00 and HK$108,000.00 into the joint account.  The wife did transfer her half interest in the matrimonial home and received HK$650,000.00 from the husband.  She is still living there.

The wife

9. The wife is now 45 years of age.  She was a former resident in the Mainland and a graduate of the Tsinghua University.  After graduation she worked in the Mainland until 1993 when she was assigned to work in Hong Kong.  After the parties married in 1996 the wife stopped work and became a housewife.  She resumed work in 1998, earning about HK$10,000.00 per month.  She stopped work again in October 2003.  At that time she was earning HK$28,000.00 per month.  In March 2003 she started a company trading in textile quotas.  However, the business was unsuccessful and was closed in March 2004.  Thereafter she did not work. 

10. The wife said she had at one time suffered from depression and in 2002 had an operation to remove a tumor in her uterus.  She claimed that a further operation may be required if the tumor grows.

The husband

11. The husband is now 46 years of age.  He is a businessman.  He was the sole proprietor of a company called 南國發展有限公司Nam Kwok Development Company Limited (‘Nam Kwok’).  He was also the director and shareholder of two limited companies, namely 潤力合成劑有限公司 Lubepower Synthetic Products Co. Ltd (‘Lubepower’) and 潤科工業有限公司 Lub-Tech Industrial Co. Ltd (‘Lub-Tech’).  The husband claimed that up to May 2002, he received HK$26,000.00 per month from Nam Kwok and also HK$1,300.00 per month from Lubepower and from June 2002 he received HK$8,200 from Nam Kwok and HK$1,000.00 from Lubepower.

The wife’s assets

12. The Judge found that the wife had assets in the sum of HK$522,740.00 :

(1)        HK$3,000.00 being deposit in banks (as of 1/2005);

(2)        US$58,300.00 or HK$457,740.00 being balance in a silver and gold foreign-exchange margin account (as of 1/2005);

(3)        HK$19,000.00 being balance in a Mandatory Provident Fund (‘MPF’) account; and

(4)        HK$46,000.00 being value of jewellery.

The wife’s earning capacity

13. The Judge further held that in view of the wife’s education and work experience she still has an earning capacity.  The Judge held that the mental and physical condition of the wife would not affect her earning capacity and she could be able to earn not less than HK$15,000 per month.  The Judge held that the reasonable expenditure of the wife would be HK$15,000 per month.

The husband’s assets

14. The Judge held that the husband had assets of about HK$4,650,000.00.  Of this, HK$1,708,246.00 is made up as follows :

1)   (1) HK$28,000.00 being balance in personal bank account  (as of 7/2005);

(2) HK$600 being balance in Nam Kwok (as of 7/2005);

(3) HK$56,000 being balance in an MPF account; and

(4) US$3,682.00 being value of a life insurance policy.

2) The husband further owned the following properties :

(1) the matrimonial home which is now in his sole name valued at HK$2,210,000.00 with an outstanding mortgage of HK$798,000.00;

(2) a one-third interest in an industrial unit in Hong Kong valued at HK$390,000.00;

(3) a property in the Mainland valued at RMB53,000.00.

The total value amounted to HK$1,708,246.00.

15. The Judge further held that the husband had other assets valued at HK$2,950,000.00.  As the husband had not made full disclosure of his assets the Judge relied on the evidence presented by the wife that between 2002 and 2003 the other assets of the husband which included bank deposit, shares and investment in foreign currency amounted to HK$2,950,000.00.  The Judge held that the value of the husband’s assets at the time of the hearing would not be less than this sum. 

16. The Judge, therefore, arrived at the rounded up sum of HK$4,650,000.00 which was made up of the sums of HK$1,708,246.00 and HK$2,950,000.00. 

Figures that required clarification

17. There are two figures in the judgment which required clarification.  First, at paragraph 38 the Judge held that the wife had previously received from the husband HK$758,000.00.  The Judge did not state how this sum was arrived at.  It is accepted that the wife had before judgment received HK$650,000.00 from the husband as a result of the transfer of her half interest in the matrimonial home.  Deducting HK$650,000.00 from HK$758,000.00, the balance is HK$108,000.00.  This figure matched the sum of HK$108,000.00 that was deposited into the joint account by the husband as security for the maintenance payment.  However, this sum was not paid to the wife at the time of the hearing but was only paid after the judgment. 

18. The second figure that required clarification is the sum of HK$1,370,000.00 which the Judge said the wife would have for her disposal.  Again the Judge did not specify how this sum was arrived at.  The Judge assessed the wife had assets of HK$522,740.00.  If the husband was to pay her HK$792,000.00 then she would only have assets of HK$1,314,740.00 and not $1,370,000.00.  The wife, in any event, contended that the figure of HK$522,740.00 was wrong because she could not make use of the balance in the MPF account and also the actual selling price of the jewellery may be substantially less than the estimated value.  The wife informed the Court that subsequent to the judgment, the Judge in a hearing in respect of her application for a charging order accepted that the figure of HK$1,370,000.00 was wrong. 

19. In my view at the end of the day these two figures did not matter in the overall financial provisions for the parties.

Payment after judgment

20. After judgment the wife received from the husband HK$258,000.00 in partial satisfaction of the sum of HK$792,000.00.  This was made up of the money in their joint account of HK$150,000.00 and HK$108,000.00 less about HK$25,000.00 which was deducted by the husband for the payment of bank charges, making a net sum of HK$232,040.00. 

Challenge on finding of fact

21. The wife challenged the finding of fact by the Judge.  The husband also in his written submission challenged the finding by the Judge.  However, as the husband did not obtain leave to appeal against the judgment he was not entitled to lodge such a challenge. 

22. The wife first said that the husband had subsequent to the judgment disclosed a document which revealed that he had further assets.  This, however, was proved wrong because the document relied upon by her was in fact part of the evidence before the Judge.

23. The wife further claimed that the Judge had under-estimated the husband’s assets by about HK$3,000,000.00.  She further challenged the Judge’s finding on the conduct of the husband. 

24. The wife is obviously a very able person.  She prepared detailed submissions with cross reference to documents and schedules which summarised the financial position of the husband.  The wife, in fact, is repeating again her case before the Judge. 

