MMWD v. CLM

FCMC 6171/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 6171 OF 2014

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JUDGMENT
(ANCILLARY RELIEF)

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1.  This is a trial on the parties’ respective claim for ancillary relief against each other.   For the sake of convenience, I shall continue to call the Petitioner “the wife” and the Respondent “the husband” in this judgment despite the fact that a decree absolute of divorce had already been granted.

The Parties’ Respective Position

2.  There is no doubt that the central issue of this case is on how to divide up the main family asset, namely the former matrimonial home at Robinson Road, Hong Kong (“the former matrimonial home”), the net value of which is agreed at $16,940,000.

3.  From the final submissions of the wife, she asks for a sale of the former matrimonial home with the proceeds of sale to be divided up between the parties.   It seems that she no longer insists on a periodic payment order and in its stead asks for a clean break order.   Furthermore, as a matter of principle, she has no objection for the former matrimonial home to be shared equally between the parties, ie each to get 50% and in monetary term, $8,470,000 ($16,940,000 x ½ = $8,470,000).  However, it is her case that the husband has to repay the following sums to her, namely:

(1) $2,000,000, being half share of the $4,000,000 that she has paid for the son’s education in the US;

(2) $1,700,000, being the moneys that she has lent to the husband during marriage;

(3) $1,000,000 being the husband’s share of the various mortgage repayments and interests; and

(4) $255,000 being a judgment debt owed by the husband in DCCJ No.1669 of 2014.

All these sums added up to $4,955,000 (“the repayment sum”), which should be deducted from the husband’s half share of the former matrimonial home.  By this calculation, the actual amount that the husband should get is $3,515,000 ($8,470,000 - $4,955,000 = $3,515,000), which is roughly about 20% of the net value of the former matrimonial home.

4.  On the other hand, the husband recognises that the wife might have made more financial contribution during the marriage and therefore, he agrees that a slightly bigger share of the former matrimonial home should be given to her.  However, he does not agree that the departure from equal sharing should be as big as 80/20.  He is of the view that a reasonable division should be 55% (in monetary term $9,317,000) to the wife and 45% ($7,623,000) to him.

Brief History

5.  The wife was born in 1953 and she is now 62 years of age.

6.  The husband was born in 1948 and he is now 67 years of age.

7.  The parties were married in 1985.

8.  In 1986, a son, M was born who is now aged 28. M is currently working but is still living with both parties at the former matrimonial home.

9.  There is no dispute that the parties formally separated in about 2002 but they continued to live in the former matrimonial home together with M, albeit in separate households.

10.  In 2014, the wife issued a petition for divorce based on 2-year separation with no opposition from the husband.   Decree nisi was granted on 11 September 2014, which was later made absolute on 8 January 2015.

11.  As for ancillary relief, the parties went through a FDR hearing which was not successful.   The case was therefore adjourned for trial which eventually came to my court for a final hearing.

Issues

12.  I understand that the parties had agreed on a list of issues for determination through their lawyers at the Pre-trial Review (before the PTR Judge).  But after hearing the parties’ evidence and bearing the parties’ latest positions in mind, I am minded to simplify and re-formulate the issues as follows:

(1) Whether the wife is entitled to the repayment sum (ie $4,955,000) from the husband? and

(2) What ancillary relief orders should be made under the circumstances of this case?

The Repayment Sum

13.  It is the wife’s case that she is entitled to the repayment sum from the husband, which sum is made up of the following figures:

(1) $2,000,000, being half share of the $4,000,000 that she has paid for the son’s education in the US;

(2) $1,700,000, being the moneys that she has lent to the husband during marriage;

(3) $1,000,000 being the husband’s share of the various mortgage repayments and interests; and

(4) $255,000 being a judgment debt owed by the husband in DCCJ No.1669 of 2014.

14.  In considering the repayment sum, I have to remind myself that the burden is on the wife to prove firstly, that there were indeed such sums being paid by her, and secondly, that she is entitled to be repaid those sums of money from the husband.

15.  The general position of the husband is that he does not dispute that the wife might have made more financial contributions than him during marriage, but he does not agree to the figures as quoted in the repayment sum.

The Costs of the Son’s Education in US: HK$4,000,000

16.  It is the wife’s case that she had paid all the son’s educational and living expenses in the US from 2005 to 2011.   She said she had used the pension received in 2002 in the sum of USD 393,062.41 (equivalent to about HK$3,065,000 at the exchange rate of USD1: HK$7.8) together with her own savings to defray those expenses of the son (paragraph 44 at p.42 of Bundle A1).   She also produced exhibit MMWD-22 which were letters from her former employer and bank statements, cheques and cheque studs of various dates showing those payments.

