BKSH nee KSH v. JAB

FCMC 5366/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 5366 OF 2008

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J U D G M E N T
(LEAVE TO APPEAL)

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1.  This is a hearing of the Respondent’s application for leave to appeal against my Judgment dated 14 October 2016 (“the Judgment”).   For the sake of convenience, I shall continue to call the Petitioner “the wife” and the Respondent “the husband” in this Judgment.

Brief History

2.  The wife is now aged 52 and the husband is aged 66.

3.  They were married in 1994 but divorced in 2008/2009 (Decree Nisi in 2008 and Decree Absolute in 2009).   This was a marriage of at least 14 years.

4.  Within this marriage, they have 2 children, now aged 21 and 19 respectively.  Both of them are now studying in England.  

5.  Subsequent to the divorce, all parties were relocated to England.  The wife used to live with the children at the house under the parties’ joint names at 45 Trefusis Road, Glensilva, Flushing Falmouth Cornwall, TR 115UB (“the house”).  I understand that both children have now moved away to live at university accommodation leaving the wife staying there by herself.

6.  The husband and his new family now reside at Plymouth which I believe is also somewhere in South West England, a city not too far away from the house.

7.  Back in 2009 and 2010, the parties entered into 2 agreements settling their ancillary relief applications, resulting in the orders of 19 November 2009 (“the 1^st AR Order”) and 9 August 2010 (“the 2^nd AR Order”).  The 2 orders were in quite some details providing for, inter alia, the sale of the house, the establishment of an education fund for the benefit of the children, the payment for the children’s maintenance, the equal sharing of the sale proceeds and the payment of certain lump sums from the share of the husband.  It may not serve any useful purpose by repeating all the terms of the 2 orders but their combined effects have been summarised at §18 of the Judgment.  I would repeat my findings herein for ease of reference:

“18. It is my ruling that the combined terms of the 1^st AR Order and 2^nd AR Order are:

(1) The husband shall pay a monthly sum of HK$30,000 as maintenance for the 2 children, ie. HK$15,000 each, starting from 1 December 2009 until the sale of the house, the distribution of the sale proceeds and the establishment of the Education Fund and thereafter, the maintenance are to be increased to HK$34,000 per month (ie. HK$17,000 each): §3 of the 1^st AR Order.

(2) The payment of the children’s maintenance shall last until the children attaining the age of 18 or finishing their full time education, whichever is the latter: §6 of the 1^st AR Order.

(3) The house is to be sold as soon as possible at a price not less than £2.35 million or at such price to be agreed by the parties: §1 of the 2^nd AR Order.

(4) After the payment of all reasonable outgoing and expenses, a sum of HK$3,000,000 will be deducted from the sale proceeds to establish an Education Fund out of which the school and university tuition fees of the children will be paid.  If the Education Fund should not be exhausted at the end of the day, the balance will be shared between the parties equally: §2 of the 1^st AR Order.

(5) The net sale proceeds will be shared between the parties equally but subject to the following payments to the wife from the husband’s share: §4 of the 1^st AR Order:

(i) In the event that the husband shall fail to pay the children’s maintenance, such arrears will be deducted from the husband’s share of the net sale proceeds: §2 of the 2^nd AR Order.

(ii) A sum of US$186,851: §4 of the 1^st AR Order and §3(a) of the 2^nd AR Order.

(iii) The total of the monthly sum of HK$11,000 (representing the difference between HK$41,000 and HK$30,000) calculated from 1 July 2010 until the receipt of the sale proceeds: §5 of the 1^st AR Order and §3(b) of the 2^nd AR Order.

(6) The solicitors or the agent handling the sale shall deduct the above sums from the husband’s share and paid over to the wife: §4 of the 2^nd AR Order.

(7) The above terms are in full and final settlement of the parties’ respective claim for ancillary relief, except for the maintenance of the children: §7 of the 1^st AR Order.”

