HUI I MEI v. CHENG YAU SHING

IN THE COURT OF APPEAL

1996, No. 157
(Civil)

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J U D G M E N T

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Ching, J.A. (giving the judgment of the Court) :

1. This is an appeal by a respondent husband against an order made by a Deputy District Court Judge on 26th March, 1996, in proceedings for financial relief in which the husband and the wife claimed against each other. There are two children of the family, a daughter born on 11th July, 1985, and a son born on 13th January, 1991. By paragraph 1 of the order custody, care and control of both of them was given to the wife. By paragraph 6 the husband is to pay as from 1st April, 1996, the sum of $1,500 for each child until that child has attained the age of 18 years or has ceased full time education, whichever shall be the later, or until further order. These orders are not challenged and it is sufficient to say that $1,500 per month is clearly not sufficient to meet all the needs of each child. The result is that the wife will have to bear the rest of the necessary finance.

2. After a period of cohabitation the parties were married in January, 1985, when the wife was 24 and the husband was 23 years of age. Before us the wife, who appeared in person, claimed that she is now 37 rather than 35 but the difference is not significant. Their circumstances were humble. She had no qualifications but she had work which brought in a few thousand dollars per month. He was earning about twice that amount, about $6,500, per month rising to $9,000 to $10,000 per month at the time of the hearing. During two periods he worked simultaneously at two employments because mortgage payments had to be made. His work has always been of a factory floor type. In contrast to this, towards the end of 1986 the wife began to work as a night club hostess and her earnings were substantial. Her income rose to about $30,000 per month and sometimes much more. She resigned from that employment at the end of the year 1995 when she began to work in a clothing shop with a view to taking over the business. Unfortunately, by the time the parties appeared before us the business had run into difficulties and she showed us a notice to quit from the owner of the shop premises for failure to pay the rent. She therefore says that she is presently unemployed although from time to time she has acted as a hostess on a casual basis. That occupation appears to represent her only money earning skill.

3. She said to us that she was becoming too old to continue in that occupation. She stressed that youth and attractiveness were important. We cannot conclude that she will be unable to return to that work but we do accept that it is notoriously precarious. In addition she has her responsibilities to her children. That or any other work will necessarily mean that some sort of domestic assistance will have to be employed. She is anxious that her daughter should not know, if she does not know already, how she has been earning her money. The husband, on the other hand, will be a single man. He is perfectly capable of maintaining himself upon what he earns and there is no evidence that he suffers from any sort of ill health.

4. Apart from his interest in the present matrimonial home the husband has no assets. The wife has a 60% interest in a property in Shanghai, the other 40% beneficial interest belonging to her sister. It was purchased in March of 1994 for a price of just over $700,000 of which $536,000 has been paid. Simple mathematics shows that if it can be resold at the purchase price then the wife's share would be just over $320,000 less expenses. Out of that she would have to pay her costs for we were told by Mr. Clough, who appeared for the husband, that although the wife was at one time legally aided she was not in receipt of that assistance at the time of the hearing below. There had been interlocutory applications for which the Judge awarded the wife her costs to be taxed under the Legal Aid Regulations (paragraph 8 of his order). As we understand paragraph 9, he also made an order that the husband's costs and such other costs as the wife may have incurred before legal aid was withdrawn from her should be taxed under the same Regulations but otherwise be made no order to as costs. He assumed that she would fund her costs from the sale of the Shanghai property. We have no idea what her costs may be, whether the Shanghai property can be sold, at what price or what amount will remain to her. Broadly, whatever that amount may be it will be severely diminished after payment of the costs and she must still take care of the children with minimal assistance from the husband. This largely removes from consideration the Shanghai property as being an asset in her hands.

