AA v. WSC

FCMC 3096/2020

[2023] HKFC 170

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 3096 OF 2020

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JUDGMENT
(Variation of interim maintenance)

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Introduction

1.  On 3 February 2021, I made an interim monthly maintenance order for the three daughters of the family (“Children”) against the Respondent (“Father”) in the total sum of HK$34,200 (ie $11,400 per child) with the Father’s following undertakings:

i.      to reimburse the Petitioner (“Mother”) 50% of the Children’s ECA expenses (with ceiling HK$20,000);

ii.     to reimburse the Mother 50% of the Children’s extra tuition expenses (with ceiling HK$15,000);

iii.    to pay the Children’s school fees direct (“the 2021 Order”).

2.  This is the application of the Mother by way of her summons dated 21 June 2021 seeking to vary the 2021 Order. 

3.  The Mother asks the Court to substitute paragraph 1 of the 2021 Order (ie interim monthly maintenance of HK$34,200) with an order for maintenance of HK$141,800/month (or ~HK$47,266 per child) an increase of HK$107,600, and also to require that the Father not deduct the reasonable expenditure of the family at the clubs from maintenance (in addition to his existing undertakings to pay for school fees and part of the Children’s ECAs and extra tuition).

4.  On 24 November 2022, I ordered that this application be disposed of on paper with other directions for filing of the bundle and submissions etc.

Background

5.  The Mother is now aged 46 and usually works from home on Mondays and Fridays in an international IT company since 2016.

6.  The Father is now aged 50 and commenced employment with a famous bank as the managing director of a department in February 2021.  Both of the parties were graduated in the very prestigious universities in the USA.

7.  They married on 3 July 2004 in Hawaii, the USA and have the Children, namely:

i.      The first daughter, aged 15, studying Grade 9 at an international school in Hong Kong;

ii.     The second daughter, aged 13, studying Grade 7 at the same campus of the same international school and

iii.    The third daughter, aged 9, studying Grade 3 at the different campus of the same international school.

8.  Decree Nisi was pronounced on 3 May 2023.

9.  According to the Order dated 3 February 2021, I granted joint custody.  Further to my Order dated 12 July 2023[1] after a 3-day trial, the Mother was granted sole care and control of the Children with defined access to the Father.

10.  It is noteworthy that the Father disclosed during the children’s trial that he has a second family and another son (“Young Son”) who is aged about 4 moved from PRC and currently living with his mother (“Madam Li”) in Hong Kong, and he spends roughly half of his time living with them at Burnside in Repulse Bay.

Mother’s case

11.  Mr Robin Egerton and Mr Azan Marwah for the Mother submitted that this application was prompted by two significant changes of circumstance.  The first change being her discovery that the Father had misled the Court at the time of the 2021 Order that he was “unemployed” with “no income”.  He hid from the Court and the Mother that he had been offered employment by his present bank employer on 30 June 2020, and that he had already signed the contract on 22 January 2021.  Under that contract, he received HK$1,185,869.10/month in total income in 2022.  This is roughly 4.4 times the Mother’s income and almost 13 times greater than what he reported to the Court at the time of the 2021 Order.  The original application determined by me on 3 February 2021 was based on the Mother’s compromised claim, which she would not have done but for the Father’s deception.  Due to the deception, she only sought the Father to pay half of the Children’s needs at that time. 

12.  The second change is the increase in the Children’s expenses related to their growing age and the end of Covid.

13.  Prior to the filing of the Petition, the Father was responsible for all of the Children’s expenses.  The amount now sought by the Mother for the Children (i.e. HK$141,800) is roughly the same amount that the Father pays for Madam Li and the Young Son’s rent (i.e. HK$140,000) as disclosed by him in his updated Form E.  Accordingly, it is reasonable for him to increase his contribution to the Children’s needs to reflect their new needs and his considerably higher income.

Father’s case

14.  The Father argued that the Mother’s claim in respect of his income is misconceived, in particular his huge US tax liability and the discretionary stock awards of US$316,691 by his bank employer, and that the Mother’s and the Children’s monthly expenses are exaggerated.  In short, he contended no material change of circumstances.