17.  In order to verify her claim, I have looked at Exhibit MMWD-22 (pages 123-186 of Bundle B1). Page 123 was a letter from her former employer saying that the wife was paid a sum of USD 393,062.41 in December 2012 as her pension, which date must be wrong because the wife actually retired in 2002, not 2012.   I accept this must be a typing error made by the former employer.    But leaving this typo aside, this letter can only prove that the wife has received the sum of USD 393,062.41, but not as proof of her actual expenditures on M’s education in the US.

18.  The other documents in exhibit MMWD-22 consist of the wife’s bank statements, cheque studs and cheque copies. My first observation on the cheque studs and cheque copies is that while the vast majority of them were drawn in the name of the son, some of them were actually drawn in the name of the husband.   I understand that the wife’s case is that some of the payments were actually made through the husband. 

19.  For the bank statements, I note that from 2005 to 2011, there were various withdrawals from the wife’s account with the word “Mxxxxx” hand written next to those items.   I have tried to add up those bank withdrawals, together with the cheque stud records (pages 124-173, Bundle B1), the total amount that I got was HK$2,021,000. In addition, there were also some bank remittance records (pages 174-180, Bundle B1) amounting to USD 187,306 (equivalent to about HK$1,460,986).   Finally, there were some cheque copies (pages 181-186, Bundle B1) which amount to HK$317,000.   All these sums added up to HK$3,798,986. 

20.  Although the sum of $3,798,986 might not be very far from the $4,000,000 claimed by the wife, this calculation exercise shows the difficult task of the wife in proving that she has spent the actual amount of $4,000,000 on the son, not to mention that there lacks a direct evidential link between the figures quoted and the son’s education.   That is exactly why the Hong Kong Court of Final Appeal did not find favour in conducting this sort of minute retrospective investigation on a failed marriage.   In the landmark case of LKW v DD[1], Ribeiro PJ said at paras 62-63:

“62. The fourth principle is that the court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tend to deplete the parties’ (and the courts’) resources and to increase antagonism and discourage settlement.

63. Such attempts have been encountered in various contexts, including disputes over the extent of a party’s assets; over the contribution made to the welfare of the family; over the parties’ conduct; over claims to be compensated for having suffered some disadvantage, and so forth.”

21.  Furthermore, even if the wife can really prove that she has spent the $4,000,000 on the son, she is also faced with the difficult task of convincing this court that she is entitled to be repaid half of that sum from the husband’s share of the family assets.   We all know that parties may contribute to the marriage in different ways.  A party may contribute more in financial terms but that does not mean that at the end of the marriage, the other party has to repay him or her half of those payments.   Of course, one party may claim he or she has made a special contribution to the family which might justify a departure from equal division of the family assets, but the approach of asking for the repayment of half of whatever one might have paid during the subsistence of the marriage certainly has no place in the final adjudication of a claim for ancillary relief in matrimonial litigations. Any investigation along those lines must be a futile exercise.

$1,700,000 Lent to the Husband

22.  In arriving at this sum, reference was made by the wife to section 2.9 of her latest Form E (page 304 of Bundle A2) in which she said the following sums were lent to the husband:

23.  In Exhibit MMWD-10 (pages 28-53 of Bundle B1), the wife has also submitted various cheque studs in order to prove the above payments.   After hearing the wife and looking at the documents, I am inclined to accept that the wife might have made those payments, but I think the more pertinent issues are firstly, whether those payments were loans to the husband and secondly, whether there should be any repayment of those sums upon the termination of the marriage.

24.  If one should look at the nature of those payments, I think the wife is facing an uphill battle in proving those were “loans” to the husband. Take the payment of $700,000 in 1993 for a Mercedes as an example. One would note that the payment was made over 2 decades ago, while the parties were still in cohabitation and presumably still maintaining a relatively good relationship.  Even the wife herself does not dispute that she and the son had access to the use of the family car, coupled with the fact that there is no evidence at all that the wife had ever asserted the existence of such a loan until this litigation, I am afraid that the wife has failed to prove the existence of such a loan to the husband.

25.  For the other payments for the husband’s karaoke business, there is also no evidence to prove those were actually loans made to the husband. It is undeniable that the husband had been in the karaoke business for quite some years, but again, there is no evidence at all that the wife has ever asserted the existence of those “loans” before this litigation. This is actually in direct contrast to the loan of $255,000 which the wife eventually obtained a judgment in DCCJ 1669/2014.   Therefore, I am not satisfied that any of those payments for the husband’s karaoke business were actually loans to the husband, the repayment of which is expected from the husband, be it at the end of the marriage or otherwise.