5. The first home was purchased in August 1986 for $288,000 with the assistance of a mortgage in the sum of $250,000. It was then that the husband first took on an extra job. He paid the major part of the deposit of $38,000. The wife paid money into his bank account with the assistance of which he would repay the mortgage instalments. On one occasion she paid in the sum of $50,000. A spare room was rented out and the rental was also used towards repaying the mortgage. The Judge rejected the husband's claim that he had provided all of the money for the repayments but neither did he find that the wife had done so. It follows that the husband did contribute to the purchase to an extent that was not ascertained. The Judge found, however, that the wife contributed 60 to 66% of the family income.

6. The first home was sold in July of 1988 for $400,000 and from whatever remained from the proceeds of sale a deposit was paid for the purchase of the second home where the wife and the children still live. The purchase price was stated in the documentation to be $636,000 but that was an understatement to save on stamp duty. In fact the price was $680,000 and it was the wife who paid the difference of $44,000. A spare room was again let out and the rental used in the repayments of the mortgage. It was the wife, however, who supplied most of the funds for the repayments. On two occasions she supplied large lump sums, one of $100,000 and the other of $209,000, the latter of which is admitted by the husband. The property is now unencumbered and it was agreed that it is worth $2,600,000. On the totality of the evidence the Judge found that the wife had contributed to its purchase to the extent of two thirds.

7. One of the complaints made by the husband against the order and the judgment is that the Judge failed to deal specifically with each of the factors set out in section 7(1) of the Matrimonial Proceedings and Property Ordinance, Cap.192. Factually that is so. However, the Judge did deal with each of these matters which were in issue and there is nothing to the complaint. Another complaint is that the Judge adopted a wrong approach in deciding upon the beneficial ownership of the second home in that he looked to the contributions of each party instead of to the fact that that home, as was the first, was registered in their joint names. It is enough to say that registration cannot be decisive. We would add that the final award also cannot be decided by reference to contributions alone but contributions are a factor to be taken into account under section 7(1) and in the circumstances of the present case were very important.

8. Having found that the husband had contributed one third to the purchase of the second home, the essential parts of his order were :-

"2. The Petitioner do pay or cause to be paid to the Respondent a lump sum of HK$520,000 within three months of the receipt of the Judgment herein by her solicitors.

3. Upon receipt of the lump sum aforesaid the Respondent shall transfer to the Petitioner all his interest in the former matrimonial home at Flat E, 28th floor, Block 10, Tsuen King Garden, Tsuen Wan, New Territories subject to a charge equal to 13 1/3% of the gross value of the said premises. The said charge shall be enforceable at the Respondent's option upon the youngest child attaining the age of 18, prior sale by the Petitioner (save as hereinafter provided), remarriage by her, or cohabitation by her for periods exceeding six months in the aggregate whichever event shall occur the earlier. The costs of the transfer herein and execution of the charge aforesaid shall be born equally between the Petitioner and the Respondent.

4. In the event that the Petitioner shall wish to sell the said premises for the purpose of purchasing another home for herself and the children of the family then the said charge shall not fall in but shall be transferred to the new premises provided that the new premises are at least of equal value to the present premises. The costs of such sale and the execution of the first charge shall be borne by the Petitioner."

$520,000 amounts to 20% of the agreed value of the premises and, with the 13 1/3% represented by the charge, comes to one third. It is clear that the Judge was trying to keep an even balance between the wife and children on the one hand and the husband on the other. We think, however, that this part of the order contained provisions which were possibly unjustified or which are not entirely clear. Thus, it would appear that one of the aims of the Judge was to ensure that the children would have a home at least until the younger child reached the age of 18 years. That purpose would be at risk, however, if the charge became enforceable upon the wife's remarriage to someone who could not provide such a home or if she were to cohabit, presumably in the biblical sense, for periods exceeding six months in the aggregate whatever that may mean.

9. The Judge proceeded on the basis that it was agreed that the present home must go to the wife since she needed a home for herself and the children. That agreement was contested before us although it was conceded that a home would be necessary. We do not think that this makes a difference. There is neither allegation nor evidence that the home is too large or is otherwise unsuitable for the wife and the children. Indeed, it is odd that such a contest should be raised when ground 5 of the grounds of appeal reads,

"The Learned Judge erred as aforesaid in that it being agreed that the Petitioner (Respondent) should continue to reside in the former matrimonial home the correct approach was to defer sale until both children had completed full time education."