8.  Despite the said 2 orders, the anticipated sale of the house did not materialise with the husband alleging non-cooperation on the part of the wife.  Therefore, the husband issued 2 new applications in 2016, one for further ancillary relief and one for “ORDER OF ENFORCEMENT”.  The details of the relief sought were summarised at §§3-5 of the Judgment which are, again for ease of reference, repeated herein:

“3. The first application of the husband was an application for ancillary relief in which he asked for:

“1. Resolution of the amount of past maintenance to be deducted from the sale of the house

2. Resolution of the amount of upkeep charges of the family home to be paid by either party

3. Variation of ongoing maintenance

4. Variation in the “Education Fund”

5. An order for [the wife] to pay [the husband] half of her accommodation costs since September 2014

6. Leave to enforce the order in the UK

7. Costs”

4. The second application was a summons for “ORDER OF ENFORCEMENT”.  I shall not repeat the wordings of the summons in verbatim as they contain some unnecessary narration of facts.  As I understand it, the husband is asking for the following orders:

(1) The house in England (which is registered under the parties’ joint names and at 45 Trefusis Road, Glensilva, Flushing Falmouth Cornwall, TR 115UB England)(“the house”) with its furniture and fittings are to be sold by private treaty through an agent called “Lillicrap Chilcott” (“the estate agent”) at a price to be first decided by the estate agent representing the market value. The estate agent is authorised to accept any offer which is no less than 5% below the said price.  If the house is not sold within 3 months, it should then be sold by auction with a reserved price of £1.5 million and that the estate agent is to be paid an agent fee of 3% of the sale price.  If the auction fails, the estate agent should advise the court on how to achieve the sale of the house.

(2) The personal and private effects should be distributed to the parties by agreement failing which a removal expert called “Britannia Lanes of Cornwall” is to be appointed to make a full inventory and store the items pending further order of the court.

(3) The appointment of the firm of “Foot Anstey” to represent the parties in the sale of the house and after the deduction of all necessary outgoings, each party should be paid a sum of £250,000 with the balance to be put in the firm’s clients’ account pending agreement on the deductions in the order dated 9 August 2010 or further order of the court.

(4) The wife to comply with all reasonable requests from the estate agent to facilitate the sale of the house.

(5) That leave is to be granted to apply to the UK Courts for enforcement of the order.

(6) Costs to the husband.

5. One will notice that the husband’s 2 applications concern with 2 important basic issues, one concerning the sale of the house and the other the children’s maintenance.”

9.  After hearing the husband’s applications for 2 days (on 1-2 September 2016), I handed down the Judgment giving detailed orders for the sale of the house, deduction from the share of the husband’s sale proceeds to provide for the needs of the children and other lump sums due to the wife (at §60 of the Judgment).  Those orders are:

“60. The orders to be made are:

(1) For the sale of the house:

(i) The house is to be sold by private treaty at or above the reserved price of £2,350,000 within 6 months of the order.

(ii) If the house cannot be sold by private treaty within 6 months, such sale should be effected by public auction with a reserved price of £1,500,000 within 4 months thereafter.

(iii) Lillicrap and Chilcott is to be appointed as the estate agent to conduct the sale.

(iv) The estate agent is to be paid an agent fee of not more than 3% of the sale price.

(v) The solicitors firm of Foot Anstey is to be appointed as the handling solicitors for the sale.

(vi) After the deduction of all reasonable and necessary outgoings and expenses of the sale, the net sale proceeds should be divided between the parties in equal shares, but subject to deduction from the husband’s share as set out in the following paragraph.

(vii) The parties’ personal and private effects in the house are to be distributed between the parties by agreement, failing which the removal specialist of “Britannia Lanes of Cornwall” should make a full inventory and store the same in their warehouse pending further order of the court.

(2) The following sums should be deducted from the husband’s share of the net sale proceeds by the handling solicitors and paid over to the wife:

(i) HK$2,350,000 as the maintenance for the 2 children as from 1 December 2009 to 30 September 2017.

(ii) HK$1,020,000 being future maintenance for the children as from 1 October 2017 to 31 August 2020.

(iii) £35,000 being the husband’s half share of the children future university tuition fees.

(iv) HK$946,000 being the difference between HK$41,000 and HK$30,000 as from 1 July 2010 to 30 September 2017.