25. In my view the length of the hearing before the Judge is a reflection of the time that had been taken by the parties in examining their respective financial positions.  The Judge had made detailed analysis on why she would not accept the husband’s evidence on certain aspects of his financial position.  At the same time she also rejected the wife’s case on what she claimed to be the true financial position of the husband.  The Judge had also considered the conduct of the husband.  She found that the husband’s adultery was only committed after the parties separated.  She came to the conclusion that it was not inequitable to disregard the husband’s conduct in her consideration.

26. There was no transcript of the hearing before the Judge and naturally one would not expect the parties with their presently disclosed resources to be able to obtain the transcript of a 22-day hearing. 

27. Bearing in mind the principle that an appellate court will not lightly interfere with the finding of fact by a trial judge who had the advantage of seeing and observing the witnesses who gave evidence before him, I am not prepared to hold that the Judge was wrong on the finding of fact.  Certainly the wife had not shown that the Judge had ignored some important and relevant evidence in coming to her finding on the financial position of the husband. 

28. Despite the wife’s claim that she could not use the money in the MPF account and that the value of the jewellery may be much lower on their eventual disposal, they nonetheless remain to be assets of the wife and I would adhere to the figures adopted by the Judge in this regard. 

The issue

29. The only issue in this appeal is whether as a matter of law the Judge was correct to award only one third of the husband’s assets to the wife. 

Matrimonial Proceedings and Property Ordinance

30. The starting point of the enquiry is that Part II of the Matrimonial Proceedings and Property Ordinance (Cap. 192) (‘MPPO’) makes provisions for ancillary and other relief in matrimonial causes and proceedings.  Under section 4 the Court may order periodical payment and lump sum payment.  Under section 6 the Court may make orders for transfer or settlement of property and for variation of settlement.  The Court also has the power to order sale of property under section 6A. 

31. Section 7(1) sets out the matters to which the Court should take into account in exercising the powers under section 4, 6 or 6A :

‘  (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.’

32. Section 7(1) is in almost identical terms with section 25(1) of the Matrimonial Causes Act 1973 (‘MCA’) (now section 3 of the Matrimonial and Family Proceedings Act 1984) of the United Kingdom.

The one-third rule

33. The Judge ordered one-third of the husband’s assets to be given to the wife although she did not indicate the basis of her decision.  The origin of the one-third rule (which in fact should be applied to the joint assets and not merely the husband’s assets) can be traced to Wachtel v. Wachtel [1973] Fam 72.  Lord Denning MR at page 95 stated that :

‘ If we were only concerned with the capital assets of the family, and particularly with the matrimonial home, it would be tempting to divide them half and half, as the judge did.  That would be fair enough if the wife afterwards went her own way, making no further demands on the husband.  It would simply be a division of the assets of the partnership.  That may come in the future.  But at present few wives are content with a share of the capital assets.  Most wives want their former husbands to make periodical payments as well ... [The former husband] also has to make payments for the children out of his earnings, even if they are with [the former wife].  In view of those calls on his future earnings, we do not think she can have both ─ half the capital assets, and half the earnings ... Giving it the best consideration we can, we think that the fairest way is to start with one third of each.’ 

The ‘reasonable requirements’ principle

34. This one-third rule, however, was disapproved in the 1980s in the case of Preston v. Preston [1982] Fam 17 where Ormrod L.J. at page 25 stated that :

‘ It is, therefore, wrong in principle to adopt a purely arithmetical approach by considering what proportion of the total assets should be allocated to the wife.  The judgments in all three of the cases are agreed on this point.  The suggestion in Wachtel v. Wachtel [1973] Fam. 72, of one half or one third of the total assets is, therefore, no more than a guideline, though it may be a useful check on the tentative figure which emerges from working through the considerations set out in the section.’

35. Ormrod L.J. further said on the same page that the word ‘needs’ in section 25(1)(b) of MCA (i.e. section 7(1)(b)) in relation to the other provisions in the sub-section was equivalent to ‘reasonable requirements’ having regard to the other factors and the objective set by the concluding words of the subsection.  The concluding words of section 25(1) were

‘ …… to place the parties, so far as is practicable and, having regard to their conduct, just to do so, in the financial position in which they would have been if the marriage had not broken down and each had properly discharged his or her financial obligations and responsi­bilities towards the other.’

36. These concluding words were omitted from the MPPO and appeared in the United Kingdom legislation between 1970 and October 1984.  Since 1984 these words were also deleted. 

37. Ormrod L.J. further observed at page 24 that :

‘ In the vast majority of cases it is not necessary to consider the full extent of the court’s powers under section 25(1) because the resources available to the parties impose their own constraint on the exercise of the court’s discre­tion.  In most cases they are insufficient to meet the reasonable needs of both parties after separation.  In others, where the resources are larger, the practicality of realising assets, without destroying or seriously damag­ing a husband’s business, imposes another constraint.  It is only in the rare case where the assets are very large and there is no serious liquidity problem, that it becomes necessary to consider the ultimate limits of the court’s discretionary powers under this section.’

Hong Kong decision of C. v. C

38. In C v. C [1990] HKLR 183 this Court (Fuad VP, Clough, Hunter JJA) followed Preston and rejected the arithmetical approach in Wachtel.  It adopted the ‘reasonable requirements’ approach set out in the Preston line of cases.  The rationale for adopting this approach was in the words of Hunter J.A. :

‘ the history of matrimonial legislation, and more particularly of that relating to financial provision, demonstrates a legislative intent in Hong Kong to use English experience and to follow England’s example.  This has inevitably and properly led to the repeated use in the Hong Kong courts of English authority and of English textbooks.’ 

39. This Court held that the relevant guidelines for financial provision were :

‘ 4. The inquiry can conveniently start at the evaluation under [section 7(1)(a)] of “the income, earning capacity, property and other financial resources” of both parties.  This usually involves the evaluation of the husband’s contribution to the family fortunes which are under his control.  But resources of both parties derived from any source, e.g. inheritance, have also to be considered.