Standard of living before separation

15.  Prior to separation, I consider that the family and the Children enjoyed a very high standard of living based on the facts as follows:

a.  The family lived in a large home (~2,700 sq ft) on the Southside, in Repulse Bay with 4 bedrooms and domestic workers’ quarters.

b.  The family are members of 3 private members’ clubs, including Jockey Club, Shek O Golf Club, and the Hong Kong Country Club.  The bills for which were met by the Father.

c.  The family would take 3-4 holidays (including ski holidays) to Japan, US, Europe and Asia, travelling on Premium Economy and in 5-star accommodation.

d.  The Children attended international schools.

e.  The family employed 2 domestic workers, with driving duties and 2 cars.

Law on Children’s Interim Maintenance

16.  Interim maintenance for the benefit of the Children is based on section 5 of the Matrimonial Proceedings and Property Ordinance (Cap 192) (“MPPO”) which provide that the Court shall make such order as it considers “reasonable”.

17.  It is trite that in determining an application for the Children’s interim maintenance, the overriding considerations are the immediate and reasonable needs of the Children and the Court has to balance their reasonable needs and the ability to pay of the payer on an interim basis.

18.  In undertaking this balancing exercise, the Court will adopt a broad-brush approach, without a detailed investigation of the financial positions of the parties which will be examined at a later date at a full ancillary relief hearing if agreement cannot be reached in the meantime.

19.  The principles to be applied to applications for maintenance pending suit or interim maintenance are as follows:

1.  The sole criterion to be applied in determining the application is “reasonableness”, which is synonymous with “fairness”.

2.  A very important factor in determining fairness is the marital standard of living. This is not to say that the exercise is merely to replicate that standard.

3.  In every application there should be a specific budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing. That budget should be examined critically in every case to exclude forensic exaggeration.

4.  Where the disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources. In such a situation, the court should err in favour of the payee.

20.  It is also well established that in ancillary relief proceedings, which include applications for maintenance pending suit, there is a duty on both parties to make full and frank disclosure of the relevant materials to enable the Court to exercise its discretion to make the order, and if it is of the view that the evidence disclosed by a party is deficient, adverse inferences may be drawn against that party.

21.  Applications for the variation of a child maintenance order are made pursuant to section 11 of MPPO, which requires:

“(7) In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates ……”

22.  In Siu Wai Ming v Shiu Wai Hong [2021] HKFC 185 at §31, HHJ Melloy summarised the law: in considering a change of circumstances, the court should look at the case de novo.  In other words, the court is not necessarily bound by the existence of a previous order. It will be necessary to look at the situation afresh and make an order based on the parties’ existing financial circumstances. The modern approach is that the court has to consider all the circumstances of the case, and the court is not hide-bound by the existence of a previous order; the court must look at the case de novo and make an order that is reasonable in the current circumstances. The usual basis on which a variation of an order for periodical payments is founded is that there has been a material change in the circumstances of one or both the parties. On application for revision, the court has ‘regard to all the circumstances of the case’ in the same manner as if those circumstances had existed at the date of the original order.  There would normally be a reason for the application to vary (i.e. a “trigger”). 

23.  It is also trite that in any financial application before the Family Court, including an application to vary maintenance, there is a positive duty on both parties to make full and frank disclosure of their means.  This duty is well known to all family practitioners (and certainly to those instructed by H at the time of this 2021 Order).  The law was helpfully summarised by HHJ Melloy in the recent case of ST v MFP [2022] HKFC 168:

“The duty of disclosure

26. It is trite, but given the circumstances of this particular case, necessary to state that the law is clear that in any financial application before the Family Court, there is a positive duty on both parties to make FULL and FRANK disclosure of their means. This means that the husband, in this instance, had a positive duty to inform both the wife and the court of all of his financial resources, not simply those that he considered relevant. This included those assets in which he held a beneficial and not simply a legal interest. This duty is ongoing and is independent of any specific discovery that was contained in the wife's questionnaires. The principle is that both parties to ancillary relief proceedings, which include applications to vary, are under a continuing “duty to the court to make full and frank disclosure of all material facts to the other party and the court”: Livesey (formerly Jenkins) v Jenkins [1985] 1 AC 424 at 437H-438C per Lord Brandon of Oakbrook. As will be seen this did not happen in this case. Indeed, there was a strong “catch me if you can” element to the husband's evidence. This has led to the parties spending more on legal fees than should otherwise have been the case. It also meant that it was almost impossible for the wife to enter into any meaningful negotiations to settle the matter with the husband, although it is of note that there was one attempt at mediation, which perhaps not surprisingly, failed.