26.  Finally, for the payment of the husband’s income tax and the sum of $6,000 paid to TK in 2002, again, I am not satisfied they were loans for the same reasons.

27.  After finding that those payments were not loans to the husband, any attempt to deduct such “loans” from the family assets and paid over to the wife must fail.

$1,000,000 for Mortgage Repayment and Interests

28.  The wife is saying that she had made all the payments towards the mortgage of the former matrimonial home together with interests.   There is no dispute that the mortgage payments were made through the wife’s bank accounts.   In asking for $1,000,000, the wife is presumably saying that she had paid $2,000,000 and therefore, is entitled to be repaid half of that sum, namely $1,000,000 from the husband.   Apart from failing to see the evidence of the actual payment of this sum of $2,000,000 by the wife, it is also important to note that the parties have in fact purchased a number of properties as their matrimonial homes during the marriage. They started off with the Maiden Court, then the Cavendish Heights and finally the present matrimonial home. There is no doubt that due to the wise choice of their investments that they were able to roll over their profits and purchased their last matrimonial home at Robinson Road. However, there is no basis for the wife to ask for the repayment of 50% of whatever sum she might have paid towards the purchase of the last matrimonial home. Therefore, the wife’s claim in this regard cannot succeed.

$255,000 Judgment Debt

29.  It was the case of the wife that she had, at one stage, lent a sum of $255,000 to the husband who had defaulted in its repayment.   Legal action was instituted in the District Court and judgment was obtained against the husband in DCCJ 1669/2014. The wife is therefore entitled to a payment of this sum from the husband.   Although strictly speaking, the wife’s claim for ancillary relief should not be used as a mean to enforce the judgment debt, for the sake of convenience and in order to achieve a clean break between the parties, I am minded to take this judgment debt into account and deduct the same from the husband’s share of the family assets in the final ancillary relief order.

Conclusion on the Repayment Sum

30.  In the above discussion, I have come to the conclusion that the wife’s claim for the repayment sum only succeeds in respect of the judgment debt of $255,500. Having made that ruling, I am not saying that the wife’s contribution to the welfare of the family will not be considered at all.  That aspect of the evidence will be more appropriately dealt with when I come to the issues of conduct and the parties’ respective contribution to the welfare of the family to see if there is any justification in departing from equal sharing of the family assets.

What kind of ancillary relief orders should be made?

The Law on Ancillary Relief

31.  The jurisdiction of the Court in granting financial relief upon the sale of the family property is governed by section 6(1) (e) of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (“MPPO”) which provides:

“(1) On granting a decree of divorce, a decree of nullity of marriage or a decree of judicial separation, or at any time thereafter (whether, in the case of a decree of divorce or of nullity of marriage, before or after the decree is made absolute), the court may, subject to the provisions of sections 10 and 25(1), make any one or more of the following orders, that is to say-

….

(e) an order for the sale of such property as may be specified in the order, being property in which or in the proceeds of sale of which either or both of the parties to the marriage has or have a beneficial interest, either in possession or reversion, and for the use of the proceeds of such sale,

and the court may make an order under paragraph (c) notwithstanding that there are no children of the family.

(2) Subsections (2) to (6) of section 6A apply in relation to orders under subsection (1)(e) as they apply in relation to orders under subsection (1) of that section. “

Section 7 Considerations

32.  In deciding on how to exercise its power in this regard, the Court is bound to consider Section 7 of MPPOwhichprovides:

“7. Matters to which court is to have regard in deciding what orders to make under sections 4, 5 and 6

(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.”

Case Law

33.  In LKW v. DD (supra), Ribeiro PJ, after considering the recent line of English authorities of White v. White [2001] 1 AC 596; Miller v. Miller and McFarlane v. McFarlane [2006] 2 AC 618, has given a detailed discussion on how a Hong Kong court should approach the issue of ancillary relief.  The following is a brief summary of His Lordship rulings in the case:

(1) The old Hong Kong Court of Appeal case of C v. C[1990] 2 HKLR 183 should be over ruled (paragraph 22 of the Judgment).  In other words, the principle of “reasonable requirements” as laid down therein should no longer be followed.

(2) When the court exercises its discretionary powers under s.7 of the MPPO, guidance may properly be sought from the White v. White line of cases (paragraph 46 of the Judgment).

(3) Ancillary relief applications are highly fact-sensitive and judges dealing with them must ultimately be guided by s.7 of MPPO and the implicit aim of arriving at a fair financial outcome as between the parties (paragraph 52 of the Judgment).

