CHD v. ST

[2018] HKFC 18

FCMC 11848 / 2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 11848 OF 2016

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J U D G M E N T
(Maintenance Pending Suit)

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1.  This is the Petitioner Wife’s application for maintenance pending suit. She says that her income has reduced drastically since December 2015 because of a downturn in her business and her depression. She is asking for a monthly sum of HK$30,000 as maintenance pending suit. The Respondent Husband does not accept the Wife’s alleged financial circumstances. He says that the Wife has misled the Court as to her previous income and that she has failed to make full and frank disclosure of her present resources. In any event, the Husband asserts that the Wife has deliberately increased her expenses (which do not accord with their previous standard of living) and that he does not have the ability to meet the Wife’s claim.

Background

Marriage

2.  The Wife is 40 years old and the Husband is 38. Both of them are accountants. They met in 2004 and were married in March 2008. They have no children.

3.  The Wife moved out of the former matrimonial home in about August 2015. The Petition for these proceedings was filed on 14 September 2016 based on unreasonable behavior. Originally the Petition was contested. The petition was amended on 11 April 2017 to one year separation with consent. A Decree Nisi was granted on 5 July 2016. The Decree was subsequently made absolute on 12 September 2017.

Employment and Income

4.  The Husband is a civil servant with a monthly salary of HK$52,730. In addition, he receives rental income in the sum of HK$13,000. In his spare time, he is a part time violin instructor. There is a dispute as to the level of his earnings as a violin instructor.

5.  The Wife is in private practice. In September 2005, she was employed as an Assistant Accountant. In late 2006, the parties met F, the founder of a company called LKT Ltd. The Wife became employed by LKT Ltd in December 2006 as an accountant. She was unhappy with both her salary and workload and wanted to leave after 3 months of probation. F persuaded her to stay by employing further staff and referring freelance jobs to her. On 4 April 2007, the Wife set up her own accounting firm called X Company. The Wife is the sole proprietor of this company. In addition to working for LKT, she used X Company to perform the freelance work referred by F.

6.  In June or July 2010, a company owned by F was investigated by the Inland Revenue Department. The Wife dealt with the investigation pursuant to F’s request. As a result, there was a complaint that the Wife was performing freelance jobs and dealing with F’s personal matters during company time. The Wife then left LKT Ltd to work for X Company on a full time basis.

7.  In January 2011, LKT Ltd began to outsource its accounting work to X Company. F also continued to refer freelance jobs to X Company. She also continued to deal with F’s personal matters. The Wife says that between January 2011 and February 2015, she had an average monthly income of HK$30,000.  The Husband started paying the Wife HK$20,000 per month. There is a dispute as to the nature of these payments.

8.  The Wife asserted that LKT Ltd stopped outsourcing its accounting work in March 2015, as a result of which, X Company received no revenue as its income was reduced drastically by 90%.  

9.  In May 2015, the Wife began to have anxiety symptoms, such as hair loss and insomnia. She sought professional advice in about August 2015. In July 2016, the Wife was diagnosed with Depressive Episode. She says that that was why she closed X Company and started another company called XAT Company Ltd (X Limited) in September 2015.

10.  In November 2015, a company called LA Ltd was incorporated. The Wife was appointed as it’s Accounting Director. On 5 July 2016, the Wife’s father was appointed as LA Ltd’s Accounting Director in her stead. In March 2016, apart from X Ltd, the Wife took up employment with another company called A Company. She stated that because of the deterioration of her health, she was only able to do part time work and has only been able to earn about HK$2,000 per month. She alleged that she was no longer able to run X Ltd and that company was closed since October 2016.

11.  In December 2016, the Husband stopped making payments to the Wife. She says that she has had to rely on her savings. Subsequently, she was even forced to sell her stocks and ask for loans from her family. By a summons filed on 31 July 2017, the Wife asked for maintenance pending suit in the sum of HK$30,000. She is also asking that such maintenance be backdated to 1 December 2016.

Assets

12.  The parties are the owners of a number of properties (jointly or solely), particulars of which are as follows: -

Property                                      Purchase Date

CF Mansion                                19/02/1990

C Heights                                    03/05/2005

HK Commercial Centre               20/07/2009

M Centre                                     31/01/2011

OH Building                                25/04/2012

HH Building                                15/04/2014

Property in China                         02/06/2015

13.  Prior to their separation, the parties lived in CF Mansion. Apart from M Centre, HK Commercial Centre, all the above mentioned properties are still subject to mortgages.

Applicable Legal Principles

14.  The Court’s power to grant an order for maintenance pending suit is governed by section 3 of the Matrimonial proceedings and Property Ordinance, Cap.192 (MPPO):

“3. Maintenance pending suit in case of divorce, etc

…

The court may order either party to the marriage to make to the other such periodical payments for his or her maintenance and for such term, being a term beginning not earlier than the date of the presentation of the petition or making of the application and ending on the date of the determination of the suit, as the court may think reasonable.”