(v) US$186,851.

(3) This order is in place of the 1^st AR Order and the 2^nd AR Order.”

10.  After the handing down of the Judgment, the husband issued a summons on 6 January 2017 asking for leave to appeal.  It seems that the husband’s application was out of time but as he explained in his affidavits and oral submissions, the delay was caused by the fact that he was now residing overseas and had to conduct the proceedings on a long distance basis.

11.  As the delay was not too serious and the wife being absent and thus raising no objection on this issue, I accepted the husband’s explanations and allowed him to proceed with his application for leave to appeal even though it was technically out of time.

The Law

12.  Leave to appeal is governed by s. 63A(2) of the District Court Ordinance, Cap 336 which reads:

“(2) Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that-

(a) The appeal has a reasonable prospect of success; or

(b) There is some other reason in the interests of justice why the appeal should be heard.”

13.  As to what constitutes a reasonable prospect of success, it has been held that the prospects of succeeding in the intended appeal must be “reasonable” and therefore more than “fanciful”, but without having to be “probable”: SMSE v KL[1].

Grounds of Appeal

14.  The husband has filed a 13-page “GROUNDS OF APPEAL” on 6 January 2017 (containing 60 paragraphs) and a 7-page “FURTHER GROUNDS OF APPEAL” on 16 January 2017 (containing 11 paragraphs and a 2-page table of calculations).  I do not propose to repeat all the husband’s grounds of appeal in verbatim but would summarise and comment on them in the following discussion.

Overall effects of the Judgment

15.  In the Judgment, I ordered that the house is to be sold by private treaty at the reserved price of £2,350,000 within 6 months, failing which the sale should be effected by way of auction at the reserved price of £1,500,000 within 4 months thereafter. 

16.  The gist of the husband’s complaints is that too little money would be left to him after the sale of the house.   His calculations are that if the house was to be sold at £2,350,000, only a sum of £417,894 would be left to him.   If the house was to be sold at £1,500,000, an even less amount of £5,644 would be left to him. 

17.  The husband further complains that this court has failed to take into account the 2 children of his new family when arriving at its conclusion.

My views

18.  I have already made clear at §20 of the Judgment that an important feature of this case is that by the 1^st AR Order and the 2^nd AR Order (made in the years of 2009 and 2010), the parties have already reached a full and final settlement on the sale of their major family asset, namely the house, and on the division of the sale proceeds, subject only to provisions being made for the 2 children’s future maintenance and education and certain lump sum payments to be made to the wife.  The main purpose of the Judgment was to give further directions on how the 1^st AR Order and the 2^nd AR Order are to be carried out.  This court should not and will not rewrite the terms of the parties’ settlement.  

19.  As to the amount of money that the husband would get after the full implementation of the 1^st AR Order and 2^nd AR Order, I note that both parties agreed for the sale price to be set at £2,350,000.  As to the reserved price of £1,500,000 in case of auction, it was actually a figure suggested by the husband himself.  Therefore, there should not be any complaint for the sale price or reserved price to be set at those levels.

20.  Under these circumstances, even if the effects of the carrying out of the 2 orders would place the husband in a financially difficult position, it is not within this court’s power to give the husband a better deal, so to speak, after the parties reaching their final settlement some 8 years ago.

21.  I am aware that in the husband’s other submissions, he has attacked other aspects of the Judgment which may merits further discussion (which will be done in the latter part of this judgment), but I am not convinced that the effects of a judgment, reflecting the full and final settlement of the parties’ disputes some years ago, can on its own justify a variation of the settlement reached and thus justifying leave to appeal to be granted in the case.

Jurisdiction

22.  The second ground of appeal is on jurisdiction.

23.  I think the husband’s complaint is that I should have granted an adjournment for him to apply for legal aid in order to argue on the issue of jurisdiction.

24.  I note that the husband’s application for adjournment was only made during his final submissions at the second day of trial.  By that time, all the evidence has been heard.  It was simply too late for such an application.