(4) In most cases, the available assets are usually not sufficient to cater for the needs of both parties so that the exercise does not progress beyond consideration of their needs (paragraph 54 of the Judgment).

(5) The principles underpinning the White v. White line of cases can be summarised as follows:

(i) The implicit objective of a s.7 (of MPPO) exercise is to arrive at a fair distribution of the assets as between the parties (paragraph 56 of the Judgment);

(ii) The concept of fairness requires the refutation of any gender or role discrimination (paragraph 57 of the Judgment);

(iii) With a view to eliminating insidious discrimination and promoting fairness, judges should check their tentative views on distribution against a “yardstick of equal division” which should be departed from only for good, articulated reasons (paragraph 58 of the Judgment); and

(iv) The court should not countenance any attempt to engage in costly and often futile retrospective investigations of the failed marriage which tends to deplete the parties’ (and the court’s) resources and to increase antagonism and discourage settlement (paragraph 62 of the Judgment).

(6) The actual steps to be taken by a court in undertaking the s.7 exercise should be as follows:

(i) The ascertainment of the financial resources of each of the parties calculated as at the date of the hearing (paragraphs 71 to 73 of the Judgment);

(ii) The assessment of the parties’ financial needs.  If the total resources are not enough to meet the parties’ needs, the s.7 exercise should stop here and there is no room to apply any sharing principle (paragraphs 74 to 79 of the Judgment);

(iii)If surplus assets would remain after the parties’ needs have been catered for, the next step should normally be for the court to apply the sharing principle to the parties’ total assets, with a yardstick of equal division as part of that principle.  This means that the total assets should be divided equally between the parties unless there is good reason for departing from an equal division (paragraphs 80 to 82 of the Judgment);

(iv) In considering whether good reasons exist for departing from equal division, the answer is to be found in the terms of s.7 and the implicit objective of a fair distribution of the assets.  Factors like source of the assets, conduct, financial needs, duration of the marriage, contribution to the family and compensation are all material considerations (paragraphs 83 to 130 of the Judgment); and

(v) The weight to be given to each of the factors is a matter of discretion for the court (paragraph 131 of the Judgment).

34.  I shall bear the above legal provisions and principles in mind when I come to consider the final ancillary relief order to be granted under the circumstances of this case.

The Wife’s Circumstances

35.  The wife is now aged 62.   She graduated from an American University in 1973 with a Bachelor Degree in Business Administration.   In 1974, she joined a local bank starting as an Officer Trainee until her retirement as a bank manager in 2002.   She was in the banking industry for a total of 28 years and at the peak of her career, she was able to earn an annual salary of over $1,000,000. Unfortunately, in about 2002, she was diagnosed to have breast cancer, followed by a period of depression thus forcing her to retire early at the age of 49.

36.  After retirement, she had remained unemployed most of the time living on her savings and the retirement funds from her previous employer. According to her, the husband had failed to support the family adequately throughout the marriage and this had continued even after the wife’s retirement. As a result, the wife had to pay for most of the family expenses, including a sum of about $4,000,000 on the son’s 6 years education in the US.

37.  According to her, this has depleted most of her savings and investment gains during the past few decades. She even had to obtain bank loans and financial assistance from her siblings to support her living generally and to finance her purchase of a flat at North Point (“the DIVA Flat”) in 2014.

38.  In her latest Form E and apart from the former matrimonial home, she listed her current assets and liabilities as follows:

Assets (other than the former matrimonial home)
(1)	DIVA (a flat in North point ) (net value)	$4,880,000
(2)	Australian Property	$426,000
(3)	Bank Accounts	$12,000
(4)	Jewellery	$100,000
		$5,418,000

39.  According to the wife, she also has liabilities in the sum of about $2,100,000.   If those liabilities are taken into account, the net assets owned by the wife, over and above the former matrimonial home, will be about $3,300,000.

40.  The wife is currently working as a part time financial planner earning an average monthly income of about $1,000 to $2,000.   She also receives a monthly sum of $5,000 from the son.  

41.  As to her monthly outgoings, she said she is now spending a sum of about $117,000 per month, including:

42.  As the wife has already retired and received no regular income for more than a decade, the wife’s monthly spending is way beyond her means. The might explain why she is now being in debt of over $2,000,000.   I understand the wife’s stance is that as she has been leading a “frugal” life for so long for the sake of the family and providing for the education of the son, it is now time for her to be “reborn” and enjoy a new life. While I have some sympathy for the wife as I accept that she might have contributed a lot to the welfare of the family in the past, but that does not mean that she has a license to dissipate the family assets recklessly. I understand that the wife is accusing the husband being financially “irresponsible” by leading a very comfortable life in the past while leaving all the family financial burdens to her,  I am afraid that such complaint cannot be justified now if she is also doing the same in depleting the assets of the family in a similar fashion.