5. The next stage is to evaluate what Ormrod, L.J. more than once referred to as the wife’s “reasonable requirements”.’

40. In C. v. C. the total asset of the family was in the sum of HK$90.338 million, the wife eventually received HK$35.424 million or about 39%.

White v. White

41. For many years the English courts faithfully followed the ‘reasonable requirements’ approach.  One glaring feature of this approach is that after satisfying the ‘reasonable requirements’ of a spouse who is usually the wife, there still may be substantial family assets left and these assets would then be given to the other spouse, namely the husband.  In more recent times the English Courts tried to redress this rather unfair way of distributing the family assets.

42. These efforts received a breakthrough in the new millennium in the landmark decision of White where the House of Lords held that the ‘reasonable requirements’ of a spouse should not be regarded as determinative in arriving at an award.  The leading judgment was delivered by Lord Nicholls of Birkenhead.  The succinct points are as follows.

(1)    Purpose of legislation

43. After referring to the factors in section 25 of MCA, Lord Nicholls relied on the statement of Thorpe LJ in Dart v. Dart [1996] 2 FLR 286 and held that, 

‘ the purpose of these powers is to enable the court to make fair financial arrangements on or after divorce in the absence of agreement between the former spouses’.  (p 604) 

(2)    ‘Reasonable requirements’ approach to be abandoned

44. He held that,

‘ Confusion might be avoided if courts were to stop using the expression ‘reasonable requirements.’  (p 608)

(3)    Equality status in a marriage

45. Lord Nicholls emphasised the equal status of a husband and wife in a matrimonial union which should be reflected in the division of assets.  He held that,

‘ In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles.  Typically, a husband and wife share the activities of earning money, running their home and caring for their children.  Traditionally, the husband earned the money, and the wife looked after the home and the children.  This traditional division of labour is no longer the order of the day.  Frequently both parents work.  Sometimes it is the wife who is the money-earner, and the husband runs the home and cares for the children during the day.  But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party when considering paragraph (f), relating to the parties’ contributions.  If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets.  There should be no bias in favour of the money-earner and against the home-maker and the child-carer.’  (p 605)

(4)    Yardstick of equality of division

46. Lord Nicholls then referred to the ‘yardstick of equality of division’ which should be used as a check on the proposed method of division.  He stated that,

‘ A practical consideration follows from this.  Sometimes, having carried out the statutory exercise, the Judge’s conclusion involves a more or less equal division of the available assets.  More often, this is not so.  More often, having looked at all the circumstances, the Judge’s decision means that one party will receive a bigger share than the other.  Before reaching a firm conclusion and making an order along these lines, a judge would always be well advised to check his tentative views against the yardstick of equality of division.  As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so.  The need to consider and articulate reasons for departing from equality would help the parries and the court to focus on the need to ensure the absence of discrimination.’  (p 605)

47. He, however, emphasised that he was not advocating a presumption of equal division. 

‘ This is not to introduce a presumption of equal division under another guise.  Generally accepted standards of fairness in a field such as this change and develop, sometimes quite radically, over comparatively short periods of time.  The discretionary powers, conferred by Parliament 30 years ago, enable the courts to recognise and respond to developments of this sort.  These wide powers enable the courts to make financial provision orders in tune with current perceptions of fairness.  Today there is greater awareness of the value of non-financial contributions to the welfare of the family.’  (p 605)

(5)    Surplus of assets

48. He further deprecated the practice of allowing one spouse, usually the husband, to keep the surplus of the assets after the needs of the other spouse is satisfied.

‘ But I can see nothing, either in the statutory provisions or in the underlying objective of securing fair financial arrangements, to lead me to suppose that the available assets of the respondent become immaterial once the claimant wife’s financial needs are satisfied.  Why ever should they?  If a husband and wife by their joint efforts over many years, his directly in his business and hers indirectly at home, have built up a valuable business from scratch, why should the claimant wife be confined to the court’s assessment of her reasonable requirements, and the husband left with a much larger share?  Or, to put the question differently, in such a case, where the assets exceed the financial needs of both parties, why should the surplus belong solely to the husband?  On the facts of a particular case there may be a good reason why the wife should be confined to her needs and the husband left with the much larger balance.  But the mere absence of financial need cannot, by itself, be a sufficient reason.  If it were, discrimination would be creeping in by the back door.  In these cases, it should be remembered, the claimant is usually the wife.  Hence the importance of the check against the yardstick of equal division.’  (p 608)

(6)    Inherited money and property

49. As to the position of property acquired by one spouse before marriage and property inherited by one spouse during marriage, Lord Nicholls stated that :

‘ Plainly, when present, this factor is one of the circumstances of the case.  It represents a contribution made to the welfare of the family by one of the parties to the marriage.  The judge should take it into account.  He should decide how important it is in the particular case.  The nature and value of the property, and the time when and circumstances in which the property was acquired, are among the relevant matters to be considered.  However, in the ordinary course, this factor can be expected to carry little weight, if any, in a case where the claimant’s financial needs cannot be met without recourse to this property.’  (p 610)

Miller/McFarlane

50. The House of Lord considered the issue of distribution of assets again in the joint appeals of Miller v. Miller and McFarlane v. McFarlane [2006] 2 WLR 1283.  In Miller the parties had a short marriage of three years and the trial judge considered the conduct of the husband in making the financial provisions.  In McFarlane the parties were professionally qualified and pursued lucrative careers until they agreed that the wife should give up her work to concentrate on raising their children.  The assets of the family were insufficient to effect an immediate clean break.  The wife sought a periodic payment order.  The succinct points of the judgment are as follows :

1)     The fairness approach

51. Lord Nicholls reiterated that the ‘reasonable requirements’ principle should be abandoned in favour of the ‘fairness’ approach :

‘ For many years one principle applied by the courts was to have regard to the reasonable requirements of the claimant, usually the wife, and treat this as determinative of the extent of the claimant’s award.  Fairness lay in enabling the wife to continue to live in the fashion to which she had become accustomed.  The glass ceiling thus put in place was shattered by the decision of your Lordships’ House in the White case.  This has accentuated the need for some further judicial enunciation of general principle.’  [8]