27. It follows that if there has been material non-disclosure, that it is then open to the court to draw a reasonable adverse inference as to the husband's financial resources and ability to pay.” (Emphasis added.)

Discussion

Father’s material non-disclosure

24.  Prior to the hearing presided by me on 3 February 2021, the Father represented that he was unemployed (per his Form E of 27 July 2020 §1.4.1) with “no income”.  On this basis, the Mother compromised her claim for interim maintenance (from $228,700 to $108,527 per month).  According to the 2021 Order, the maximum amount payable by the Father is $51,700 per month excluding direct payment of school fees of the Children by him.

25.  The Father signed an agreement with his present bank employer on 22 January 2021 (just two weeks before the hearing on 3 February 2021), despite being personally present with his solicitors and Counsel at the hearing on 3 February 2021.  His first Form E dated 27 July 2020 did not mention that he had been offered employment by his present bank employer on 30 June 2020. 

26.  The Mother only came to know about the Father’s new position after the hearing on 3 February 2021. On around 10 March 2021, the Mother’s lawyers saw details of the Father’s employment in a press announcement that he had been hired by his present bank employer, as one of their senior bankers.  However, when the Mother’s lawyers wrote to the then Father’s lawyers, he still refused to provide full and accurate information about his work and his remuneration.

27.  According to the Father’s most recently Form E, his total compensation including bonus is indeed just over HK$8.54 million (in excess of HK$712,000/month) plus additional allowances (which he has still not disclosed).  According to his 2022 US Tax Return, his annual income in 2022 was US$1,824,414 (~HK$14,230,429) or roughly HK$1,185,869/month.

28.  I accept the Mother’s submission that the Father’s non-disclosure is highly relevant and significant to this variation application.  He chose to withhold this important information from the Court at the hearing on 3 February 2021.  Consequently, the Mother compromised her claim.

29.  His only justification for his failure to disclose his new employment, the negotiations, his expected income and allowances is that these matters were confidential, and he was forbidden from disclosing to “third parties”.  Nonetheless, he has provided no documentary evidence of any such non-disclosure agreement.  In my view, he must have been advised by his then experienced and specialist Counsel and solicitors that his overriding legal duty was to the Family Court to make full and frank disclosure and that the Mother would have been subject to her own implied undertaking not to disclose to third parties[2].

30.  I therefore reject the Father’s argument for non-disclosure due to the confidentiality of documents, as parties are under an implied undertaking not to use them for any ulterior purpose.

31.  In spite of his first Form E filed in July 2020, the Father must have the duty to inform the Court of his new employment via his then lawyers at the said hearing on 3 February 2021.  I have no doubt to conclude that he has been in breach of his continuing duty to the Court to make full and frank disclosure of all material facts.  In the circumstances, it is then open to the Court to draw a reasonable adverse inference as to his financial resources and ability to pay.

Increase in the Children’s expenses

32.  The Mother has reported an aggregate increase of about $82,000 in her monthly expenses in the light of the Children’s growing up and the end of Covid-19 pandemic.

33.  For instance, the Mother said that the Children are now participating in summer activities/camps (HK$12,830), the 2 elder daughters’ swimming competitions (HK$5,000), and overseas holidays (HK$15,000), all of which were not possible at the 2021 Order due to Covid-19.  However, I consider that some of these expenses are not regularly incurred on monthly basis.

34.  As the Court will only adopt a broad-brush approach without a detailed investigation, I am of the view that for interim purpose, the Mother’s and the Children’s expenses will not be examined item by item.  As the 2021 Order was made more than 2 years and 6 months ago, I generally accept that their expenses would have been increased after the end of Covid-19, which are now assessed as follows:

General Expenses

Item	Amount
Rent	$82,000
Utilities	$3,000
Food	$10,000
Household expenses	$3,000
Car expenses	$2,000
Car maintenance	$1,000
Insurance premia	$1,600
Domestic worker	$7,300
Driver	$18,000
Club subscriptions	$4,235
TOTAL	HK$132,135