25.  Furthermore, even up to the date of this hearing, the husband has made no submission on how the court’s refusal to grant such an adjournment was being prejudicial or unfair to him. After all, even the husband accepts that the Judgment is unenforceable in the UK (see §10 of the husband’s “GROUNDS OF APPEAL”).  I am not in a position to say whether this is right or not as there was no expert evidence on this point at trial.  But if the Judgment is accepted to be unenforceable in the UK, this court’s refusal to grant leave to the husband to enforce the orders in the UK (at §58 of the Judgment) must be right.   Therefore, I simply do not see there being any reasonable prospect of success on this ground of appeal.

26.  In §5 of the husband’s “FURTHER GROUNDS OF APPEAL” dated 16 January 2017, the husband attempted to make further submissions on the law of forum, which I believe has added nothing of substance to the husband’s intended appeal.

Financial Dispute Resolution (FDR)

27.  The husband complains that a FDR Judge should not proceed to hear his application for variation.

28.  I trust that the husband must be relying on the recent Court of Appeal case of AB aka ABW v MAW[2] in which the Court of Appeal has stated that a FDR Judge should have no further involvement on matters concerning the ancillary relief application.

My views

29.  First of all, it has to be noted that the Reasons for Judgment of the case of AB was handed down on 1 December 2016, which was after I have handed down the Judgment on 14 October 2016, meaning that I did not have the benefit of the guidelines on the role of a FDR Judge as laid down by the Court of Appeal in that case.

30.  Furthermore, according to court records, there had never been any formal FDR hearing being fixed.   On 19 November 2009, before the 1^st AR Order was made, that hearing was originally fixed for the trial of custody, which issue was later settled by the parties at the hearing.   In seeing that there was time left in the day, the parties were encouraged to consider settlement of the issue of ancillary relief as well.   Therefore, it was not like an ordinary FDR hearing in which without prejudice correspondence were exchanged or disclosed well before hand. 

31.  One also has to bear in mind that the discussion of settlement was done more than 7 years ago when all parties were still working and residing in Hong Kong.  Their then circumstances, be they financial or otherwise were completely different from now.  Therefore, not only that the contents of the discussion (if any) were not in my memory, but even if they were, I do not think they are of any relevance to the husband’s present applications.

32.  Lastly, it also has to be pointed out that the main focus of the trial was on the sale of the house. The variation of the children’s maintenance was only a secondary issue.   I do not consider the fact that I had presided over the parties’ discussion of settlement over 7 years’ ago would have any prejudicial effect on the husband’s present case at all. 

Resolution of amount of past maintenance

33.  In §§14 to 16 of his Grounds of Appeal, the husband is arguing that after the establishment of the Education Fund, the amount of maintenance for the children should be reduced.

34.  I was unable to read this into the terms of the 1^st AR Order and 2^nd AR Order.

35.  In §18 of his Grounds of Appeal, the husband “appeals for clarification”.  I see nothing to be clarified and certainly the Court of Appeal is not a proper place to seek such clarification.

Failure to take account of changed circumstances prior to application

36.  In §§19 to 24 of his Grounds of Appeal, the husband argues that the living costs is much lower in England than in Hong Kong and therefore, the maintenance for the children should be reduced after their relocation to England.

37.  In this regard, I must point out that in §§52 to 56 of the Judgment, after making allowance for past school fees being paid by the husband, I have ruled that a sum of HK$2,350,000 to be deducted from the husband’s share of the sale proceeds being all the arrears of maintenance owed up to the sale of the house.  This sum was in fact smaller than the sum of HK$2,535,200 being accepted by the husband as arrears of past maintenance calculated up to 29 February 2016 (see §20 of the husband’s affidavit dated 7 March 2016, p.16 of the Trial Bundle).   I therefore see no substance in the husband’s complaints on this ground.

Failure to take into account the husband’s reduced income prior to trial

38.  The husband complains that this court has failed to take into account the parties’ changed circumstances prior to trial.  But if one should read §33 of the Judgment, it is clear that this court has already taken the husband’s case on changed circumstances into consideration before arriving at its conclusions.  In §35, I accepted the figures as put forward by him representing his then financial situation.  I accepted that his only income was mainly from a small state pension of £643 per month. Therefore, it is untrue to say that the lack of regular income from his former employer has not been taken into account by this court.