2)     The three elements of fairness   

52. Lord Nicholls identified three elements or strands of principles under the fairness approach.  He stated that in terms of fairness the first consideration should be given to the welfare of the children of the marriage, beyond that there are these three elements or strands of principle :

(1)     Financial needs 

‘ This element of fairness reflects the fact that to a greater or lesser extent every relationship of marriage gives rise to a relationship of interdependence.  The parties share the roles of money-earner, home-maker and child-carer.  Mutual dependence begets mutual obligations of support.  When the marriage ends fairness requires that the assets of the parties should be divided primarily so as to make provision for the parties’ housing and financial needs, taking into account a wide range of matters such as the parties’ ages, their future earning capacity, the family’s standard of living, and any disability of either party.  Most of these needs will have been generated by the marriage, but not all of them.  Needs arising from age or disability are instances of the latter.’  [11]

‘ In most cases the search for fairness largely begins and ends at this stage.  In most cases the available assets are insufficient to provide adequately for the needs of two homes.  The court seeks to stretch modest finite resources so far as possible to meet the parties’ needs.  Especially where children are involved it may be necessary to augment the available assets by having recourse to the future earnings of the money-earner, by way of an order for periodical payments.’  [12]

(2)    Compensation

‘ This is aimed at redressing any significant prospective economic disparity between the parties arising from the way they conducted their marriage.  For instance, the parties may have arranged their affairs in a way which has greatly advantaged the husband in terms of his earning capacity but left the wife severely handicapped so far as her own earning capacity is concerned.  Then the wife suffers a double loss: a diminution in her earning capacity and the loss of a share in her husband’s enhanced income.  This is often the case.  Although less marked than in the past, women may still suffer a disproportionate financial loss on the breakdown of a marriage because of their traditional role as home-maker and child-carer.’  [13]

(3)   Sharing

‘ This “equal sharing” principle derives from the basic concept of equality permeating a marriage as understood today.  Marriage, it is often said, is a partnership of equals.  In 1992 Lord Keith of Kinkel approved Lord Emslie’s observation that ‘husband and wife are now for all practical purposes equal partners in marriage’: R v R [1992] 1 AC 599, 617.  This is now recognised widely, if not universally.  The parties commit themselves to sharing their lives.  They live and work together.  When their partnership ends each is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary.  Fairness requires no less.  But I emphasise the qualifying phrase: ‘unless there is good reason to the contrary’.  The yardstick of equality is to be applied as an aid, not a rule.’  [16]

(4)    Sharing applies to all marriages

53. In terms of the equal sharing principle Lord Nicholls was of the view that it applies to both short and long marriages.  [17] 

(5)    Two types of properties

54. While Lord Nicholls rejected the distinction between ‘family’ assets or ‘business or investment’ assets, [20] he drew a distinction between two types of properties which are distinguished by their source, namely :

(1) Property acquired during the marriage otherwise than by inheritance or gift, sometimes called the matrimonial property, and

(2) Non-matrimonial property.  [22]

(6)    Duration of marriage and its effect

55. Lord Nicholls held that the length of the marriage may have an effect on the division of these two types of properties.

 a) Short marriage

Lord Nicholls held that in the case of a short marriage,

‘ fairness may well require that the claimant should not be entitled to a share of the other’s non-matrimonial property.  The source of the assets may be a good reason for departing from equality.  This reflects the instinctive feeling that parties will generally have less call upon each other on the breakdown of a short marriage.’  [24] 

b) Long marriage

‘ With longer marriages the position is not so straightforward.  Non-­matrimonial property represents a contribution made to the marriage by one of the parties.  Sometimes, as the years pass, the weight fairly to be attributed to this contribution will diminish, sometimes it will not.  After many years of marriage the continuing weight to be attributed to modest savings introduced by one party at the outset of the marriage may well be different from the weight attributable to a valuable heirloom intended to be retained in specie.  Some of the matters to be taken into account in this regard were mentioned in the above citation from the White case.  To this non-exhaustive list should be added, as a relevant matter, the way the parties organised their financial affairs.’  [25]

(7) Periodical payments and clean break principle

56. Lord Nicholls first of all stated that periodical payments are not to be limited to payment for maintenance [31] :

‘ In particular, I consider a periodical payments order may be made for the purpose of affording compensation to the other party as well as meeting financial needs.  It would be extraordinary if this were not so.  If one party’s earning capacity has been advantaged at the expense of the other party during the marriage it would be extraordinary if, where necessary, the court could not order the advantaged party to pay compensation to the other out of his enhanced earnings when he receives them.  It would be most unfair if absence of capital assets were regarded as cancelling his obligation to pay compensation in respect of a continuing economic advantage he has obtained from the marriage.’  [32]

57. Then on the impact of a clean break on periodical payment orders made to provide compensation to a disadvantaged party, he held that,

‘ There is of course a significant practical difference between providing compensation by appropriate division of existing capital assets and providing compensation by means of a periodical payments order.  Of its nature a lump sum payment is once and for all.  A lump sum payment represents, to that extent, the financial closure of a failed marriage. It draws a line under the past.  Periodical payments represent the opposite.  Future earnings and future payments lie in the future.  They are a continuing financial tie between the parties.  Today the undesirability of such continuing ties is regarded as self-evident.’  [35]

58. Notwithstanding the undesirability of a continuing financial tie between the parties, he stated that circumstances may justify the payment of periodical payments as a means of compensation to the other spouse.