15.  In HJFG v KCY [2012] 1 HKLRD 95, Hartmann JA (as he then was) at paragraphs 37-38 of the judgment, gave a succinct summary of the law in this area:

“37. The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness. This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a Deputy Judge, in TL v ML [2006] 1 FLR 1263, 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it…

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

(b) 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.

(c) In every maintenance pending suit application there should be a specific maintenance pending suit 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.

(d) Where the affidavit or Form E 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 favor of the payee.

38. Finally, it is to be noted that in applications for interim maintenance, when the amount to be paid is for a limited period only and not all of the evidence is necessarily before the court, it is not appropriate, nor indeed in most cases possible, for the court to conduct a detailed investigation into the finances of the parties. While, in order to determine what is or is not reasonable, some analysis is always required, that analysis can be conducted on a “broad-brush” basis.

16.  The overriding considerations for such applications are reasonableness and fairness. In order to achieve these objective, the Court has to balance the reasonable needs of the applicant and the ability to pay of the respondent on an interim basis: LJ v LWHH [2003] 3 HKC 455 at 461D. In undertaking the balancing exercise, the Court will adopt a broad brush approach, and not a detailed investigation of the financial positions of the parties.

Arguments and Analysis

The Wife’s Previous earnings

17.  The Wife deposed that prior to the deterioration of her business and health, she was earning HK$30,000. This is not accepted by the Husband. He submitted that it was not possible for the Wife to maintain her stated lifestyle if her assertions were true. That submission is clearly correct. Even according to the Wife, her monthly payments of personal expenses on her credit cards alone amounted to about HK$20,000. In addition, she was paying for the mortgages of the properties and the family expenses. Further, after she allegedly started working part time, the Wife says that she was only earning HK$3,000. Even after taking into consideration the HK$20,000 or HK$22,000 paid by the Husband, she only had HK$23,000 to HK$25,000 per month. These sums are wholly insufficient to support the Wife’s alleged lifestyle. Contrary to what was alleged by the Wife and despite her lifestyle, her bank statements demonstrated that she had a 5 figure increase in her bank accounts for at least 5 months. The Husband then referred to the financial statements of X Company, pointing out that although the Wife drew a “salary” of HK$30,000 per month, she was in fact using X Company to pay for her other expenses. It was only then that the Wife conceded at the end of the hearing that she was earning about HK$100,000 per month if those payments were taken into account. It is therefore evident that the Wife has attempted to mislead the Court in respect of her earning capacity.

The Wife’s Business

18.  The Wife alleged that her business deteriorated after LKT Ltd ceased to outsource its accounting work in March 2015. However, according to the cheques produced by the Husband, LKT Ltd in fact continued to outsource its accounting work to X Ltd after that date [See B4/1424]. According to the documents produced by the Husband, LKT Ltd had agreed to pay HK$200,000 for the accounting services of X Ltd in 2015. Further, LKT Ltd paid the 1^st instalment of HK$60,000 to X Ltd on 22 August 2015. It was clear that LKT Ltd had not ceased to outsource its accounting work. Further, LKT Ltd had continued to outsource such work to X Limited, which is a company with the same name as X Company and is wholly owned and operated by the Wife. There was no dispute that the HK$60,000 was paid by LKT Ltd to X Ltd. The Wife has not been able to provide any explanation for such payment. She merely appears to suggest that the Husband had worked for LKT Ltd and had caused the payment to be made to X Ltd (a company to which the Husband had no access). At the same time, the Wife asserted that the Husband had never had anything to do with her business. At this stage, the Court is not in a position to make any findings as to who undertook the accounting work for LKT Ltd. However, it is clear that not only had LKT Ltd not stopped outsourcing its accounting work, it continued to outsource it to the Wife’s company.

19.  The Wife asserted that X Company had no revenue by March 2015. Despite her alleged financial difficulties, she chose to purchase a property in China in early June 2015 with the assistance of a mortgage and thereby increasing her monthly expenditure. The down payment for that property was HK$617,151,13. Further, the Wife’s expenses have increased exponentially since the issue of the Petition. Her behavior was wholly inconsistent with her alleged financial difficulties.

20.  There is no dispute that originally appointed as Accounting Director of LAT Company Limited. According to Clause 7 of the nominee director agreement, an annual fee would be paid to the Petitioner. Up to the end of the hearing, there was no disclosure as to the amount of the annual fee or as to where such payment had been deposited, as they are not reflected in her disclosed bank accounts.

21.  On 5 July 2016, the Wife’s father was appointed as the Accounting Director of LAT Company Limited in the Wife’s stead. Despite that, the Wife appears to have continued to make alleged referrals to LAT Company Limited. Her father is a retired chef and there was no reason for anyone to appoint him as an Accounting Director of an accountancy firm. In his Questionnaire, the Husband asked why the Wife had been replaced by her father as the Accounting Director and what was the relationship between the alleged owner of LAT Company Ltd with the Wife, her father and her sister. The Wife refused to provide an answer. No explanation has been forthcoming up to the end of the hearing. It was not surprising that the Husband suspects that the replacement by her father as the Accounting Director is a sham.