Personal Expenses

Item	Amount
Meals out of home	$6,000
Transport	$1,000
Clothing /shoes	$6,000
Personal grooming	$4,000
Entertainment / presents	$4,000
Holidays	$10,000
Medical / dental	$4,000
Tax	$50,300
Mandatory MPF contribution	$1,500
Insurance premia	$600
Others (gym, mobile, exercise classes)	$5,000
Charitable donations	$1,000
TOTAL	HK$93,400

Children’s Expenses

Item	Amount
School fees	(paid by H)
Extra tuition fees / ECAs	$35,000[3]
Summer activities	$5,000
Swimming competition (2 daughters)	$2,000
Books & Stationery	$500
Transport to school	$1,500
Medical / dental etc.	$3,000
Entertainment / presents	$3,000
Holidays	$12,000
Clothing / shoes	$4,500
Insurance premia	$1,800
Lunches / pocket money	$1,500
Other transport	$500
Uniform	$500
Personal grooming	$900
Pet expenses	$2,000
Dining out	$3,000
Others (mobile)	$400
TOTAL	HK$77,100
Grand Total	HK$302,635

35.  According to the latest Form E of the Mother, her monthly earning is about $270,000.  In my view, since she is seeking interim maintenance for the Children only but not MPS for herself, she has to solely bear her own personal expenses of HK$93,400 or even the higher amount she claimed.  For the general expenses of $132,135, I consider that she shall bear ¼[4] thereof being her share for the general expenses.  For the remaining ¾ of the general expenses in the sum of $99,101 (ie ¾ × $132,135) and the Children’s expenses (ie $77,100) in the total sum of $176,201 (ie $99,101 + $77,100), it shall be shared by the parties.  As they have different monthly earnings, they shall not share equally.  However, before I deal with the issue of sharing or apportionment, I have to discuss the Father’s ability to pay first.

Father’s ability to pay

36.  The Mother said that the Father is a wealthy man with a very high income earning HK$10 million per year, prior to the breakdown of the marriage.  In his Updated Form E, his assets exceed HK$58 million (including HK$25m in cash at bank).  He is now paying HK$140,000 for the Young Son’s rent alone (excluding general and child related expenses). 

37.  To start with, I reject the Father’s submission that he is required to maintain 2 households.  I have no knowledge about the finance, earning capacity and actual income of Madam Li.  As the Father fails to disclose Madam Li’s financial situation, I disagree that he has to bear all the expenses of the Young Son and Madam Li. In the circumstances, his expenses claimed in his Form E which may covered the expenses of the Young Son and Madam Li will not be allowed.

38.  The Father only accepted that he has the average monthly income of about HK$718,000 and further as a US citizen, he is liable to pay very substantial US Tax.  For the purpose of this application, I will take into account of his employer’s discretionary stock awards, which must form part of his annual income, even though it is not a regular payment.

39.  Regarding the US Tax payable by the Father, he stated “To be confirmed” in his latest Form E dated 15 May 2023.  Subsequently on 18 May 2023, he suddenly produced the US Tax Return (a bundle of tax documents consisting of about 70 pages) to the Mother’s solicitors by email and he now said in his written submission that his annual tax payment is US$605,446 (or HK$4,710,370).  I doubt very much as to why he could not state the exact amount of tax in his Form E (which he has to affirm) but chose to produce the tax documents by email after about 3 days later (which he does not have to affirm).  It is entirely undesirable and unreasonable for him to do like this.

40.  Where the disclosure by the Father is obviously deficient, I do not hesitate to make robust assumptions about his ability to pay.  The court is not confined to his mere say-so as to the extent of his income or resources.  In such a situation, the court should err in favour of the Mother.  In other words, I conclude that the Father has ability to pay.  In any event, he has assets exceeding HK$58 million according to his updated Form E.

41.  I would further say that since the issue of the Father’s tax liability in US and HK may be complicated and disputed by the Mother, if the FDR hearing or trial of the ancillary relief proceedings is to be set down, the parties may have to consider to file a report by a single joint expert for the issue of the Father’s tax liability, if necessary.

Apportionment of the Children’s expenses

42.  As the Father has the income at least 3 times of the Mother even excluding the discretionary stock awards, I roughly apportion that the Father shall pay $132,150 (ie about ¾ of $176,201) based on broad-brush approach.  Such monthly payment be made by the Father on the basis that he does not have to reimburse the Mother 50% of the Children’s ECA expenses and the Children’s extra tuition expenses but still have to pay the Children’s school fees direct as undertaken in 2021 Order.