‘ These references to financial dependence and hardship are apt when applied to a periodical payments order making provision for the payee’s financial needs.  They are hardly apt when applied to a periodical payments order whose object is to furnish compensation in respect of future economic disparity arising from the division of functions adopted by the parties during their marriage.  If the claimant is owed compensation, and capital assets are not available, it is difficult to see why the social desirability of a clean break should be sufficient reason for depriving the claimant of that compensation.’  [39]

(8)    Conduct

59. On the relevance of conduct of the parties, Lord Nicholls held that :

‘ In most cases fairness does not require consideration of the parties’ conduct.  This is because in most cases misconduct is not relevant to the bases on which financial ancillary relief is ordered today. Where, exceptionally, the position is otherwise, so that it would be inequitable to disregard one party’s conduct, the statute permits that conduct to be taken into account.’  [65]

(9)    Special contribution

60. In evaluating the contributions each party made to the welfare of the family, Lord Nicholls held that,

‘  Parties should not seek to promote a case of “special contribution” unless the contribution is so marked that to disregard it would be inequitable.   A good reason for departing from equality is not to be found in the minutiae of married life.’  [67] 

61. He held that

‘  exceptional earnings are to be regarded as a factor pointing away from equality of division when, but only when, it would be inequitable to proceed otherwise.’  [68] 

Baroness Hale of Richmond

62. In terms of great wealth which has either been brought into the marriage or generated by the business efforts and acumen of one party, Baroness Hale of Richmond held that the approach is the same as that given in White in connection with premarital property, inheritance and gifts.  She held that :

‘ The source of the assets may be taken into account but its importance will diminish over time.  Put the other way round, the court is expressly required to take into account the duration of the marriage: section 25(2)(d).  If the assets are not “family assets”, or not generated by the joint efforts of the parties, then the duration of the marriage may justify a departure from the yardstick of equality of division.  As we are talking here of a departure from that yardstick, I would prefer to put this in terms of a reduction to reflect the period of time over which the domestic contribution has or will continue (see Bailey-Harris, “Comment on GW v RW (Financial Provision:Departure from Equality)” [2003] Fam Law 386, 388) rather than in terms of accrual over time (see Eekelaar, “Asset Distribution on Divorce─Time and Property” [2003] Fam Law 828).  This avoids the complexities of devising a formula for such accruals.’  [152]

My view on White and Miller

63. White and Miller are, of course, not binding on this Court but nonetheless they are highly persuasive authorities.I would firmly embrace the approach in White and Miller on the division of family assets on divorce.  On marriage the parties commit to sharing their lives.  It is a partnership of equals.  The husband may work while the wife may stay at home to take care of the family.  Their contributions are nonetheless equal.  As more frequently happens these days, with domestic helpers being available, both the husband and wife work and make equal contributions to the welfare of the marriage. 

64. On divorce the principle and spirit underlining the union should be reflected in the division of the family assets.  The division should proceed on the basis of fairness and this necessarily means there is no room for discrimination between husband and wife.  The starting point is equality in division unless there is a good reason to depart from it. 

65. The ‘reasonable requirements’ principle which served Hong Kong for nearly two decades since C. v. C should be disregarded and replaced by the new approach.  This is necessary because C. v. C was based on the then matrimonial practice in the United Kingdom which has since the year 2000 adopted the new ‘fairness’ approach.  C. v. C exhorted the Hong Kong courts to adopt the matrimonial practice in the United Kingdom.  The Hong Kong legislation on matrimonial property is still based on the almost identical United Kingdom legislation.  The conditions between Hong Kong and the United Kingdom have not changed dramatically since C. v. C.  On the contrary Hong Kong continued to develop socially and economically since 1990.  It is now one of the major centres for financial services and is often described as a ‘world city’.  The equality principle is fully embraced in the Basic Law and Bill of Rights of Hong Kong.  One cannot see any discernible difference in the social and economic context of these two places which may justify a retention of the former matrimonial practice which is no longer applied in the United Kingdom.  This Court (Stock, Yuen JJA and Hartman J) in L v. C [2007] 3 HKLRD 819 considered C v. C to be outdated and regarded it as no longer a satisfactory approach, although in that case the Court did not consider it necessary to embark on an analysis of the White approach.

66. Although it takes nearly eight years for the new fairness approach to be introduced in Hong Kong the consolation perhaps is that the law in this area has become more firmly established in the United Kingdom and there is less controversy on how the underlying principle is to be applied.  The most important aspect is on its practical implementation.  While White seems to be tentative on the application of the equality principle with Lord Nicholls calling upon judges to check their preliminary assessment against the ‘yardstick of equality of division’, by the time of Miller the House of Lords has firmly come down to a more assertive approach.  ^Lord Nicholls observed when the partnership ends ‘each is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary.  Fairness requires no less’.  While it is fair to say that he would not like to treat the equal division as a legal presumption and for that reason he continued to say that the yardstick of equality is to be applied ‘as an aid, not a rule’, there is no doubt that the general approach is to apply the equal division principle unless there is a good reason to depart from it.  This can be seen from the phrases Lord Nicholls used in Miller namely ‘equal sharing principle’ [20] and ‘sharing entitlement’ [29].

67. In fact this is also the interpretation placed on Miller by the English Court of Appeal (Potter P. Thorpe, Wilson LJJ) in Charman v. Charman [2007] 2 FCR 217 where it held at [65] that these phrases described more than a yardstick for use as a check.  It was further of the view that Baroness Hale put the matter beyond doubt in Miller when she said :

‘ I agree that there cannot be a hard and fast rule about whether one starts with equal sharing and departs if need or compensation supply a reason to do so, or whether one starts with need and compensation and shares the balance.’

68. In my view one can safely reject the notion that appeared in some previous cases that equality in treatment does not necessarily mean equality in division.

The applicable principles

69. I am aware that Family Court judges are concerned with the practical application of the principles established in White and Miller.  I will set out what I consider to be the relevant principles when the Court considers ancillary relief applications :

(1) In the majority of the cases where the parties only have limited financial resources, the focus of the inquiry on fairness is to divide the assets of the parties so as to make provision for their housing and financial needs.  It may be necessary to augment the available assets by making orders for periodical payments (Miller [11][12]).

(2) Where there are assets which are available beyond satisfying the immediate housing and financial needs, equality in division of the assets should be made unless there is a good reason to the contrary (Miller [16], Charman [65]).  This approach is not confined to ‘big money cases’ but to cases where the assets are available beyond satisfying the needs of the parties.  (Rayden and Jackson on Divorce and Family Matters Vol 1(1), para 16.26)

(3) The inquiry should be conducted in two stages :

1)    First, computation of the available assets of the parties such as property, income (including earning capacity) and other financial resources which the parties have and the parties have and are likely to have in the foreseeable future (Charman [67]).