If the wife and children are to remain in the home it can surely make no difference to the husband if the property is in her name subject to a charge in his favour or if it should continue to be in their joint names.

10. There were only two other arguments advanced before us. The first was that the husband should have been held to have been entitled to one half rather than one third of the present home. We take the view that on the evidence the Judge was right and that he could not have come to any other view. The second was that, because the husband was anxious to ensure that the children would be provided with a suitable home, the property should not be sold until the youngest child should have completed his full time education or, in amplification of ground 5, had reached the age of 18 years whichever should be the later. It is true to say that this argument was put forward on behalf of the husband on the basis that he was entitled to half of the value of the home. It remains, however, that the basis of his argument was his concern for the children for which reason he was willing to wait for his share. He added that although the Judge had ordered that he should be paid $520,000 within three months of the judgment so that he could re-enter the property market that sum would be inadequate for that purpose in any event. We agree with the husband that in the circumstances of this case it is of paramount importance that the home for the children should not be put at risk. The wife will only be able to raise the $520,000 she has been ordered to pay by taking a mortgage on the home. She may be unable to do that as she has no income and even if she could there would be a risk that she would be unable to repay. We therefore do not consider that she should be ordered to make that payment. Instead, we order that the husband is to have a charge on the property to the extent of one third of its value as at the date when that charge is enforced. Agreeing with him as we do that the children must be assured of a home, the charge is not to be enforced until the younger child has reached the age of 18 years or both children have ceased full time education whichever be the later. The wife is not to sell or otherwise deal with the property except with the leave of the Court and upon such terms as the Court may direct.

11. We therefore quash paragraphs 2, 3 and 4 of the Judge's order and substitute therefore the following :-

"2 (1) The Respondent shall forthwith upon the making of the decree absolute transfer to the Petitioner all his right title and interest in the property known as Flat E, 28th floor, Block 10, Tsuen Wan, New Territories subject to a legal charge over the property to be registered in his favour for a sum equal to one third of the net value of the property such value to be calculated at the time of enforcement.

(2) By 'Net value of the property' is meant the value of the property after deduction only of any mortgage loan and all proper agents' commission, legal fees, taxes and levies, such sums to be notional if the property is not sold at the time the legal charge is enforced. Failing a sale of the property at market value and in the absence of an agreement as to its net value, that value shall be decided by a land surveyor to be appointed by the parties at their equal costs, the decision of such surveyor to be final and binding. Failing the appointment of the surveyor by the parties, the appointment shall be made by the Court.

(3) All fees and levies to effect the transfer in (1) above are to be borne by the Petitioner and the Respondent equally.

(4) All fees and levies in drawing up and registering the charge referred to in (1) above shall be borne by the Petitioner.

3. The Petitioner is not to sell or otherwise deal with the said property except with the leave of the Court and upon such terms as the Court may direct until the younger child of the family shall have attained the age of 18 years or both children of the family shall have ceased full time education whichever may be the later.

4. In the absence of a sale referred to in paragraph 3 above the said charge shall not be enforced until the younger child of the family shall have attained the age of 18 years or both children of the family shall have ceased full time education whichever may be the later."

We so order.

12. We make the order in these terms to ensure, so far as we can, that a home will be provided for the children until the time when their need for such protection may have passed. At the same time we recognise that it may be necessary or desirable for the wife to sell or otherwise deal with the property before that time. If that position should come about she must apply for leave and the Court will lay down such conditions as may then be necessary including the redemption of the charge. Otherwise the husband will have to wait for his share until he can enforce his charge under the provisions of Order 50 rule 9A and Order 88 of the Rules of the Supreme Court.

13. We also make an order nisi that there be no order as to costs of this appeal.