22.  Further, until her 2^nd Affirmation, the Wife never mentioned that she was in receipt of referral fees. No such income was even suggested in her Form E or her Answers to Questionnaires. The Wife only admitted that she was receiving referral fees after the Husband exhibited some cheques and debit notes addressed to her. She failed to disclose that she was doing part time jobs in her Form E. Further, it was discovered that the Wife owned certain share investments which was never disclosed. She failed to give any answers even upon discovery.

23.  In L v L ]2006] HKFLR 121, it was held (at paras 197-199) that: If the court comes to the conclusion that full disclosure has not taken place then it should not hesitate to draw an adverse inference against such a litigant.

“It is high time that litigants in matrimonial proceedings and those advising them should appreciate that affirmation of means and answer to questionnaire are not a game of hide and seek. Too much legal costs and judicial time had been spent on such wasteful exercise. As stressed by Mr. Mostyn, the onus falls squarely and fairly on a party to give full and frank disclosure of his or her own means. To adopt a wait and see approach with a hope that the opponent might fail to ask the right question is a tactic to be deplored. That by itself is a breach of the positive duty to give disclosure. As Coleridge J put it recently in J v V [2004] 1 FLR 1042, “all cards must be put on the table face up at the earliest stage if huge costs bills are to be avoided…If the court shall come to the conclusion that a litigant has been recalcitrant in failing to come clean in giving full and frank disclosure of his or her means, it should not hesitate to draw adverse inference against such a litigant, see Baker v Baker [1995] 2 FLR 829”.

24.  In the present case, the Wife has clearly failed to make full and frank disclosure.

Previous “Maintenance”

25.  There is no dispute that the Husband paid the Wife HK$20,000 to HK$22,000 between February 2015 to April 2016. There is however a dispute as to the nature of these payments. The Wife says that it was maintenance whilst the Husband asserts that it was his contribution to their investment fund (although these payments were referred to it as maintenance in the parties’ messages).

26.  The Wife argued that all the properties have been purchased by 2014, hence there were no further investments and it was not possible for these payments to be part of any investment fund. Firstly, the parties have always invested in real property. It is impossible to say whether they will ever make further investments. In fact, the Wife purchased the property in China in 2015. Their properties are still under mortgage. They also have to have other outgoings such as rates and management fees. The outgoings for the properties under the Husband’s name used to be paid for by X Company. He only started making these payments to the Wife after X Company was closed.

27.  The Court is not in a position to make any findings of fact in respect of the nature of these payments at this stage.

The Wife’s Medical Condition

28.  The Wife says that she is only able to do a limited amount of part time work as a result of her medical condition. This is not accepted by the Husband. There appears to be no dispute that the Wife has been diagnosed with anxiety and mood disorders. However, the Husband pointed out that there was nothing to suggest that her working ability has been in any way affected. According to the report from Dr. Karina Chan, one of the Wife’s symptoms was social withdrawal. This however, does not tally with the Wife’s alleged lifestyle or the sums she is allegedly spending on eating out (with others), transport, clothing, personal grooming and entertainment.

The Wife’s Needs

29.  The Wife says that her present monthly expenses amount to HK$59,338.14. She therefore requires HK$30,000 as maintenance pending suit to make ends meet. The Husband argued that her alleged expenses have increased exponentially since the issue of the Petition and are wholly unreasonable. The Husband’s legal representatives have prepared a summary of the Wife’s disclosed bank accounts as Annex 2 to their written submission. The figures in this summary was not in dispute.

30.  According to the summary, despite having little or no income, the Wife’s bank balance increased by 5 digit figures in 8 out of 18 months prior to the issue of the Petition. Apart from the expenditure for the purchase of the property in China and an alleged repayment to her family, the net outgoings for the Wife’s accounts from March 2015 to August 2016 amounted to HK$214,349.92 (i.e. HK$11,908.32 per month).

The Husband’s Ability to Pay

31.  The Husband says that his expenses amount to over HK$74,000 per month and he is unable to meet the Wife’s claim. The Wife argued that the Husband can cease to make contributions to his parents. The Husband’s expenses are in fact very modest. His personal spending is a mere fraction of the Wife’s alleged lifestyle. The only items which may be the subject of criticism are eating out expenses (HK$8,200) and donation (HK$3,500). The Wife says that he should stop making contributions to his parents (HK$7,000). However, the Husband explained that this was in fact repayment of the mortgage for C Heights. Even according to the Wife’s own case, she is not paying anything towards the mortgage of C Heights. In that event, the Husband will have to continue those payments.

32.  The Wife also submitted that the Husband had deliberately taken out bank loans to frustrate her claims for maintenance. Contrary to what is suggested by the Wife, the Husband took out his two loans on 4 January 2017 and 7 June 2017 respectively. The Wife’s summons was only taken out on 31 July 2017. It is difficult to see the logic behind the Wife’s argument.

Conclusion

33.  As explained above, the Wife has chosen to mislead the Court. She has adopted a “catch me if you can” attitude and has failed to make full and frank disclosure. The Court is entitled to draw adverse inferences against her income and her resources. She has failed to prove her needs on a balance of probabilities. Her summons is dismissed with costs to the Husband, to be taxed if not agreed.