2)     Second, distribution of the assets by reference to the three principles of need (generously interpreted), compensation and sharing.  These principles can be gleaned from section 7(1) and each of the matters set out in section 7(1)(a)-(g) can be assigned to one or another of the three principles (Charman [68]).

(4) The principle of need requires consideration of    

1)     the financial needs, obligations and responsibilities of the parties (section 7(1)(b));

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

3)     the age of the parties (section 7(1)(d)); and

4)     any physical or mental disability (section 7(1)(e))  (Charman [70]).

(5) The principle of compensation relates to, among others,

1) the prospective financial disadvantage which upon divorce some parties face as a result of decisions which they took for the benefit of family during marriage.

2) in short marriage the financial disadvantage a party suffered, if any, on entering into the marriage.

3) any loss of possible pension rights : section 7(1)(g) (Charman [71]).

(6) The relevant factors for the principle of sharing are,

1)     the contributions of each of the party to the welfare of the family (section 7(1)(f)).

2)     the duration of the marriage (section 7(1)(e)).  (but see below)

3)     conduct of the parties which it would be inequitable to disregard (Miller [65]; Charman [72]).

(7)    As to any conflict between these three principles,

1) the criterion of fairness is to apply in irreconcilable conflicts between the three principles [Charman 73].

2) when the result suggested by the needs principle is an award of property less than the result suggested by the sharing principle, the latter result should in principle prevail (Miller [28], [29], [139]; Charman [73].

3) when the result suggested by the needs principle is greater than the result suggested by the sharing principle, the former result should in principle prevail (Miller [142], [144]; Charman [73]).

(8) The principle of fairness is to apply to all properties of the parties both ‘matrimonial’ (i.e. the product of both parties which also include the matrimonial home, even if this was brought into the marriage by one of parties) and ‘non-matrimonial’ (i.e. by inheritance and gift) (Miller [22]).

(9) The equal sharing principle applies to both long and short marriages but in case of short marriage, the non-matrimonial property may be a good reason for departing from equality (Miller [24]; Charman [66]).

(10) The concept of ‘special contribution’ i.e. exceptional income generated by only one party, may be regarded as a factor pointing away from equality of division when, but only when, it would be inequitable to proceed otherwise (Miller [68]).

(11) Where a spouse has given up a lucrative career for the benefit of the family, this may justify an award for compensation (Miller [90-93]).

The principles are not exhaustive

70. It would not be practicable to list each and every principle that one may extract from White and Miller.  As Charman observed, the House of Lords after laying down the guidelines has left much to be developed by courts.  What I have done here is to set out those principles which I believe would be most frequently encountered in ancillary relief applications.

Authorities from other jurisdictions

71. Ms Yip has referred to a number of authorities from other overseas jurisdiction on the application of White.  I have not referred to them in this judgment because first, I do not wish to turn a subject which has huge practical impacts on the lives of the population into an overly academic discussion.  Second, I consider that the two House of Lords decisions and the English Court of Appeal interpretation of them in Charman are clear enough on the issues under consideration.  The question as to whether Hong Kong should follow the new approach could be resolved without reference to the other overseas authorities.

Equality provisions

72. For the same reasons I have not referred to the equality provisions in the Basic Law, Bill of Rights, Convention on the Elimination of all forms of Discrimination against Women (‘CEDAW’) or the anti-discriminatory provision of the Sex Discrimination Ordinance (Cap. 480) as I considered the matter can be resolved solely by the equal status of the parties to a marriage.

Post White cases in Hong Kong

73. Ms Yip has also referred to a number of Hong Kong cases decided after White such as F v. F [2003] 1 HKLRD 836, L v. L (HCMC No. 6 of 2003, Decision 4/4/2007), C v. F (D.C.M.C. No. 17010/2001, Decision 14/11/2006).  These cases contained valuable discussions on White and Miller.  I have not referred to them because again I wish to confine the discussion to the relevant principles set out in the two landmark cases and the interpretation placed upon them in Charman. 

The total asset available for distribution

74. In my view the assets that are available for distribution are not merely the assets of the husband as held by the Judge but rather the joint assets of the family.  The Judge found that the husband’s assets are HK$4,650,000.00 and the wife’s assets are HK$522,740.00.  However, it is common ground that the husband had paid the wife $650,000.00 after separation but before judgment to acquire her interest in the matrimonial home.  I agree with the approach of Yuen JA that in calculating the assets of the husband it may be better to treat this sum to be under the control of the husband.  Hence the husband’s assets are $5,300,000.00 ($4,650,000.00 plus $650,000.00).  The wife said that she had used the $650,000.00 to reduce her loss in a margin trading account.  The balance of this account is included in the wife’s assets as found by the Judge.  In other words the $650,000.00 was eventually reduced to $522,740.00.  Since the $650,000.00 was treated as the husband’s assets, for the purpose of calculation, there should be adjustments in the figures of the wife’s assets.  In the circumstances I would adopt the approach of Yuen JA by treating the wife’s assets as consisting of $19,000.00 (MPF) and $46,000.00 (jewellery) at a total of $65,000.00.  The joint assets are therefore $5,365,000.00 made up of $5,300,000.00 and $65,000.00 .

Equal contribution in the present case

75. In this case the Judge held that both the husband and wife had made equal contributions to the family.

Wife entitled to half

76. In my view applying the principle of equality the wife should be entitled to half of the joint matrimonial assets in the sum of HK$2,682,500.00.  There is no contrary factors in this case which would justify a departure from the equality of division principle.  The marriage of seven years is not unduly short or long.  The conduct of the husband has no impact on the division.  From this sum of HK$2,682,500.00 the following sums should be deducted  :

1)    the wife’s assets of $65,000.00; 
2)    the payment of $650,000.00; and
3)     the payment of $232,040.00.

77. The balance is HK$1,735,460.00. 

The orders

78. The appeal is allowed and I will make the following orders :

(1) The husband is required to pay the wife HK$1,735,460.00 as full and final settlement of the wife’s application for financial relief.

(2) The husband is required to pay the sum within three months.

(3) The wife is required to vacate from the former matrimonial home in Sea Crest Villa within three months.  The payment of HK$1,735,460.00 is to be made to the wife at the same time as she vacates from the former matrimonial home.