Failure to take into account holiday payments made by the husband

39.  The husband complains on the court’s refusal to deduct the holiday expenses that he has paid on behalf of the children from the arrears of maintenance.

40.  First of all, the husband has a duty to prove his case including the actual amount of the expenses.   The husband has produced no such evidence. 

41.  Second, and even more importantly, there is no agreement in the parties’ settlement that those expenses have to be deducted from the children’s maintenance.   If the husband should decide to spend holidays with the children, and without any prior agreement from the wife for such reimbursement, I think it is unfair for those holiday expenses to be deducted from the children’s maintenance.

42.  I am not persuaded that the husband has any merits in this complaint.

Appeal against incorrect deduction of maintenance already paid by the husband

43.  The husband complains that there is an error in the deduction of past maintenance already paid by the husband.  He said he has already made part of those payments to the wife.

44.  At §22 of his supporting affidavit (at p.19 of the Trial Bundle), the husband only said:

“I have paid a total of HK$942,581.50 in school fees (as set out in the following list) that can be counted towards maintenance…”

There was never any evidence showing that he has made any or part of those payments directly to the wife.   As I was of the view that the school fees should have been paid out of the Education Fund, meaning that the parties were to share those school fees equally, that was why this court allowed half of those school fees paid by the husband to offset part of the outstanding maintenance.

Appeals against order for future maintenance

45.  The husband complains that I have failed to properly calculate the future maintenance in that I should not have taken the husband’s capital into account.  He said maintenance should be based on income only.

46.  I am afraid the husband has adopted a wrong approach: see s. 7(2) of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (“MPPO”). 

47.  In §59(3) of the Judgment, I have ruled that the sums of HK$4,316,000, £35,000 and US$186,851 (equivalent to about HK$6,100,000) should be deducted from the husband’s half share of the sale proceeds.   If the house is to be sold at £2,350,000 (which is a figure agreed by both parties), the husband’s half share would be about £1,175,000 (about HK$12,000,000 at the exchange rate of 1:10.20 then prevailing). After deduction, the husband would still have a sum of about HK$5,900,000. That was why I said at §40 of the Judgment that after the deductions, the husband would still have a not insubstantial amount of money left to him.

48.  The husband further submits (at §38 of his Grounds of Appeal) that the children’s maintenance should be set at a lower rate as the living standard in the UK is much lower than in Hong Kong. 

49.  I note that the monthly maintenance table at §38 was not produced as evidence at trial.  For example, under the item of “Food” which was set at £150 for each child, I cannot find the same at p.12 of the Trial Bundle.  In any event, those figures are not supported by any documentary evidence and therefore, it is difficult to come to a conclusion that the living standard in the UK must be lower than in Hong Kong. 

50.  Furthermore, even if the UK living standard is really lower, which I believe may be true as far as accommodation is concerned, one must bear in mind that the children are adults now (aged 21 and 19).   The allowance for food at £150 seems to be unacceptably low.   At the exchange rate of say, 1:10, £150 is equivalent to HK$1,500 only. I do not believe that it is reasonable for the children to rely on a food allowance of HK$1,500 per month only, ie HK$50 per day, in view of the capital retained by the husband after the sale of the house.  Therefore, I am not satisfied that the husband to have any reasonable prospect of success in this area of his submissions.

Duty of the Court to consider all the children of the husband

51.  From §§40-44 of the husband’s Grounds of Appeal, the husband complains that this court has not taken the needs of his new family, in particular, the needs of the 2 children born out of another relationship/marriage into consideration. 

52.  At §39 of the Judgment, I did say that when the parties reached their settlement in 2009 and 2010, the new children of the husband were already born and therefore, they cannot be regarded as a new circumstance.  In other words, when the husband agreed to the terms of settlement, he was well aware of the then and future needs of these 2 new children.  I therefore maintain my view that the needs of the husband’s 2 new children are not new circumstances.   In any event, as I have ruled that the husband would still retain a not insubstantial amount of capital after distribution, I am not convinced that the maintenance for the 2 children of this marriage should be adversely affected.