The Husband’s Circumstances

43.  The husband is now aged 67, an entertainment manager by occupation working in a karaoke, earning a monthly sum of about $23,000.   In view of his age, it is the husband’s plan that he will retire in about 2 to 3 years’ time when he reaches the age of 70.

44.  The current monthly outgoings of the husband are as follows:

45.  According to the husband, the first loan repayment of $8,600 will be finished very shortly, after which his monthly expenses will be reduced to about $46,000.

46.  In his Form E, the husband stated his assets (other than the former matrimonial home) as follows:

Total Assets

47.  By adding up the above figures, the total family assets are as follows:

Age and Length of Marriage

48.  The wife is aged 62 and the husband aged 67. Both are either retired or approaching retirement very shortly.

49.  They were married in 1985 and separated in 2002. It was a long marriage of 17 years.

Physical and Mental Disability

50.  The wife did suffer from breast cancer and depression but it seems that she should have recovered by now.

Contributions

51.  It is the wife’s case that she has made substantial contribution to the welfare of the family, by way of paying most of the family outgoings and the son’s education in the US. Furthermore, it is also her case that due to her hard work and wise investment, the purchase of the past landed properties and eventually the former matrimonial has become possible.  

52.  From the evidence of the husband, I do not think he is disputing that the wife has made more contributions, at least financially than him.  But it is also his case that he has also made some contributions in the form of mortgage repayments or family outgoings. 

53.  After considering the parties’ respective case, overall speaking, I am inclined to accept that the wife had made more contributions to the welfare of the family, at least financially.   However, I also accept that the husband had made certain contributions, though less than the wife, due to the not very successful business ventures undertaken by him in the past few decades.

Conduct

54.  At trial, the wife tried to convince the court that the husband was so irresponsible in terms of lack of support to the family and that this negative conduct has to be taken into account in the final ancillary relief order.

55.  For conduct to be taken into account, it has to be conduct which is “gross and obvious”[2]. I do not think the so called “negative” conduct of the husband can be regarded as so “obvious and gross” that the court has to take them into account.  In any event, the husband’s so called “misconduct” or “negative” conduct is just the opposite side of the wife’s “good” conduct in making substantial contribution to the welfare of the family, which fact has already been taken into account in the final ancillary relief order.

Ancillary Relief

56.  After considering all the circumstances of this case, in particular, the parties’ financial circumstances, the length of marriage, the parties’ respective contribution to the welfare of the family, I am of the view that a departure from the yardstick of equal division of the former matrimonial home is justified.   I would award 60% of the former matrimonial home to the wife and 40% to the husband.   In monetary terms, the wife would get about $10,164,000 ($16,940,000 x 60% = $10,164,000) whilst the husband would get about $6,776,000 ($16,940,000 x 40% = $6,776,000). 

57.  As stated in paragraphs29 to 30 above, I have already ruled that the husband should pay back the judgment sum of $255,000 to the wife.  In order to achieve a finality of the parties’ dispute, I am minded to order the husband to pay a further sum of $300,000 to the wife from his share of the former matrimonial home to cover his liability under the judgment, the additional sum of $45,000 should be enough to cover all the interest and costs of that litigation.

58.  After the above distribution, the wife would be in possession of assets in the sum of about $13,764,000 ($10,164,000 + $3,300,000 +$300,000 = $13,764,000) whilst the husband would be in possession of about $7,072,000 ($6,776,000 + $596,000 - $300,000 = $$7,072,000).

Orders

59.  Based on the above reasons, I hereby make the following orders in full and final settlement of the parties’ respective claim for ancillary relief:

(1) The former matrimonial home to be sold in the open market with vacant possession at the best available market price within 3 months from the date of this order, and after the deduction of all necessary outgoings including but not limited to government taxes (if any), agent fees, legal fees, outstanding mortgage (if any) and other reasonable expenses (if any), the wife shall have 60% and the husband shall have 40% of the net proceeds of sale.

(2) The husband shall pay a further sum of $300,000 from his share of the former matrimonial home to the wife towards the satisfaction of the judgment in DCCJ 1669/2014.

(3) Each party is allowed to keep all the other assets that are currently under their respective name.

Costs

60.  In the circumstances of this case, it is difficult to say who the winner is.  Therefore, there should be no order as to costs, including all costs reserved.   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.

[1] [2010] HKFC 1727

[2] LKW v DD (supra) at para 104 in which Rebeiro PJ affirming the test as laid down in Wachtel v Wachtel [1973] Fam 72 at 89-90