(4) There will be a provisional order that there will no order as to costs of the appeal.

79. I will further vary the order of the Judge dated 6 March 2007 when she imposed a charging order absolute against Sea Crest Villa until such time as the husband completely paid the balance of the sum of HK$792,000.00 and interest.  The new order is that the charging order absolute is to remain until the husband fully paid the sum of HK$1,735,460.00.  

Appreciation

80. On behalf of the Court I would like to express our appreciation to the detailed research and valuable assistance provided by Ms Anita Yip.

Translation

81. The judgment below was in Chinese.  However, in view of the fact that I have quoted extensively from the English decisions and this judgment may be used in other family cases, the majority of which are conducted in English, I have decided to give the judgment in English.  The parties will be provided now with a summary of the judgment in Chinese and a translation of the judgment in Chinese in due course.

Hon Yuen JA :

82. It is well-established that this court is bound by a previous decision of its own unless it was reached per incuriam.  There is no suggestion that the decision in C v C has been reached per incuriam as it does not appear that it had been reached in ignorance or forgetfulness of a decision binding upon it or of an inconsistent statutory provision and that if the court had had this material in mind it must have reached a contrary decision (Limb v Union Jack Removals Ltd [1998] 1 WLR 1354, §34). 

83. It may be that with new constitutional and human rights put in place since C v C, this court may be permitted to revisit C v C even though it was not per incuriam.  But this court has not been referred to those constitutional and human rights and as neither party was legally represented, I do not think it would be appropriate to go down that route in this case.      

84. So I start with the premise that this court is bound by C v C.  However the ratio decidendi of a case is not the conclusion but the “essential logical step(s) in the ... reasons” for coming to that conclusion (Saif Ali v Sydney Mitchell & Co [1978] 3 All ER 1033, 1040 h-j per Lord Diplock).  So the main issue in this case is what were the reasons for the conclusion in C v C and what that ratio decidendi requires this court to do.  After discussing that issue I would like to add some observations on the English position after White v White and Miller v Miller.

85. In C v C the wife’s counsel had drawn to the attention of the court the fact that the legislative “target” shown in the concluding words of s.25(1) MCA (i.e. that the court should strive to put the parties in the financial position they would have been in had the marriage not broken down) had been deliberately omitted from s.7 MPPO.  On the strength of that difference in the legislation, the wife’s counsel had invited the court to construe s.7 for itself in the light of the court’s perception of Hong Kong’s need and to ignore all English authority (p.185E-F). 

86. Hunter JA (delivering the judgment of the court) noted the omission (p.185H- p.186B) but considered it made no difference, or might even be detrimental to the wife in a “tentative conclusion” (p.188E-H).  In considering what the legislature intended when it passed s.7 MPPO – in similar (albeit not identical) terms to the English legislation – he placed substantial emphasis on the fact that historically the Hong Kong legislation closely followed the English legislation (p.185G-H).  He held that “the history of matrimonial legislation, and more particularly of that relating to financial provision, demonstrates a legislative intent in Hong Kong to use English experience and to follow England’s example” (p.186A-B). 

87. It was in that light that the court then went through the English authorities to “extract” what the court called “guideline advice or principles” (p.186D).  Accordingly it applied the reasonable requirements test because that was how the legislation was then interpreted in England by the English Court of Appeal (in fact there was no House of Lords decision on the legislation until White v White). 

88. In the light of that reason for the conclusion in C v C, what is the effect of the House of Lords’ interpretation of the same piece of legislation in White v White, which has been informed by the developing socio-economic conditions and increasing human rights awareness in the two decades since the first of the English Court of Appeal cases?  In considering the answer to this question, I note that (1) those developing conditions and increasing awareness apply as much in Hong Kong as they do in England; (2) this type of legislation is of the type intended to be “always speaking”; and (3) although House of Lords decisions are no longer binding on Hong Kong courts after 1997, the Hong Kong legislature is deemed to be aware of C v C’s ratio decidendi (to follow the English interpretation of the legislation) and of the new interpretation of that legislation by the House of Lords, and the legislature has done nothing in the years since White v White to amend the legislation to disavow the House of Lords’ interpretation.  By virtue of those considerations, I think this court – bound by the ratio decidendi of C v C to follow the English interpretation – is bound to apply the House of Lords’ interpretation in White v White and Miller v Miller.  This is quite apart from the constitutional and human rights considerations which had played no part in the court’s decision in C v C.

89. Applying White v White and Miller v Miller to this case, I consider that it would be fair in the simple circumstances of this case for the Wife to receive half of the joint family assets.  The following calculation is derived from such figures as we are able to extract from the judgment below and is divided into stages appropriate to the facts of this case.

Stage 1 - Assessment of the Joint Marital Product

(A) Controlled by Husband

(1)     The Husband was held at trial to have assets of $4,650,000 (including assumed non-disclosed assets of $2,950,000)

(2)     Before trial the Husband had paid $650,000 to the Wife

Sub-total of (1) + (2) = $5,300,000.

(B) Controlled by Wife

(3)      Her MPF account of $19,000

(4)      Jewellery worth $46,000

(NB. The Wife did not work after marriage and there was no evidence that the Wife had any savings from before marriage.  Although there was evidence that she had a forex trading account, there was no finding from the judge that this was in a credit position before the Husband paid her $650,000 after separation, and by the time of trial the sum of $650,000 had been reduced to $522,740). 

Sub-total of (3)+(4) = $65,000.

Therefore the joint marital product (1)+(2)+(3)+(4) was $5,365,000

Stage 2 - Division of the Joint Marital Product

On the basis that a fair division would be 50:50, the Wife’s share would be [(1)+(2)+(3)+(4)] ÷ 2, i.e. $2,682,500.

Stage 3 - Deductions for assets controlled by Wife and payments made to her before trial

From that share should be deducted:

(5) the sum the Husband paid her after separation but before trial of $650,000

Sub-total of (3) + (4) +(5) = $715,000.