Appeal against capitalisation of maintenance and immediate payment of future education fees

53.  At §§45-55 of his Grounds of Appeal, the husband complains about the award of a lump sum for the children’s future maintenance and payment of their future education fees.  He said there are possibilities that the elder child may not return to his medical studies and the younger child may not be able to finish his university education.  He said he would not object to the creation of a maintenance fund to be held jointly by the parties to pay for the children’s future maintenance and education fees.

54.  Apart from the fact that the husband has not made such an offer of establishing a maintenance fund at trial, I think the probability for the children stopping full time education in the coming 3 to 4 years is quite small.  Therefore, it is fair to allow maintenance (including their education fees) for the children until the time they are supposed to finish their first university degree.

55.  As I have stated at §45 of the Judgment, in view of the husband’s claim of impecuniosity, it was fair to make a lump sum order in respect of the children’s future maintenance so as to achieve something akin to a clean break.  At §49 of the Judgment and in order to simplify the matter, I also came to the view that a sum of £35,000 should be deducted from the husband’s share of the sale proceeds instead of maintaining the Education Fund which was originally agreed at HK$3,000,000.  I still maintain that should be the right approach and I do not believe the husband has any reasonable prospect of success in overturning that conclusion.

Appeal against the wife free use of the house

56.  In §§56-60 of his Grounds of Appeal, the husband complains that I should not have ruled that the wife needs not pay for her residence at the house as from September 2014.

57.  First of all, I note that the wife and at least one of the children were relocated to the UK and started to live at the house since September 2014.  There was no evidence to suggest that the house had been rented out before the wife and the child’s occupation.  Therefore, it is difficult for the husband to argue that the wife’s occupation of the house has caused a loss of rental income.  After all, it was the parties’ agreement that the house should be sold and any tenancy created would not be conducive to such a sale. 

58.  Second and more importantly, I think there is no dispute that the husband has failed to pay the maintenance as agreed under the 1^st AR Order and 2^nd AR Order.   Without such maintenance, where else the wife and the child could have stayed, if not at the house.  Therefore, I do not see there being anything wrong for the wife and children to occupy the house since September 2014.   Equally, I do not see the husband as having any reasonable prospect of success on this ground.

Effects of capital gains tax on the Judgment

59.  In §§ 1-4 of his “FURTHER GROUNS OF APPEAL” (dated 16 January 2017), the husband has made further submissions on the effect of UK’s Capital Gains Tax on the amount of capital that he would get after the sale of the house. 

60.  I note that the husband has never argued or produced any such evidence at trial and it would be too late for him to do it now.   Furthermore, even if Capital Gains Tax is to be levied, it would not only affect the husband, but the wife as well.   In other words, not only that the husband will get a smaller sum after the sale, but so will the wife.  As I have stated in §§18-20 above, one of the main purposes of the Judgment was to give effect to the sale which was already agreed back in 2009 and 2010. There is no room for rewriting the parties’ agreement, as far as the sale of the house is concerned.  Therefore, I am not convinced that the payment of Capital Gains Tax in the UK, if any, will justify leave to appeal to be granted in this case.

Maintenance Quantum

61.  In §§6-11 of the his “FURTHER GROUNDS OF APPEAL”, the husband has made lengthy submissions on the English laws on children maintenance, which is irrelevant to my Judgment which was based on Hong Kong laws.  Simply put, I do not regard the husband’s submissions will have any reasonable prospect of overturning the rulings in the Judgment.

Conclusions

62.  Based on the above discussions, I am not satisfied that the husband has any reasonable prospect of success in his intended appeal and there being no other reasons in the interest of justice that leave should be granted, I refuse to grant leave to appeal and the husband’s summons dated 6 January 2017 is to be dismissed.

Costs

63.  The wife did not appear at the hearing and I shall therefore order that there be no order as to costs. This will be in the form of an order nisi, to be made absolute upon the expiry of 14 days from the handing down of this judgment.