Club expenses

43.  There is no dispute that the Children incur club expenses, and that the Father should pay these expenses.  He has all along represented through submissions of counsel[5] that he would continue to pay club expenses, which was accepted by me at the hearing on 3 February 2021. 

44.  The Mother said that the Father has, however, deducted these payments from the Children maintenance payments unilaterally.  

45.  His only complaint is that the Mother might use her access to the club for her own purposes without the Children.  The Mother is willing to give an undertaking to the Court to reimburse the Father for any club expenses she incurs for her sole benefit.  If the Mother incurs for the benefits of the Children or any one or two of them, and herself, she should try to apportion the expenses reasonably and pay back the Father her share. I trust the Mother will honour such an undertaking by reimbursing the Father these expenses.  In case, the Father has evidence to show the Mother’s breach of the undertaking, he may consider making an application to the Court, if necessary.

46.  In view of that undertaking, I accept that there is simply no basis for the Father to unilaterally deduct expenses from his maintenance obligations.  In other words, he shall not make deductions from the payment of maintenance under the 2021 Order and this Order for any reasonable expenditure by the Children at the Hong Kong Country Club and Hong Kong Jockey Club.  The Mother invited me to give a declaration so that the matter is clear for the future.  However, for the purpose of making an interim maintenance order for the Children, I do not think that I shall make such a declaration as sought.  But I will accept the undertaking given by the Mother as said above.  If the Father insists to make such unilaterally deduction, the Mother may take out necessary application to enforce the 2021 Order and this Order.

Back-dated payment

47.  The Mother took out her variation summons on 21 June 2021 and asked for the new interim maintenance of the Children be back-dated in May 2021.  The Father opposes as the Covid-19 restrictions were removed in the first quarter of 2023.

48.  I accept that some of the Children’s expenses increased only after the end of Covid-19. However, the main reason for my decision to vary the 2021 Order is the Father’s material non-disclosure or his commencement of employment in February 2021.  Besides, another reason why the application which I ordered to be disposed of on paper, is determined only about 2 years later, is largely due to the delay of the Father’s filing of his updated Form in May 2023, which I think that he can do it much earlier.  Having considered all the relevant circumstances, I exercise my discretion to order back-dated payment from 1 July 2022.     

Order

49.  In the circumstances, I make an order as follows:

UPON the Petitioner confirming and undertaking to the Court and to the Respondent to reimburse the Respondent for club expenses that are incurred for her sole benefit

IT IS HEREBY ORDERED that:-

(i)      Paragraph 1 of the Order for interim maintenance of His Honour Judge S Lo dated 3 February 2021 (“2021 Order”) be varied and substituted as follows:

“The Respondent shall pay to the Petitioner interim maintenance for the benefit of the Children, in the sum of HK$132,150 per moth being HK$44,050 per month per child commencing on 1 July 2022 and on the first day of every month thereafter until further order of the Court.”

(ii)     The Respondent’s undertaking to reimburse the Mother 50% of the Children’s ECA expenses and the Children’s extra tuition expenses in the 2021 Order be discharged with effect from 1 July 2022;

(iii)    For the avoidance of doubt, in case the Respondent had reimbursed the Petitioner 50% of the Children’s ECA expenses and the Children’s extra tuition expenses from 1 July 2022 up to this date, she has to re-pay the Respondent of such sum;

(iv)    The Respondent’s undertaking to pay the Children’s school fees direct as recorded in the 2021 Order do stand.

Costs

50.  As to the question of costs, the Mother asks the Father to pay costs on an indemnity basis: L v C [2007] 3 HKLRD 819 at §§67 to 70.

51.  I accept her submission that the Father is in breach of his duty to make full, frank and clear disclosure, which should be “correct, complete and up-to-date”. However, I do not think that she entirely succeeds in this variation application. I now exercise my discretion to make an order nisi that the Respondent shall forthwith pay the Petitioner 2/3 of her costs of this application on party and party basis with certificate for one Counsel including all costs reserved in relation thereto, which shall become absolute unless any of the parties apply for variation with supporting affirmation by summons within 14 days.

52.  Such costs be summarily assessed on paper with the following directions:

i.   the Petitioner do lodge and serve her statement of costs within 21 days;

ii.  the Respondent do lodge and serve his statement of objections within 14 days thereafter.