Stage 4 - What the judge should have ordered

Therefore what the judge should have ordered the Husband to pay the Wife was: 

less 

After trial the Husband further paid the Wife a net sum of $232,040 (§20 Cheung JA’s judgment), therefore this court should now order the Husband to pay the Wife a sum of $1,735,460 in the manner suggested in Cheung JA’s judgment.  I would also agree with the other parts of Cheung JA’s order.    

90. That is the only order that this court can make because we are bound by the previous decision in C v C to apply the English position.  I would however observe that there is much to be said for the Australian position as set out in cases such as Figgins v Figgins [2002] FamCA 688.  However the English position can only be overturned by the Court of Final Appeal and one can only hope that priority will be given to the hearing of a suitable case, with adequate representation for both parties.  That said, I would like to add that the assistance of Miss Yip as amicus in the present case was most gratefully received.

91. Finally I would observe that the parties had entered into an agreement for the division of the matrimonial assets and it is regrettable that the Husband (as the judge has found) had been guilty of material non-disclosure with the result that the agreement had to be set aside.  This court (Stock, Yuen JJA and Hartmann J) has held in L v C [2007] 3 HKLRD 819 that parties should be held to agreements for division of matrimonial assets in the absence of unfair or unconscionable factors in the circumstances in which they made the agreement and in the absence of unforeseen circumstances arising after the agreement.  If the Husband had been frank with his assets, that would have saved both parties much time and anguish.

Hon Lam J :

92. I agree with Cheung JA that the reasonable requirement principle is outdated.  I also agree with Yuen JA on her analysis regarding the impact of White and Miller on C v C.  I have examined some unsatisfactory aspects of that principle in L v L HCMC 1 of 2003, 18 Nov 2005.  As I identified in Paragraph 65 of that judgment, the question is whether the law in Hong Kong has been fossilized by C v C [1990] 2 HKLR 183.

93. As a matter of stare decisis, this court is bound by its previous decisions, including decisions prior to 1^st July 1997.  Therefore C v C is binding on this court.  But what is the true ratio of C v C?

94. The primary duty of the court is laid down by Section 7(1) of the MPPO.  In C v C, the court gave guidance on how the discretion under Section 7(1) should be exercised.  One important guidance was the conclusion at p.187I,

“In my view the courts of Hong Kong can and should derive considerable help from the much wider experience of the English courts in this field.”

95. The eight propositions set out in the judgment of Hunter JA were a summary of the then prevalent English authorities on the exercise of discretion.

96. As pinpointed by Lord Nicholls in White v White [2001] 1 AC 596, the overriding objective of the Section 7(1) exercise should be achieving fairness between the parties.  I stand by my conclusion in L v L that C v C is consistent with that analysis.

97. Lord Nicholls further explained why the notion of fairness have to be applied in a manner in line with the prevailing social and moral values at paras. 4 to 8 in the judgment in Miller v Miller [2006] 2 WLR 1283.  In particular, His Lordship highlighted the point that these values may change from generation to generation.  This leads to the possibility that the requirements of fairness may change as social conditions change.

98. Thus, what was fair in the past may no longer be fair at present.

99. The shattering of the glass ceiling set by the principle of reasonable requirement is a recognition by the English courts that fairness demands the law to move forward given the change in social and moral values in the English society.

100. As Cheung JA said in his judgment, Hong Kong has developed socially and economically since 1990.  Like the situation in England, a maxima set by reasonable requirement can no longer serve the overriding objective of fairness.

101. In other words, if the court were to be shackled by the reasonable requirement approach in making an ancillary relief award, it will not be carrying out the Section 7 exercise faithfully.

102. For my part, I have no doubt whatsoever that C v C would have decided in accordance with the latest English authorities if the court were to decide that case today. 

103. I regard the conclusion set out in paragraph 94 above as the primary ratio in C v C.  The summary of the English authorities should only be regarded as the consequential propositions following from that primary guidance.

104. Due to the subsequent developments in the English case law, there is now a conflict between the primary ratio in C v C and proposition (7) in the summary.  In my view, in such circumstances, bearing in mind that the court’s duty is prescribed by Section 7 with fairness being its overriding objective, the primary ratio should prevail.

105. Given the above analysis, I do not think this court acts out of line with the principle of stare decisis in following White v White in abrogating the reasonable requirement approach and in giving recognition to gender equality by adopting a non-discriminatory approach when considering contribution to the welfare of the family.

106. Like Cheung JA, I think time has come for Hong Kong to embrace the three principles explained by Lord Nicholls and Baroness Hale in Miller v Miller as the rationale for the redistribution of properties by way of ancillary relief: the principle of need, the principle of compensation and the principle of sharing.

107. As regards how these principles work in practice, the judgment of Cheung JA contains a good working summary of the English authorities.  Obviously, given the great varieties of cases that may call for determination in ancillary relief matters, there are areas that have yet to be argued, whether in Hong Kong or in England.  As observed by Sir Mark Potter P in Charman v Charman [2007] 2 FCR 217 at para. 63, even with the guidance in White and Miller, “the House has left much for the courts to develop”. 

108. There might well be further developments in the case law on Section 7.  It will be unfortunate if one were to treat this judgment as another C v C fossilizing the law of Hong Kong.

109. Another reason for my diffidence is that both parties in this appeal are legally unrepresented.  Whilst we have been greatly assisted by Ms Yip, it is unrealistic to assume that we have been addressed on all possible points that might emerge from an ancillary relief application.

110. In his judgment, Cheung JA set out the background of the parties to this appeal.  For a family like the one we are concerned with, I agree that equal division is the appropriate yardstick.

111. The husband’s argument mainly focused on the fact that the matrimonial home was acquired with funds from his parents.  Even assuming that were so (and there is a dispute on facts in that regard), that must be regarded as matrimonial property or family asset.  Equal division should apply to the property irrespective of source of fund for its purchase.  See Miller para. 22 and para. 149.

112. For these reasons and the reasons given by Cheung JA and Yuen JA, I agree that the appeal should be allowed.  In practical terms, if the husband does not pay the wife $1,735,460, she can apply for an order for sale pursuant to the charging order. She must of course vacate from the property before the sale.  She will then be entitled to have the HK$1,735,460 from the net sale proceeds whilst the husband can have the balance.